Announcement PDF 29 August 2023 Appendix 4E (Preliminary Final Report) and Annual Report The Appendix 4E (Preliminary Final Report) and Annual Report of Wrkr Ltd (ASX: WRK) (Wrkr or the Company) for the financial year ended 30 June 2023 are attached. These documents have been authorised by the Board for release to ASX. For enquiries: Trent Lund Chief Executive Officer T. +61 404 570 000 E. trent.lund@wrkr.com.au This release contains forward-looking statements and information that are necessarily subject to risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements of the Company to be materially different from those expressed or implied in this release including, amongst others, changes in general economic and business conditions, regulatory environment, results of advertising and sales activities, competition, and the availability of resources. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release. Except as required by law, the Company assumes no obligation to update or correct the information in this release. To the maximum extent permitted by law, the Company and its subsidiaries and officers do not make any representation or warranty as to the likelihood of fulfilment of any forward-looking statements and disclaim responsibility and liability for any forward-looking statements or other information in this release. This release should be read in conjunction with the Company’s ASX announcements and releases. Wrkr Ltd ACN 611 202 414 Level 24, 66 Goulburn Street, Sydney NSW 2000 wrkr.com.au Wrkr Ltd Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Wrkr Ltd 50 611 202 414 For the year ended 30 June 2023 For the year ended 30 June 2022 2. Results for announcement to the market $ Revenues from ordinary activities up 43.0% to 6,575,048 Loss from ordinary activities after tax attributable to the owners of Wrkr Ltd down 4.0% to (4,172,908) Loss for the year attributable to the owners of Wrkr Ltd down 4.0% to (4,172,908) Dividends There were no dividends paid, recommended or declared during the current financial period. Comments The loss for the Group after providing for income tax amounted to $4,172,908 (30 June 2022: $4,346,885). Further commentary on the Group’s operating performance and results from operations are set out in the attached Annual Report. 3. Net tangible assets Reporting period Cents Net tangible assets per ordinary security Previous period Cents (0.01) The Group does not have right-of-use assets and lease liabilities, thus these are not included in the calculations. 4. Control gained over entities Not applicable. 5. Loss of control over entities Not applicable. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. Previous period There were no dividends paid, recommended or declared during the previous financial period. 0.06 Wrkr Ltd Appendix 4E Preliminary final report 7. Dividend reinvestment plans Not applicable. 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. 10. Audit qualification or review Details of audit/review dispute or qualification (if any): The financial statements have been audited and an unqualified opinion has been issued and is attached as part of the Annual Report. 11. Attachments Details of attachments (if any): The Annual Report of Wrkr Ltd for the year ended 30 June 2023 is attached. 12. Signed As authorised by the Board of Directors Signed ___________________________ Emma Dobson Non-Executive Chair Sydney Date: 29 August 2023 Wrkr Ltd ACN: 611 202 414 ASX Code WRK Financial Report for the year ended 30 June 2023 Wrkr Ltd Contents 30 June 2023 Report of the Chair and CEO Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's report to the members of Wrkr Ltd Shareholder information Corporate directory 1 2 4 16 17 18 19 20 21 54 55 59 61 Wrkr Ltd Report of the Chair and CEO 30 June 2023 Dear fellow shareholder, It is with pleasure that we present the Wrkr Ltd (Wrkr) Annual Report for the financial year ended 30 June 2023. The team at Wrkr have consistently met the businesses objectives this year and continue to strike a healthy balance between growth, innovation and quality. The management team was tasked with achieving revenue growth targets, advancing our largest contracts and negotiations, and maintaining a continued investment in people, products and technology. The balanced approach and outcomes are notable with key advances across all aspects of the business as per the following FY23 highlights. Market Activity & Revenue ● Operating revenue of $6.6m, a 43% increase on FY22 of $4.6m ● 21% improvement in cash burn rate and 20% improvement in cost to income ratio year on year ● 16% increase in annual recurring revenue (ARR) compared to FY22 ● Entered into an updated Master Services Agreement with Link Group and commenced work to offer a range of Wrkr employer software solutions ● Continued customer growth of our Wrkr SMSF Hub serving over 21k SMSFs ● Delivery of our ‘Onboarding to Super’ functionality in market (at scale) Investment in Technology ● Concluded a major milestone enabling the platform and all future product releases to be delivered to multiple cloud providers and jurisdictions ● Progressed the Wrkr READY onboarding product to support contingent workers, franchise arrangements, contract signing, Ahpra (Australian Health Practitioner Regulation Agency) credential checks and ID Match integration ● Continued our investments in our cyber posture through increased monitoring and real-time compliance. Invested in our Talent ● Increased our full-time talent and experience across Product, Engineering, Cyber Security and Customer Success ● Added key talent to our employee performance incentive options plan linked to the delivery of our short to medium term business strategy. Market conditions have been favourable for Wrkr as our income streams are linked to regulated compliance requirements. In addition, Wrkr has benefited from long term contracts and customers that continue to rely upon the Wrkr technology and teams. Interest rate movements have been beneficial to Wrkr with a notable increase in our float income, enabling a forward investment in our platform consolidation and cyber hardening. Wrkr proudly serves approximately 2.9 million working Australians, 4 APRA Funds, 29 Payrolls, 70,000 employers, 21,000 Trustees and over 500 Advisors & Intermediaries. Our revenue streams come from enabling regulated compliance moments and as such, we remain resilient to discretionary spending challenges. This base of regulated compliance moments continues to grow and will continue to provide a solid platform to underpin our transition to higher value compliance moments across the hire-to-retire lifecycle. Looking ahead, Wrkr’s goal is to capitalise on our product investments and commercial successes to move towards an EBITDA positive position by FY25. In FY24, we will continue to focus on onboarding customers with the aim to increase our annual recurring revenue as a percentage of total revenue, moving away from implementation and development fees. We will also continue to position ourselves to create potential opportunities to upsell our employee onboarding, single touch payroll and wage payments products to our larger superannuation contribution customers. 2 Wrkr Ltd Report of the Chair and CEO 30 June 2023 The Board and management team have a shared confidence in the strategic direction and continued growth of the business. The team has continued to collaborate with existing and new customers throughout the year and we feel that perseverance is paying off and will be rewarded in FY24 and FY25. We would like to take this opportunity to thank the entire team at Wrkr for their commitment and dedication to our customers. On behalf of the Board, we’d like to thank all our shareholders for their ongoing support. Yours sincerely, Emma Dobson Non-Executive Chair Trend Lund Chief Executive Officer 29 August 2023 Sydney 3 Wrkr Ltd Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Wrkr Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of Wrkr Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Emma Dobson - Non-Executive Director and Chair Trent Lund - Chief Executive Officer and Managing Director (permanently appointed on 30 March 2023) Paul Collins - Non-Executive Director Randolf Clinton - Non-Executive Director Principal activities During the financial year the principal activities of the Group consisted of operating the following businesses: ● Wrkr PLATFORM, a modern cloud-based compliance platform for handling messaging with the Australian Taxation Office ('ATO'), SuperStream, Single Touch Payroll ('STP') 2.0, Pan-European Public Procurement Online ('PEPPOL'), Standard Business Reporting ('SBR') and State authorities, and orchestrating payment processing for worker pay and super contributions for fund administrators; ● Wrkr PAY, a superannuation gateway and clearing house and payment handling solution for secure processing of employee pay and super contributions for payrolls and superfunds. This product includes the Wrkr SMSF Hub providing ATO messaging and contributions compliance for Self Managed Super Funds ('SMSFs'); and ● Wrkr READY, a white label employee onboarding solution to manage the compliant onboarding of full-time and casual workers. Throughout the current financial year, the Directors determined that activities categorised as Wrkr BENEFITS in the prior year should be reclassified as Wrkr PAY activities. This decision was taken due to the underlying transactional nature of these activities. The Group does not expect to bring on Wrkr BENEFITS until at least 2025. The Group holds payment processing patents in the USA. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the Group after providing for income tax amounted to $4,172,908 (30 June 2022: $4,346,885). 4 Wrkr Ltd Directors' report 30 June 2023 The Earnings Before Interest, Taxes, Depreciation and Amortisation ('EBITDA') for the year ended 30 June 2023, was a net loss of $1,558,236 compared to net loss for the year ended 30 June 2022 of $1,429,458. EBITDA is a financial measure not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for depreciation, amortisation, interest revenue, finance costs, fair value movement on embedded derivatives and tax expenses. The directors consider EBITDA to reflect the core earnings of the Group. The following table summarises key reconciling items between statutory profit after tax and EBITDA. Consolidated 30 June 2023 30 June 2022 $ $ Loss after income tax benefit Add: Finance costs Less: Income tax expense/(benefit) Less: Interest revenue Less: Fair value gain on embedded derivatives Earnings Before Interest and Tax, ('EBIT') (4,172,908) 96,837 (95,889) (161,866) (4,333,826) (4,346,885) 2,808 165,136 (375) (4,179,316) Add: depreciation and amortisation 2,775,590 2,749,858 EBITDA (1,558,236) (1,429,458) The directors consider that the Group will continue as a going concern, as explained in note 2 to the financial statements. Corporate overview Wrkr Ltd ('Wrkr') is an Australian regulatory technology business helping Australian employers to simplify workforce compliance across the hire-to-retire lifecycle. Wrkr replaces paper-based compliance processes across employee onboarding, payments, super contributions and self-managed superannuation funds ('SMSFs') with a simple, intuitive, and secure digital experience. The Group resolves compliance moments in real time by facilitating the collection, transfer and processing of data and payments between regulated authorities and participants in the ecosystem (HR/payrolls, Accountants, Advisors, Banks, Australian Prudential Regulation Authority ('APRA') and self-managed super fund ('SMSF') and federal departments like the Australian Taxation Office ('ATO')). Business risks The following is a summary of material business risks that could adversely affect our financial performance and growth potential in future years and how we propose to mitigate such risks. Macroeconomic risks The Group’s financial performance can be impacted by current and future economic conditions which it cannot control, such as increases in interest rates and inflation. The Group stays abreast of these conditions, focuses on its internal debtor controls and diversifies its customer base to help manage these risks. Competitive market and changes to market trends The Group operates in a highly competitive market. Innovation is constant and superior products that may be released to the market could result in pricing pressures upon our product and result in unfavourable product positioning within the market. We manage this risk through maintaining product development teams that are highly experienced and remain abreast of the latest technological advances and implications for our current and future products. We also continue to invest in our brand which continues to gain recognition within Australia. 5 Wrkr Ltd Directors' report 30 June 2023 Cybersecurity and Information technology ('IT') infrastructure Wrkr’s IT infrastructure may be at risk from a variety of sources including hardware or software failures and cyber attacks that could result in financial loss, disruption to operations or damage to Wrkr’s reputation. The global increase in cyber attacks has elevated the risk to Wrkr of a negative event impacting Wrkr’s information and/or information systems. Wrkr continually reviews and monitors its cyber security, cyber resilience and Information Security Management System against business risk tolerance and emerging threats. During the year, the Group has continued to mature its policies and procedures around our technology infrastructure and we have invested further in our site reliability and security capability. The Group continues our certification under ISO 27001, is accredited by the Gateway Network Governance Body ('GNGB') to operate on the Superannuations Transaction Network ('STN') and is compliant with the System and Organisation Controls ('SOC 2') framework. Through our work with Superannuation businesses, we are involved in assisting their accreditation to Australian Prudential Regulation Authority ('APRA') Prudential Standard CPS 234 and have used these learnings to further shape the cyber and security posture of our platform. Legal or regulatory change A change in laws or regulations could adversely affect the business. Changes may result in, but are not limited to, a change in the market conditions affecting the competitive landscape, increase in costs of operating the business, and increased information security requirements. Wrkr adopts a sound corporate governance structure and practices that align with industry standards. This enables Wrkr to have clarity and confidence around its regulatory risk framework and its ability to manage regulatory change. Significant changes in the state of affairs On 27 September 2022, the Company announced a $3,800,000 capital raise to accelerate the Group's growth strategy through the following: (a) Convertible notes The convertible notes have a two-year term, 10% pa coupon rate paid quarterly in cash and a conversion price based on a 20% discount to the Company's 30-day Volume-Weighted Average Price ('VWAP') subject to a ceiling price of $0.039 per share and a floor price of $0.018 per share. The convertible notes were issued in 2 tranches as follows: (a) Tranche 1 - comprising of 2,800,000 convertible notes raising a total of $2,800,000 which were issued on 29 September 2022; and (b) Tranche 2 - comprising of 500,000 convertible notes raising a total of $500,000 which were issued on 28 November 2022 following the shareholder approval for the purpose of ASX Listing Rule 10.11 at the Company's AGM on 24 November 2022. (b) Share Purchase Plan ('SPP') The share purchase plan aimed to raise $500,000 and provided eligible shareholders with the opportunity to subscribe for a minimum of $2,500 and up to maximum of $30,000 of new fully paid ordinary shares at $0.018 per share. Due to high demand, the Board accepted a total of $942,000 from the SPP by issuing 52,333,355 ordinary shares at $0.018 per share on 27 October 2022. The additional subscription in the SPP resulted in raising a total of $4,242,000. There were no other significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year The Board adopted a new Employee Securities Incentive Plan ('ESIP') on 27 July 2023. On 1 August 2023, a number of employees were invited to participate in the ESIP. The total number of performance rights offered was 12,000,000. All employees accepted the invitation on or before 8 August 2023. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Refer to the Report of the Chair and CEO section for details. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. 6 Wrkr Ltd Directors' report 30 June 2023 Information on directors Name: Title: Qualifications: Experience and expertise: Emma Dobson Non-Executive Director and Chair B.Com, GAICD Emma is currently an Independent Director for Bank of New Zealand Investment Services Limited, as well as advising the New Zealand Government on data standardisation through eInvoicing. As a Member of the SuperStream Advisory Council and a Senior Executive at Westpac Institutional Bank she was instrumental in the creation of the SuperStream data standards working closely with the ATO and the Australian treasury and the Superannuation Industry. She has over 30 years’ experience In Financial Markets and Banking, as well as extensive experience in Government Policy and Data Standards. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of Nomination and Remuneration Committee and Audit, Risk and Compliance Committee Interests in shares: 2,666,667 ordinary shares Interests in options: 5,000,000 options Name: Title: Trent Lund Chief Executive Officer and Managing Director (permanently appointed on 30 March 2023) Experience and expertise: Trent is the Chief Executive Officer of Unlocked Ventures Pty Ltd, a major shareholder of Comply Path. Prior to this role, he was the lead partner for Innovation & Ventures at PwC Australia where he helped organisations leverage emerging technologies to innovate new business models. He co-designed the PwC Global Innovation & Ventures model and led the development of more than 8 technology platforms and 30 products. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of Nomination and Remuneration Committee and Audit, Risk and Compliance Committee Interests in shares: 259,633,868 ordinary shares Interests in options: None Name: Title: Qualifications: Experience and expertise: Paul Collins Non-Executive Director B.Sc., GAICD Paul has extensive experience with publicly listed technology companies. Over the last 20 years, Paul has been extensively and directly involved in the start-up and subsequent ASX listing of 2 successful FinTech companies. A co-founder of IWL in 1997, he was an Executive Director of this company from its inception, through its listing in 1999 (ASX: IWL) before leaving in 2004. Later in 2004, Mr Collins was a co-founder and Executive Director of Xplore Wealth Limited formerly known as Managed Accounts Holdings Ltd which listed on the ASX in 2014 (ASX: MGP). He chaired the Audit, Risk and Compliance Committees of MGP from 2009 until 2016. In 2017 he accepted the role of Chair of ReadCloud Limited and assisted in listing the company on the ASX in 2018. Other current directorships: ReadCloud Limited (ASX: RCL) Former directorships (last 3 years): None Special responsibilities: Chair of Nomination and Remuneration Committee and Audit, Risk and Compliance Committee Interests in shares: 44,545,941 ordinary shares Interests in options: None 7 Wrkr Ltd Directors' report 30 June 2023 Name: Title: Experience and expertise: Randolf Clinton Non-Executive Director Randolf is the founder and Chief Executive Officer of Clinton Capital Partners, a venture capital investment and advisory business that focuses on early-stage technology companies. Prior to this role, he had over 30 years of leadership experience in global investment banking and financial markets, having started, developed or managed businesses across the Asia pacific region. He has worked in London, Singapore, Hong Kong and Australia; and for companies such as JPMorgan Chase & Co, Credit Suisse Group, ABN Amro Bank N.V. and Royal Bank of Scotland. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of Nomination and Remuneration Committee and Audit, Risk and Compliance Committee Interests in shares: 59,326,045 ordinary shares Interests in options: None 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities and their subsidiaries and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Jillian McGregor (BCom, LLB, Grad Dip GIA) serves as Company Secretary of the Company. Jillian has worked as a corporate lawyer for over 20 years and as a company secretary of listed companies for over 10 years. She has regularly advised companies and directors on compliance with the Corporations Act 2001 (Cth), ASX listing rules and other corporate legal matters. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each director were: Nomination and Remuneration Audit, Risk and Compliance Committee Committee Attended Held Attended Held Full Board Attended Held Emma Dobson Trent Lund Paul Collins Randolf Clinton 13 14 14 14 14 14 14 14 3 3 3 3 3 3 3 3 7 8 8 8 8 8 8 8 Held: represents the number of meetings held during the time the director held office and was a member of the relevant committee. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● Principles used to determine the nature and amount of remuneration ● Details of remuneration ● Service agreements ● Share-based compensation ● Additional information ● Additional disclosures relating to key management personnel 8 Wrkr Ltd Directors' report 30 June 2023 Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● competitiveness and reasonableness; ● acceptability to shareholders; ● performance linkage / alignment of executive compensation; and ● transparency. The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by: ● having economic profit as a core component of plan design; ● focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and ● attracting and retaining high calibre executives. Additionally, the reward framework should seek to enhance executives' interests by: ● rewarding capability and experience; ● reflecting competitive reward for contribution to growth in shareholder wealth; and ● providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors' remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure nonexecutive directors' fees and payments are appropriate and in line with the market. The chair's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of their own remuneration. Non-executive directors do not receive share options or other incentives, unless approved by shareholders. The annual chair's fees are $110,000 plus superannuation guarantee and the other annual non-executive director's fees are currently $60,000 plus superannuation guarantee contribution for each non-executive director. Under the Constitution, the Board may decide the remuneration of each director is entitled to for his services in any capacity. However, the total amount paid to all non-executive directors must not exceed in aggregate in any financial year, the amount fixed by the Company in a general meeting. The Company shareholders approved the maximum amount of $500,000 per annum including superannuation at the Company's Annual General Meeting in January 2021. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has three components: ● base pay and non-monetary benefits; ● share-based payments; and ● other remuneration such as superannuation and long service leave. The combination of these comprises the executive's total remuneration. 9 Wrkr Ltd Directors' report 30 June 2023 Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. The Chief Executive Officer is not present at any discussions relating to the determination of their own remuneration. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group and provides additional value to the executive. There are no short-term incentives ('STI') such as bonuses currently in place. The long-term incentives ('LTI') include long service leave and share-based payments. Senior executives participate in the Employee Share Option Plan ('ESOP'). Employee Share Option Plan The shareholders approved the Wrkr Ltd Employee Share Option Plan ('ESOP' or 'Plan') on 25 November 2021.The ESOP was first adopted by the Board in 2016. The Plan is governed by the Plan rules ('Plan Rules'), a summary of which is set out below. Persons eligible to participate in the Plan are full-time or part-time employees (including executive directors), non-executive directors and contractors and casual employees of the Group