WEBVTT - Is Canva actually profitable?

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<v Speaker 1>From The Australian. He is was on the front. I'm

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<v Speaker 1>Claire Harvey. It's Thursday, April nine, twenty twenty six. Then

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<v Speaker 1>Roberts Smith will remain behind bars after he was arrested

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<v Speaker 1>on murder chargers. The VC Recipients lawyers didn't apply for

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<v Speaker 1>bail on Wednesday, meaning he'll be held on remand until

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<v Speaker 1>at least next Friday. Iranian civilians who were preparing for

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<v Speaker 1>further strikes by American forces now fear for their lives

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<v Speaker 1>under the regime after Iran and America agreed to a

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<v Speaker 1>two week ceasefire deal. That stories live right now at

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<v Speaker 1>the Australian dot Com dot a U. Australian design startup

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<v Speaker 1>Canva killed off graphic design as a career choice by

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<v Speaker 1>making everyone a designer. Now the ultimate disruptor is itself

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<v Speaker 1>being disrupted by the rise of vibe coding, where any

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<v Speaker 1>one can tell an AI tool to do something magical. Today.

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<v Speaker 1>Is Canva actually making money and can it survive this moment?

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<v Speaker 1>John Stenzel edits the list Australia's riches to fifty and

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<v Speaker 1>so he gets a great insight into what's really going

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<v Speaker 1>on at some of our most prominent companies. John, I

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<v Speaker 1>must admit I was kind of shocked to read a

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<v Speaker 1>story by you that said that Canva is not really

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<v Speaker 1>as profitable as we might think, and there's some technical

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<v Speaker 1>differences here. But first, just give me the big picture.

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<v Speaker 1>Is Canvas making a profit or not?

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<v Speaker 2>Well, you don't really want to get into gap accounting

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<v Speaker 2>and other various measurements because we'll be here all day

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<v Speaker 2>and I think they're listening smoke a little bit bored.

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<v Speaker 2>But yeah, absolutely, Look, it all depends on whether you

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<v Speaker 2>want to do it by the general accounting principles that

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<v Speaker 2>all the companies have got to use here in Australia,

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<v Speaker 2>whether you're talking whether they're cash flow cash flow profitable

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<v Speaker 2>or not so. In the latter which is offered a

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<v Speaker 2>measurement of how tech companies do these things. Now, the

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<v Speaker 2>reason they do these things because it looks better that way, right,

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<v Speaker 2>and also because they pay their they pay their employees

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<v Speaker 2>and the way of attracting employees through stock based compensation,

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<v Speaker 2>which means that they effectively go, we'll pay you some

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<v Speaker 2>in cash, we'll pay you some in shares, and then

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<v Speaker 2>when those shares explode on the stock exchange, you'll make

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<v Speaker 2>lots of money as a result. Now there's an accounting

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<v Speaker 2>measurement where they've got to compensate that on the balance

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<v Speaker 2>sheet and it makes their profits look less. But they're

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<v Speaker 2>basically saying that we are making a lot of money,

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<v Speaker 2>just not in the standard ways that you think we

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<v Speaker 2>might be doing it. We're doing it through other ways.

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<v Speaker 2>So yes in a way, but no in another way.

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<v Speaker 1>Yeah, I guess the test for any business, whether it's

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<v Speaker 1>a fish and chip shop or a giant tech startup,

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<v Speaker 1>is do you have enough money to kind of reinvest

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<v Speaker 1>in things that you need to be buying? In canvas case,

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<v Speaker 1>it's doing a massive renovation on a big city building

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<v Speaker 1>in Sydney and it's buying all sorts of other companies,

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<v Speaker 1>does it have the cash on hand to do those things?

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<v Speaker 2>As of December thirty one, twenty twenty four, which is

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<v Speaker 2>the last time that these accounts Resting Lodge with Assex show.

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<v Speaker 2>By the way, they're about fifteen months late, so I'm

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<v Speaker 2>not sure what Daykiva is doing to get things on

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<v Speaker 2>it in on time. But anyway, they had about six

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<v Speaker 2>hundred ninety nine million dollars in cash on its balance sheet,

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<v Speaker 2>so yes, they do have a lot of cash. Now

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<v Speaker 2>they've raised cash from investors, they've got to use it

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<v Speaker 2>for certain things. They've made acquisitions, they are doing that

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<v Speaker 2>property renovation as you say, they are expanding globally, they

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<v Speaker 2>are hiring a lot more people, they're having to deal

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<v Speaker 2>with AI, so they do have a lot of cash.

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<v Speaker 2>Not necessarily profitable in a normal sense.

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<v Speaker 1>Though I use Canva every day, so do so many

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<v Speaker 1>people across the Australian economy and the world, of course,

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<v Speaker 1>and it's meant that a huge productivity advance is available

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<v Speaker 1>for people like me who are not graphic designers but

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<v Speaker 1>need to use kind of graphic design elements. They really

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<v Speaker 1>helped businesses like ours make a big productivity leap. They

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<v Speaker 1>also decimated the job market for graphic designers overall. Has

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<v Speaker 1>Candra in that way been a success.

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<v Speaker 2>It's incredible how popular it is around the world. So

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<v Speaker 2>they're saying now they've got more than two hundred and

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<v Speaker 2>sixty five million monthly active views, so it's huge. I mean,

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<v Speaker 2>can you imagine that's what ten times the population of Australia, right,

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<v Speaker 2>I mean, it's incredible this success story that an Australian

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<v Speaker 2>based business has become on a global basis and how

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<v Speaker 2>easy it has made things for a lot of people.

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<v Speaker 2>Now you know, it's constantly evolving. They're going to have

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<v Speaker 2>to deal with competition as time goes on. But yes,

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<v Speaker 2>from a user point of view, it's staggering how popular

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<v Speaker 2>this is a company that was founded by a couple

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<v Speaker 2>of young Australians in Melanie Perkins and ow husband Quiff

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<v Speaker 2>obrack in Camera Addams as well, who's still there and

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<v Speaker 2>they're all billionaires in our list, But just it's hard

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<v Speaker 2>to think of what else has become so popular from

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<v Speaker 2>Australia so quickly. Now, obviously the Internet helps things grow quickly,

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<v Speaker 2>but the ease of their products and the amount of

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<v Speaker 2>people that use them from primary school level up whatever

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<v Speaker 2>it is is incredible. I mean, the success that they

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<v Speaker 2>have made in such a quick time in that way

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<v Speaker 2>has not been replicated by any Australian business ever.

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<v Speaker 1>It started out with basically templates, So if you were

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<v Speaker 1>designing a social media post for your business or a

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<v Speaker 1>birthday invitation for your kids, canvas designers would have designed

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<v Speaker 1>a template for you that you could adjust moving things around.

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<v Speaker 1>Then they very quickly saw that they needed to incorporate

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<v Speaker 1>AI into their products and that meant buying other businesses

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<v Speaker 1>that could do AI kind of things that then they

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<v Speaker 1>incorporated into the platform. One of those was a video

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<v Speaker 1>generation platform called Leonardo. Has that been a good purchase.

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<v Speaker 2>It's an incredible platform or technology that Leonardo users, but

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<v Speaker 2>I think the jury is definitely still out on that.

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<v Speaker 2>So a couple of my colleagues, David Ross and Tanzi

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<v Speaker 2>Hardcore reported a little while ago, now, about a month

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<v Speaker 2>or so ago, that Leonardo's acquisition hasn't gone as well

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<v Speaker 2>as what the Canvas executives, the owners would have hoped to.

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<v Speaker 2>They paid about three undred and sevny million dollars for

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<v Speaker 2>this company that's based in North Sydney. There's been layoffs,

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<v Speaker 2>there's been I guess a sort of recalibration of the

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<v Speaker 2>staff that are in there. They've had to be sort

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<v Speaker 2>of put in other places in Canvas, just you know,

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<v Speaker 2>to say things quite simply. So I think that that

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<v Speaker 2>maybe that technology is probably ahead of what people or

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<v Speaker 2>consumers are able to use or able to pay for.

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<v Speaker 2>So in that way, I think it probably hasn't been

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<v Speaker 2>a success yet. Now look, I mean, corporate history is

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<v Speaker 2>littered with acquisitions that don't work, and I think in

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<v Speaker 2>this situation, the jury is I said, the jury is

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<v Speaker 2>still out as to whether Cliff and mill have been

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<v Speaker 2>able to pull off a successful acquisition and integrated into

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<v Speaker 2>what Canva already has.

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<v Speaker 1>It sort of failed to anticipate the rise of what

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<v Speaker 1>they now call vibe coding, where you can type into

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<v Speaker 1>an AI something like in language, make me a birthday

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<v Speaker 1>party invitation that includes unicorns and balloons for a seven

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<v Speaker 1>year old girl called Katie, you know, or make me

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<v Speaker 1>a social post that speaks to my business audience about

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<v Speaker 1>why my fish and chip shop is growing in all

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<v Speaker 1>the right directions. That's what Canva kind of failed to anticipate,

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<v Speaker 1>isn't it. It thought that people would want to keep

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<v Speaker 1>doing what they were already doing on Canva, which is

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<v Speaker 1>moving things around manually themselves, adjusting things, and not necessarily

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<v Speaker 1>going elsewhere for that product. Did they assume that they

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<v Speaker 1>kind of owned the idea of designing things yourself.

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<v Speaker 2>Look, I don't think anyone in the software industry would

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<v Speaker 2>have been the forecast how quickly AI has grown and

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<v Speaker 2>impacted on their business, right, I mean, for now Cliff

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<v Speaker 2>in particular, Cliffobreck has been pretty out there, pretty vivise

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<v Speaker 2>about that you're saying, Look, AI is really good for Canvas.

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<v Speaker 2>Canvas is actually a disruptor. Look we're fine. You know,

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<v Speaker 2>our valuations still hold up. You know, the sixty billion

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<v Speaker 2>dollars valuation for the company is still there. Now, I

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<v Speaker 2>think maybe you're going to say, Claire, that we've heard

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<v Speaker 2>this before. There's a notable company called Atlasian. It's boss

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<v Speaker 2>mar Cannon Books made similar noses about only a couple

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<v Speaker 2>of months ago before laying off sixteen hundred workers recently.

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<v Speaker 2>So look, no one knows. I think how quickly AI

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<v Speaker 2>is going to do disrupt companies that were already disruptors themselves.

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<v Speaker 2>Now for now they're saying that it's good for them.

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<v Speaker 2>They haven't gone public on a stock exchange yet. Now,

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<v Speaker 2>how quickly that happens. Better be later this year or

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<v Speaker 2>by next year, probably the latest. Maybe if that's delayed,

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<v Speaker 2>it probably shows that there is some more issues behind

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<v Speaker 2>the scenes that we know of.

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<v Speaker 1>It might be that I don't own any shares in

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<v Speaker 1>any of these companies myself, John, but I do kind

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<v Speaker 1>of enjoy the disruptors being disrupted so quickly. When we

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<v Speaker 1>had you on the front to talk about this year's edition,

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<v Speaker 1>off the list Australia's Riches two fifty. You made the

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<v Speaker 1>point that one of Atlassian's issues is that the market

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<v Speaker 1>is saying to at Lassian, now, you know, growth is great,

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<v Speaker 1>but we actually need you to make some profit in

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<v Speaker 1>a very kind of old fashioned way. I feel like

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<v Speaker 1>there's been an expectation with tech companies, maybe in the

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<v Speaker 1>past decade, that we understand that it takes a long

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<v Speaker 1>time to get to profitability, and what they do for

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<v Speaker 1>the first part of their life is just grow and

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<v Speaker 1>grow and grow. Is that changing?

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<v Speaker 2>Absolutely, It's all been about growth, and I think when

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<v Speaker 2>you go as it lastin has for fifteen years without

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<v Speaker 2>making a decent profit, then people are going to start

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<v Speaker 2>asking questions, particularly when that growth levels off. So if

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<v Speaker 2>you're not growing, you need to be managing your costs

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<v Speaker 2>accordingly and making that profit and giving some sort of

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<v Speaker 2>a return to share or is whether it's dividends or

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<v Speaker 2>what have you. So I think that's a very big

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<v Speaker 2>test for a company like Camba. Now they're claiming a

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<v Speaker 2>four billion dollars in US and your revenue forty percent

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<v Speaker 2>and your growth, so that growth is still there for them,

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<v Speaker 2>and whether that growth is going to be there for

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<v Speaker 2>them next year and the year after. I think, look,

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<v Speaker 2>you time will tell clearly, but it'll be a fascinating

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<v Speaker 2>perspectus if they do go public as to what that

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<v Speaker 2>shows has been happening more recently and more importantly, what

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<v Speaker 2>they're projecting in the next few years after.

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<v Speaker 1>Is there a lesson there? Do you think, John, if

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<v Speaker 1>you and I were starting a startup in our garage today,

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<v Speaker 1>would you be saying, look, we need to get to

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<v Speaker 1>profit faster than previously we might have thought we did.

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<v Speaker 2>Well they are with the company like at Lasting, for example,

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<v Speaker 2>was very profitable very early days until when Global on

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<v Speaker 2>the stock exchange point of view, went on the NASDEK

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<v Speaker 2>and then the spending, the stock based compensation and other

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<v Speaker 2>expenses kept going up and up and haven't and the

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<v Speaker 2>growth in revenue hasn't kept up. So yeah, I think

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<v Speaker 2>if you're going to be both high growth and decently

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<v Speaker 2>profitable in your early days from that garage startup, you'd

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<v Speaker 2>have the best of both worlds. Now, it's a very

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<v Speaker 2>hard thing to pull off, obviously, it really is.

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<v Speaker 1>I'm also kind of fearful that Canva might collapse, like

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<v Speaker 1>I really need it now.

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<v Speaker 2>I'm not sure it's collapsing. I think it's just a

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<v Speaker 2>matter of where it will be valuation and financially wise.

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<v Speaker 1>Really, John Stenzel, thank you very much. Thanks John Stenzel

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<v Speaker 1>edits the least Australia's Riches two fifty. You can check

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<v Speaker 1>out how the billionaires really make their money right now

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<v Speaker 1>at Riches two fifty dot com dot au that's richest.

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<v Speaker 1>Two five zero dot com dot Au