Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue of $55.5 million, exceeding guidance.
- Underlying EBITDA of $6.6 million, in line with guidance.
- Operating cash flow increased by 150% to $3.8 million.
- Free cash flow increased nearly 200% to $3.5 million.
- Inaugural dividend of $0.0025 per share declared, fully franked.
Negative Points
- Operating loss before tax, though improved, still at a small loss of $100,000.
- Increase in corporate costs and overheads due to additional head office employees.
- Non-current assets decreased from $48.1 million to $44.8 million due to amortization.
- Current borrowings increased from $1 million to $7.6 million.
- Some revenue churn in the SME telco market.
Q & A Highlights
Q: Can we expect an interim and final dividend for FY25 or just one dividend in FY24?
A: That is not something that we've considered at the Board level at this point. I think at this point, we've announced the FY24 dividend. But we will give that consideration to that moving forward.
Q: Is the Board considering acquisitions or more likely to divest divisions?
A: We did make an announcement on the strategic review. The Board is of the view that there's a disparity between the value of the business divisions and the overall market value. We received strong interest in a number of divisions with valuations well in excess of the market value. However, we decided not to divest any divisions due to the time constraints and potential business disruption. We are cautious with acquisitions and will consider them if they generate good returns.
Q: Are you planning to resume the strategic review?
A: No, we're not planning to resume the strategic review. It was extremely taxing in terms of management time. Despite the distractions, we produced record financial results for the year. If approached by someone for the whole business, the Board would consider it at the time.
Q: What is the reason for the increase in corporate costs and overheads? Do you see more operating leverage in the future?
A: The increase is primarily due to the addition of a couple of employees to the head office, including an HR manager and a COO. There have also been marginal increases in insurance and audit costs. Future increases will depend on additional head office positions as the business grows.
Q: Will the gross margin stay flat? What are the targets for each of the three divisions and the group?
A: Our gross margin stood at 47%. We have delivered several synergy projects over the last few years, and there may be a slight increase in margin in our cloud communications and collaboration business. However, we do not expect significant increases in gross margin but aim to maintain it around the 50% level.
Q: With the CBA loan now due in February '25, what are the terms?
A: The loan has been extended through to August '26, largely on the same terms and conditions as the current loan. The only real change is an increase in our quarterly amortization from $250,000 to $300,000.
Q: What is the company's net cash position?
A: The drawn debt today is $7.6 million, and the cash position is $3.6 million, resulting in a net debt of $4 million. The cash position changes over time, and we expect it to improve.
Q: Do you expect reduced revenue churn going forward, given the shift in focus to the corporate mid-market?
A: Yes, we expect reduced revenue churn, especially with the bundling of services. Our goal is to reduce churn moving forward.
Q: What is the 10% of revenue that is non-recurring in nature, and how volatile can this be year-to-year?
A: The non-recurring revenue, which was around 8% this year, typically involves one-off items like hardware and upfront installation costs. It is generally not very volatile, and we aim to grow this segment moving forward.
Q: Do you expect to finish FY25 in a neutral or net cash position?
A: We expect to be in a strong positive cash flow position for the year, in line with what we delivered this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
