Release Date: September 07, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue of $19.6 million in FY '23, up from $16.4 million in FY '22.
- Annual Recurring Revenue (ARR) grew by 26% to $23.2 million.
- Cash flow positive in the second half of FY '23 with $2 million generated.
- Strong customer acquisition including major brands like Macy's, Verizon, and BAE.
- Successful transition of Snare product to a subscription model, with 80% of commercial customers opting for subscriptions.
Negative Points
- Overall negative cash flow for the year, with a $1 million deficit.
- Legacy revenue expected to phase out completely by the end of FY '24.
- Operating expenses increased by 20% due to higher employee costs and professional fees.
- Challenges in securing large US government contracts, with only seven out of nine bids still open.
- The company trades at a significant discount compared to other small-cap tech peers, potentially due to market perception and liquidity issues.
Q & A Highlights
Q: Will the legacy income in FY '23 disappear, or do you expect that to be convertible into revenue for eMite now?
A: No, this is a completely different offering that has no path to either Snare or eMite. It's one customer in South Australia migrating off a very old technology platform. We might get a few hundred thousand dollars out of it in FY '24, but it should be completely done by Christmas.
Q: Are you still in the running for the large US government contracts previously referenced?
A: Yes, we were initially in nine bids. One has been withdrawn, and one has been awarded to a consortium we were not part of. Seven are still open but have not been awarded. We also have other large opportunities in defense and military in both the UK and the US.
Q: Can you elaborate on the value and potential of the deal with Charles Schwab?
A: The deal was just over AUD560,000 for a perpetual license. Schwab acquired another business, and we've extended our coverage to monitor the new acquisition, totaling around 19,000 endpoints being monitored by Snare.
Q: What drove the 20% increase in employee expenses and professional fees despite a small increase in headcount?
A: Several factors contributed, including bringing the Manila team in-house, hiring additional external consultants for the iPaaS development, and the increased cost of hiring due to the global war for talent, particularly in the technology segment.
Q: Do you expect expenses in FY '24 to be flat or to grow?
A: We aim to keep expenses as flat as possible in FY '24, focusing on growing ARR and revenue while delivering an EBITDA profit. However, we do expect some increase due to suppliers raising prices and the ongoing cost of hiring talent.
Q: What are the gross margins for eMite and Snare?
A: eMite has a gross margin of about 85%, with 15% of revenue going towards hosting costs. Snare, sold as a software appliance, effectively has a 100% margin as there are no hosting costs, only sales commissions.
Q: Who are the main competitors for Snare and eMite, and what are your competitive advantages?
A: For Snare, competitors include Sumo Logic, LogRhythm, SolarWinds, NXLog, and Logly. Snare's advantage is its design for defense and military purposes, allowing it to operate in highly secure environments. eMite has a leadership position in the CX analytics market, particularly with Amazon and Genesys, and faces less direct competition due to its unique integration capabilities.
Q: Why did the company miss being cash flow positive for the full year, and what are the plans for FY '24?
A: We spent $1 million on product launches and business positioning, which impacted cash flow. Our goal for FY '24 is to be cash flow positive for both the half and full year and to deliver a small EBITDA profit.
Q: Given a smaller pipeline, how confident are you in growing ARR at similar levels in the year ahead?
A: The pipeline is generated and converted at a consistent rate. Our partner strategy aims to generate additional opportunities without significantly increasing internal resources. We are confident in our ability to grow ARR through these efforts.
Q: What are your aspirational revenue targets over the next few years?
A: If we continue to grow at the current rate, we could reach around $50 million in revenue in three years. This includes $25 million plus in '24, $35 million in '25, and $50 million in '26, without necessarily accelerating or making additional investments in scaling sales and marketing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
