Release Date: February 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Urbanise.com Ltd (ASX:UBN, Financial) reported a 6.3% increase in Annual Recurring Revenue (ARR) compared to the previous corresponding period (pcp), totaling AUD 11.99 million.
- The company achieved a 99% customer retention rate for its strata and facilities management (FM) platforms.
- Urbanise.com Ltd (ASX:UBN) identified AUD 2.4 million in cash flow improvements, with 95% of this target already achieved by December 31, 2023.
- The company reported an 11.6% increase in FM license fees, driven by new contracts and growth from existing customers.
- Operating expenses showed an 8% improvement on pcp, contributing to a 29.1% reduction in EBITDA loss.
Negative Points
- Total revenue of AUD 6.27 million was marginally lower compared to pcp due to a 3.4% decrease in professional fees.
- Strata revenue was 5.5% lower, largely due to a temporary reduction in license fees from an APAC customer and a 53% decline in professional fees.
- The company is still facing challenges with large outstanding debts in the Middle East, affecting overall cash flow.
- Urbanise.com Ltd (ASX:UBN) experienced a temporary reduction in license fees from a large APAC customer, impacting overall revenue.
- Despite improvements, the company is still not cash flow positive and aims to achieve cash flow breakeven by FY 2025.
Q & A Highlights
Urbanise.com Ltd (ASX:UBN) Earnings Call Highlights
Q: Simon, can you please talk to the ongoing contract discussions with a large APAC customer and what is involved in that process?
A: The fee reductions we've seen through our license fees over the last 2 or 3 quarters are related to this large APAC customer. It's related to our recognition of license fees and cost escalations. We don't expect there will be an ongoing reduction in license fees due to the agreement of a cost escalation mechanism and out-of-scope functionality we're delivering to this customer. We are confident that we'll conclude this discussion by the end of this quarter.
Q: Do you still expect to reach cash flow breakeven in FY '25?
A: Yes. The Board reviews our cash flow forecasts regularly. We have a good view on our cost base, existing customers, professional fees, and working capital management. We take a conservative view and expect to reduce cash use by the end of this year, aiming for cash flow breakeven in FY 2025.
Q: Simon, could you talk to the Middle East debtor book? Revenue was up, but debtors are down.
A: Revenue is up due to growth in FM and strata customers. While we don't report debtors on a regional basis, our overall debtors are down. We still have some large outstanding debts in the Middle East, but the rest of the portfolio has improved. We are working closely with customers to clear these debts in the coming weeks.
Q: Are you happy with the pace of contract wins in strata and FM?
A: I'm pleased with the improvements over the last 12 to 18 months, particularly in our go-to-market strategy and sales team appointments. We have a strong pipeline and are focusing on reducing conversion times by making our pricing and scope clearer to customers. There are always improvements to be made, but we are making good progress.
Q: What are the key components of your strategy to achieve cash flow breakeven?
A: Key components include managing our cost base, professional fees, and working capital. We are also focusing on increasing our runway with cash in advance and managing debtors effectively. We review our cash flow forecasts monthly and take a conservative approach to ensure we stay on track for cash flow breakeven in FY 2025.
Q: Can you provide more details on the operational review and its impact on cash flow improvements?
A: The operational review identified AUD 2.4 million in cash flow improvements, 95% of which were realized in the first half. This included headcount savings, reduction in non-wage overheads, and improved cash collection strategies. We are on track to meet or exceed this target by September 2024.
Q: How is the rollout of the FM platform across Colliers Australia progressing?
A: The Colliers project went live in April 2023 and is now live in all states except New South Wales. We expect to complete the rollout in the current half. This project is a significant part of our strategy to drive growth in our FM platform.
Q: What are the main challenges you face in the Middle East market?
A: The main challenges include managing large outstanding debts and navigating complex customer processes. However, we have a strong presence in the region and are working closely with customers to improve cash collection. The demand for our strata and FM platforms remains strong, driven by similar legislation to Australia and large infrastructure projects.
Q: How do you plan to drive further improvement in working capital?
A: We are focusing on cash collection strategies, advanced billing, and managing debtors effectively. We review our working capital management regularly and are confident in our ability to drive further improvements as we progress towards cash flow breakeven.
Q: What is your outlook for the second half of FY 2024?
A: We expect to complete the rollout of our FM platform across Colliers Australia, finalize contract discussions with a key APAC strata customer, and drive further improvements in working capital. We remain focused on achieving cash flow breakeven in FY 2025 and delivering long-term growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
