Q4 2023 Dye & Durham Ltd Earnings Call

Speaker 1: Good afternoon, my name is Jenny and I will be your conference operator today. At this time, I would like to welcome everyone to the Dye and Durham Fourth Quarter and Fiscal Year 2023 Earnings Call.

Good afternoon, My name is Jenny and I will be your conference operator today at.

At this time.

I'd like to welcome everyone to the tie in during the fourth quarter and fiscal year 2023 earnings call.

I would now like to turn the call over to Ross Marshalls Investor.

Speaker 1: I would now like to turn the call over to Ross Marshall. Investor Relations on behalf of Diane Durham. Mr. Marshall, you may begin your conference.

Investor Relations on behalf of Brian Doran, Mr. Marshall You May begin your conference.

Thank you Jenny and good afternoon, welcome to the <unk> Conference call before we start we'd like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated.

Speaker 2: Thank you, Jenny, and good afternoon. Welcome to the Dine Durn. Come.

Speaker 2: Before we start, we'd like to remind you that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated.

Speaker 2: Please note that statements made during this call may include forward-looking statements and information and future-orientated financial information regarding dying Durham and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicates management's expectation of future growth, results of operations, business performance and business prospects and opportunities.

Please note that statements made during this call may include forward looking statements and information and future oriented financial information regarding <unk> and its business and disclosure regarding possible events conditions or results that are based on information currently available to management, which indicate managements' expectations of future growth results of opera.

<unk> business performance and business prospects and opportunities.

Speaker 2: Such statements are made as of this date hereof and Dine Durham assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.

These statements are made as of this date hereof and dine during the sudden no obligation to update or revise them to reflect events disclosures or circumstances, except as required by applicable securities laws such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.

Speaker 2: A number of these risks or uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information in the Future-Oriented Financial Information section of our public filings. Without limitation, our MD&A and our earnings press release issue today for additional information.

Some of these risks or uncertainties could cause results to differ materially from the results discussed today, given these risks and uncertainties one should not place undue reliance on these statements and information. Please refer to the forward looking statements and information and future oriented financial information section of our public filings without limitation, our MD&A and our earnings press release issued today.

Additional information.

Speaker 2: Joining us on the call today are Matt Proud, Diane Durham, Chief Executive Officer, and Frank D'Alessio, Diane Durham, Chief Officer Officer. A question and answer session will follow the formal remarks for research panels. I now turn the call over to Matt.

Joining us on the call today are Matt crowd, Dine Durham, Chief Executive Officer, and frankly, Lisa Dion Durham, Chief swaps at a question and answer session will follow the formal remarks for retail channels I'll now turn the call over to Matt for opening remarks. Thanks.

Speaker 3: Thanks, Ross, and good afternoon, everyone. The business performed well in the quarter, and we either delivered or exceeded on what we said we would deliver. Our performance, once again, demonstrates the strength and resilience of our business, as well as the significant efforts we have made to diversify our revenue base and grow our contracted revenue.

Thanks, Ross and good afternoon, everyone. The business performed well in the quarter and we added delivered or exceeded what we said we would deliver our performance once again demonstrates the strength and resilience of our business as well as the significant efforts, we have made to diversify our revenue base and grow our contracted revenue.

As many of you know we sell software to law firms globally, we remain focused on expanding our wallet share across this large and growing market.

Speaker 3: As many of you know, we sell software to law firms globally. We remain focused on expanding our wallet share across this large and growing market.

Speaker 3: In fiscal 23, we made significant product investments, which have accelerated our go-to-market strategy, in turn rapidly accelerating the amount of ARR in our business.

In fiscal 'twenty, three we made significant product investments, which have accelerated our go to market strategy in turn rapidly accelerating the amount of <unk> in our.

As a result, we have brought our AAR from basically nothing 18 months ago to over $100 million $100 million today and growing.

Speaker 3: As a result, we've grown our ARR from basically nothing 18 months ago to over $100 million today and growing.

In the fourth quarter, we surpassed our revenue guidance coming in above the top end of the range with more than $120 million in revenue.

Speaker 3: In the fourth quarter, we surpassed our revenue guidance coming in above the top end of the range with more than $120 million in revenue.

Speaker 3: We achieved our guidance on adjusted EBITDA with nearly 66 million in the fourth quarter, up almost 10 million compared to the third quarter of fiscal 23.

We achieved our guidance on adjusted EBITDA with nearly 66 million in the fourth quarter up almost $10 million compared to the third quarter of fiscal 'twenty three.

Speaker 3: It goes without saying that year over year comparisons with respect to revenue and adjustivity but are less favorable reflecting lower transaction volumes driven by challenging macroeconomic conditions and uncertainty regarding inflation and rising interest rates. Frank will give you some more details on that in a moment.

It goes without saying the year over year comparisons with respect to revenue and adjusted EBITDA are less favorable reflecting lower transaction volumes driven by challenging macroeconomic conditions and uncertainty regarding inflation and rising interest rates Frank will give you some more details on that in a moment.

Speaker 3: Our stated goal as a company is to lead the global legal software industry. This week we marked a major milestone in this journey when we announced the upcoming launch of our global unity platform.

Our stated goal as a company is to lead the global legal software industry. This week, we marked a major milestone on this journey when we announced the upcoming launch of our global Unity platform.

Speaker 3: This one stop shop will bring together all our full product suite in a single destination with one sign on and one bill for our over 60,000 customers around the world.

This one stop shop and bring together all our full product suite and a single destination with one side on one bill for our over 60000 customers around the world.

Okay.

Well, we've always operated a well oiled backend platform into which we integrate the businesses we acquire our new global Unity platform is a result of a dedicated effort to integrate all of our customer facing applications on the front end, enabling our customers to access all of our capabilities.

Speaker 3: While we've always operated a well-oiled back-end platform into which we integrate the businesses we acquire, our new global unity platform is a result of a dedicated effort to integrate all of our customer-facing applications on the front-end, enabling our customers to access all of our capabilities from one frictionless destination.

From one frictionless destination did.

Speaker 3: This is a first of its kind and truly disruptive offering for the legal profession and is unmatched by any other provider in the market today.

The first of its kind and truly disruptive offering for the legal profession and is unmatched by any other provider in the market today.

We're launching the Google Global Uli platform in the U K in the coming few weeks candidate later this year and Australia, Ireland in calendar 2024.

Speaker 3: We're launching the global yearly platform in the UK in the coming few weeks, Canada later this year, and Australia, Ireland in calendar 2024.

Yes.

Speaker 3: Our Global Unity Platform project is part of a larger product development strategy at Dine Durham that supports our goal.

Our global yearly platform project as part of a larger product development strategy at Dine Durham that supports our goals.

Speaker 3: In the past, we received questions from the investing community regarding our total product investment.

In the past we were we received questions from investment community regarding our total product investment.

Speaker 3: During fiscal 24, we intend to invest more than $60 million in product innovation and R&D to further enhance our industry-leading practice management capabilities across the markets we operate.

Fiscal 'twenty four we intend to invest more than $60 million in product innovation and R&D to further enhance our industry, leading practice management capabilities across the markets we operate.

In addition to the global yearly platform project and enhancing our practice better capabilities. The team is actively working on AI applications for our practice management software specifics specifically in the form of document generation for law firms.

Speaker 3: In addition to the global unity platform project and enhancing our practice management capabilities, the team is actively working on AI applications for our practice management software, specifically in the form of document generation for law.

Speaker 3: This fall, our first generative AI-enabled capabilities will significantly streamline and improve how law firms can create an initial draft of a will.

This fall this fall our first generative AI enabled capabilities will significantly streamline and improve how law firms can create an initial draft of a well.

Speaker 3: When opening will matters in our practice management software, users will seamlessly interact with a generative AI-enabled capability that through a multi-turn or chat or conversational experience will in seconds generate an initial draft of a will.

When opening will matter has been our practice management software users will seamlessly interact with the generated AI enabled capability that through a multi turn or chat or conversational experience within seconds generate an initial draft of a well.

Speaker 3: Through generative AI, DynDerm will have reduced to seconds, a task that used to take hours of manual work, or 30 minutes or so even, using our traditional questionnaire style workflows.

To generate of AI <unk>, and we will have reduced two seconds of tasks that used to take hours of manual work or 30 minutes or so even using our traditional question your style workflows.

Our strategy to diversify our revenue streams across a larger total share of wallet that legal market spends can be seen in our results.

Speaker 3: Our strategy to diversify our revenue streams across a larger total share of wallet that legal market spends can be seen in our results.

Speaker 3: As of June 30th, 58% of our revenue in the quarter was related to law firms conducting matters on behalf of their clients using software, which is a significant decrease from the 68% in the same period the prior year, and that's our software.

As of June 30, or 58% revenue in the quarter was related to rail related to law firms conducting matters on behalf of their clients using software, which is a significant decrease from the 68% in the same period the prior year and that's our software.

More importantly, as I previously mentioned <unk> grown.

Speaker 3: More importantly, as I previously mentioned, ARR has grown.

Growth has increased by 117% since the start of last fiscal year.

Speaker 3: growth has increased by 117% since the start of last fiscal year.

Speaker 3: We also materially strengthened the company's executive leadership team this quarter with the additions of David Nash as Chief Products Officer and Aaron Eichenlaub as Chief Revenue Officer. Both David and Aaron have deep software experience with growing and innovating companies that deliver enhanced value to their B2B customers.

We also materially strengthened the company's executive leadership team this quarter with the addition of David Nash as Chief product Officer, and Aaron I can lob as Chief revenue Officer, both David and Eric have deep software experience with growing and innovating companies that deliver enhanced Val.

To their <unk> customers.

With respect to our capital allocation priorities, we intend to drive our total leverage ratio, including the convertible debenture below four times adjusted EBITDA. However.

Speaker 3: With respect to our capital allocation priorities, we intend to drive our total leverage ratio, including the convertible of the venture, below four times adjusted EBITDA. However, we believe we can walk and chew gum at the same time and we must balance speed leveraging with our stated growth objectives.

We believe we can walk and chew gum at the same time, and we must balance deleveraging with our stated growth objectives. Therefore, we will also continue to be disciplined and prudent in our acquisition strategy.

Speaker 3: therefore we'll also continue to be disciplined and prudent in our acquisition strategy.

Speaker 3: As many of you know, we have a strong track record of acquiring assets and rapidly and de-leveraging what we drive revenue and cost energies to get to a post-energy goal.

As many of you know we have a strong track record of acquiring assets and rapidly Delevering rapid you a cup and deleveraging, while we drive revenue and cost synergies to get to a post synergy goal.

Speaker 3: We've established clear goals for the business. We have a set target of annually delivering 20% to 25% adjusted EBITDA growth, consisting of approximately 50% organic, meaning economic growth, wallet share growth, and pricing power, and 50% from M&A.

We've established clear goals for the business, we have a set target of annually delivering 20% to 25% adjusted EBITDA growth consisting of approximately 50% organic meaning economic growth wallet share growth and pricing power and 50% from M&A.

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Speaker 3: An important aspect of achieving this goal is building more predictable recurring revenue streams and diversifying our revenue mix across our customer base.

An important aspect of achieving this goal is building more predictable recurring revenue streams and diversify your revenue mix across our customer base.

We have a set goal of 50% recurring revenue.

Speaker 3: We have a set goal of 50% recurring revenue within three years. We also have a goal of diversifying our exposure to real estate transactions to less than 33%.

Within three years, we also have a goal of diversifying our exposure to real estate transactions to less than 33%.

Speaker 3: We built a world-class software business of scale. It's a business that can generate strong top-line growth with stable cash flows and very healthy markets.

We've built a world class software businesses scale, it's a business that can generate strong topline growth with stable cash flows and very healthy margins.

Speaker 3: We look forward to updating our progress as we continue to grow, optimize and diversify our global business. I'll now turn it over to Frank to review the financials. Frank-

We look forward to updating our progress as we continue to grow optimize and diversify our global business I will now turn it over to Frank to review the financials Greg.

Speaker 4: Thank you, Matt, and good afternoon, everyone. This afternoon, we reported our fourth floor and full year 2023 results.

Thank you, Matt and good afternoon, everyone.

This afternoon, we reported a fourth floor and full year 2023 results.

Speaker 4: And please report that we achieved the guidance we provided you in May.

I am pleased to report that we achieved the guidance we provided to you in may.

Speaker 4: Our results continue to demonstrate the resiliency and consistency of the business despite the challenging market conditions and significantly lowered real estate transactions we've had to navigate during the past 12 months.

Our results continue to demonstrate the resiliency and consistency of the business. Despite the challenging market conditions and significantly lowered our real estate transactions, we've had to navigate during the past 12 months.

Speaker 4: This consistency demonstrates how we're able to manage through market cycles while still delivering shareholder value.

This consistency and demonstrates how we're able to manage through market cycles, while still delivering shareholder value.

Our diversification strategy and build out of our pocket spanned the solutions are working as we continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions.

Speaker 4: Our diversification strategy and build out of our product's bandwidth solutions are working as we continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions.

Speaker 4: Annual recurring revenue contracted was 19% as of June 30th, 2023, compared to just 10% in the same period last year. And revenue exposed to real estate transactions, volumes globally Q4, was 58% compared to 68% in the same period of fiscal 2022. While revenue exposed to real estate transactions in Canada was 33% compared to 45% in the same period of last year.

Annual recurring revenue contracted was 19% as of June 32023, compared to just 10% in the same period last year and revenue exposed to real estate transactions volumes globally in Q4 was 58% compared to 68% in the same period of fiscal 'twenty two.

While revenue exposed to real estate transactions in Canada was 33% compared to 45% in the same period of last year.

Speaker 4: We reported a revenue of $120.2 million during the fourth quarter, an increase of $16.1 million, or more than 15%, compared to the third quarter of fiscal 23.

We reported revenue of $122 million during the fourth quarter, an increase of $16 1 million or more than 15% compared to the third quarter of fiscal 'twenty three.

Speaker 4: On a sequential basis, you can see the market has improved from the lows we saw in the second and third quarter periods of fiscal 23. Now keep in mind, our fiscal 24 period is typically a stronger seasonal period for us. However, we are not back to normalized levels at this stage.

On a sequential basis, you can see the market has improved from the lows. We saw in the second and third quarter periods of fiscal 'twenty three now keep in mind. Our fiscal Q4 period is typically a stronger seasonal period for us. However, we are not back to normalized levels at this stage.

Speaker 4: Fourth quarter revenue decreased by 9.5 million or 7% in the same period last year.

Fourth quarter revenue decreased by $9 5 million or 7% in the same period last year.

The change is primarily related to market conditions, leading to lower real estate transactions versus the prior year.

Speaker 4: changes primarily related to market conditions leading to lower real estate transactions versus the prior year.

Fiscal year 2023 revenue was 100 was $451 million, a decrease of $23 7 million or 5% from fiscal 'twenty two.

Speaker 4: Fiscal year 2023 revenue was $451 million, a decrease of $23.7 million or 5% from fiscal 22.

Speaker 4: The change is primarily result of the conditions I referenced earlier.

The change is primarily a result of Merck conditions I referenced earlier.

We generated adjusted EBITDA of $65 7 million in the fourth quarter of fiscal 'twenty, three an increase of nearly $10 million or 17% compared to the third quarter of fiscal 'twenty three.

Speaker 4: We generated a justity beta of 65.7 million in the fourth quarter of fiscal 23, an increase of nearly 10 million for 17% compared to the third quarter of fiscal 23.

Speaker 4: Adjusted EBITDA decreased by 9.5 million or 13% compared to the same period last year. We continue to maintain our strong EBITDA margins coming at 55% this quarter, which is in line with our target range of 50 to 60%.

Adjusted EBITDA decreased by $9 5 million or 13% compared to the same period last year. We continued to maintain our strong EBITDA margins coming at 55% this quarter, which is in line with our target range of 50% to 60%.

Yes.

Speaker 4: Adjustment EBITDA for fiscal 23 was $243.8 million, a decrease of $23 million, or 9% compared to fiscal 22. The change is primarily a result of lower revenues, partially offset by lower operating costs, net acquisition, and tax.

Adjusted EBITDA fiscal 'twenty, three was $243 8 million, a decrease of $23 million or 9% compared to fiscal 'twenty two.

Change is primarily a result of lower revenues, partially offset by lower operating costs net of acquisition and tax.

Speaker 4: Adjust the EBITDA margin to 54% for the entire fiscal 23.

Adjusted EBITDA margin was 54% for the entire fiscal 'twenty three.

Total operating costs, which includes direct costs technology operations costs, G&A and sales and marketing expenses were $54 5 million for the quarter or 45% of revenues, which is in line with the prior year period.

Speaker 4: Total operating costs, which includes direct costs, technology operations costs, G&A, and sales and marketing expenses, or $54.5 million for the quarter, or 45% of revenues, which is in line with the prior year period.

Speaker 4: Net of the impact of expenses from fiscal 23 acquisitions, our operating costs for the quarter were $49.7 million, which demonstrates improvements from our cost reduction initiatives implemented earlier in the fiscal year.

Net of the impact of expenses from fiscal 'twenty three acquisitions, our operating costs for the quarter were $49 7 million demonstrates the improvements from our cost reduction initiatives implemented earlier in the fiscal year.

Speaker 4: As we require assets, we continuously look for ways to drive cost energies and eliminate redundancy.

As we acquire assets and continuously look for ways to drive cost synergies and eliminate redundancies.

Speaker 4: We expect our ongoing operating costs to be within the 40 to 50 percent range of revenue.

We expect our ongoing operating cost to be within the 40% to 50% range of revenues.

Speaker 4: Net finance costs for the quarter were $37 million compared to $14.4 million in the same period of last year.

Net finance costs for the quarter were $37 million compared to $14 4 million in the same period of last year.

Speaker 4: The increase is due to an increase in interest rates and lower favorable non-cash impacts and the change in fair value of our convertible debentures and continued considerations.

The increase is due to an increase in interest rates and lower favorable noncash impact from the change in fair value of our convertible debentures and continues considerations.

Speaker 4: and loss on the settlement of loans as compared to the prior period.

And loss on the settlement of loans as compared to the prior period.

As a reminder, <unk> accounting requires us to mark to market on our fair value of these instruments each quarter. So we do expect this variability in our finance costs to continue.

Speaker 4: As a reminder, IFRS Accounting provides us the market to market on fair value of these instruments each quarter, so we do expect its variability in our finance costs to continue.

Acquisition restructuring and other costs for the quarter were $9 2 million or $8 million, excluding noncash items.

Speaker 4: Acquisition for structuring another cost for the quarter or $9.2 million or $8 million excluding non-cash items.

Speaker 4: This was a decrease from 16.4 million in the fourth quarter of fiscal 2022, primarily related to the TM group and link transactions being behind us. And we anticipate downward trend to continue.

This was a decrease from $16 4 million in the fourth quarter of fiscal 'twenty to.

Primary related to the TM group and linked transactions being behind us and we anticipate this downward trend to continue.

We announced the sale of TM group subsequent to the end of fiscal 'twenty three.

Speaker 4: We announced the CTLM group subsequent to the end of fiscal 23.

Speaker 4: As part of the transaction, the company received $75.6 million Canadian in cash at closing on August 3rd. Net of transaction costs incurred with up to $70.9 million Canadian in potential additional earn-out payments between 2023 and 2026.

As part of the transaction the company received $75 6 million Canadian cash at closing on August 3rd net of transaction costs incurred with up to $70 9 million Canadian and potential additional earn out payments between 2023 and 2026.

Speaker 4: During the fourth quarter, we recorded a non-cash impairment charge on the sale of $66.7 million, which impacted net income for the period.

During the fourth quarter, we recorded a noncash impairment charge on the sale of $66 7 million, which impacted net income for the period.

Speaker 4: Now turning to our balance sheet, as of June 30th, 2023, we had approximately 132 million liquidity. This liquidity consists of cash, the revolving credit facility, and a delayed draw term loan.

Now turning to our balance sheet as of June 30 of 2023, we had approximately $132 million of liquidity. This liquidity consists of cash the revolving credit facility and the delayed draw term loan.

Speaker 4: Our leverage ratio based on fiscal 2024 consensus and excluding the impact of the convertible venture is currently 3.7 times as of June 30th.

Our leverage ratio based on fiscal 2020 for consensus and excluding the impact of the convertible debenture is currently three seven times as of June 30.

Good afternoon.

Jenny: My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dye & Durham 4th quarter and fiscal year 2023 earnings call.

Speaker 4: Subsequent to the end of the period, we used the upfront net proceeds from the investor of the TM group and cash operations to pay down $84 million in debt.

Subsequent to the end of the period, we used the upfront net proceeds from the divestiture of the TM group and cash operations to pay down $84 million in that.

Ross Marshall: I would now like to turn to call over to Ross Marshall.

Speaker 4: During the same period, we also drew 43.5 million from the delayed draw from loan to fund acquisition.

During the same period, we also drew $43 5 million from the delayed drop term loan to fund acquisitions.

Ross Marshall: Investor relations on behalf of Dye & Durham, Mr. Marshall, you may begin your conference. Thank you Jenny and good afternoon. Welcome to the Dye start. We'd like to remind you that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Dye & Durham and its business and disclosure regarding possible events, conditions or results that are based on information currently available for management which indicates management's expectation of future growth results of operations of business performance and business prospects and opportunities.

Speaker 4: The net result of this is that we have reduced our debt by approximately $41 million.

The net result of this is that we have reduced our debt by approximately $41 million.

This afternoon, we announced a normal course issuer bid as the existing program terminates on September 29, 2023, the NCI will allow us to acquire up to $2 $75 million outstanding common shares or approximately 5% of the total $55 million issued outstanding shares as of September 13, 2023.

Speaker 4: This afternoon, we announced the normal course issuer bid as the existing program terminates on September 29, 2023. The NCIB will allow us to acquire up to 2.75 million outstanding common shares or approximately 5% of the total 55 million issued outstanding shares as of September 13, 2023.

Ross Marshall: Such statements are made as of this date here of, and Dye & Durham assumes no obligation to update or revise them to reflect events, disclosures, or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks for uncertainties could cause results to differ materially from results discussed today. Given these risks and uncertainties, one should not play some due reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings.

Speaker 4: We view our shares as a great opportunity in the market available to us. We'll continue to be disciplined in our approach to double allocation as we grow the business.

We view our shares as a great opportunity in the market available to US we will continue to be disciplined in our approach to capital allocation as we grow the business.

Speaker 4: With that, I'll turn it back to the operator for Q&A. Jenny?

With that I'll turn it back to the operator for Q&A Jenny.

Thank you.

Speaker 1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchstone bow.

Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on you touched on currently.

Speaker 1: You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the tail. If you are using a speakerphone, please lift the handset before pressing any piece.

What was your three Cohen from acknowledging your request.

<unk> will be taken in the order received should you wish to cancel your request. Please press the star followed by the tail.

Using a speakerphone please pick up the handset before pressing any case.

Speaker 1: Once again, that is store one should do it to ask a question.

Once again that is star one should you wish to ask a question.

Ross Marshall: With those limitations, our MDNA and our earnings press release issued today for additional information.

Speaker 1: Your first question is from Thanos Moscapulos from VML Capital. Please ask your question.

Your first question is from a fairness muska Carlos from BMO capital. Please ask your question.

Ross Marshall: Joining us on the call today are Math Proud, Dye & Durham Chief Executive Officer, and Frank Elizo, Dye & Durham Chief Officer. A question and answer session with will follow the formal remarks for research candidates.

Speaker 5: Good afternoon with respect to M&A, it seems like you completed 42M of M&A this quarter 55M plus quarter ends. Any color you can provide in terms of the nature of the assets or geographies that require.

Hi, good afternoon.

With respect to M&A. It seems like you completed 22 million of M&A this quarter $55 million post quarter end.

Matthew Proud: I now turn the call over to Math Proud. Thanks Ross and good afternoon everyone. The business performed well in the quarter and we are the delivered or exceeded on what we said we would deliver. Our performance once again demonstrates the strength and resilience of our business, as well as the significant efforts we have made to diversify our revenue base and grow our contracted revenue. As many of you know, we sell software to low-at-law firms globally.

Any color you can provide in terms of.

The nature of the assets or geographies are required.

Yes.

Speaker 3: Yeah, the acquisitions this quarter were in the United Kingdom, and it was, it's in relation to practice bandwidth software for law firms.

The acquisitions this quarter were in the United Kingdom.

And it was.

In relation to bracket battery software for law firms.

Okay, and what about the hip and $5 million loss quarter and any comment on that.

Matthew Proud: We remain focused on expanding our wallet share across this large and growing market. In fiscal 23, we made significant product investments, which have accelerated our go-to-market strategy, in turn rapidly accelerating the amount of ARR in our business. As a result, we have run our ARR from basically nothing 18 months ago to over $100 million dollars today and growing. In the fourth quarter, we surpassed our revenue guidance coming in above the top end of the range with more than $120 million dollars in revenue.

Yes, so so I think what Matt said this quarter he meant.

Speaker 4: Yeah, so so I think when Matt said this, he meant this, this current quarter Q1 panels in Q4. We have done the post practice acquisition that was announced that was in the mailing geography of South Africa. That we were able to complete in, I believe, May of 2023.

In this current quarter Q1 panels in Q4.

You had done.

Post practice.

Acquisition that was announced.

But that was.

Mainly the geography is South Africa.

We were able to complete I believe may of 2023.

Okay.

Yes.

Speaker 5: With respect to the new launch of Unity, just given that you're leveraging some common R&D across the geographies, as that platform fully rolls out, but there'd be some incremental cost synergies from an OPEX perspective or a cross-market perspective that would...

With respect to new launch.

Unity just given that.

Matthew Proud: We achieved our guidance from Adjust City, but with nearly 66 million in the fourth quarter, up almost 10 million compared to the third quarter of fiscal 23. It goes with those saying that year-over-year comparisons with respect to revenue and Adjust City, but are less favorable, reflecting lower transaction volumes driven by challenging macroeconomic conditions and uncertainty regarding inflation and rising interest rates. Frank will give you some more details on that in a moment.

Youre leveraging some common R&D across across the geographies as a platform fully rolls out.

But there'll be some incremental cost synergies from an opex perspective, or a gross margin perspective that we might say.

I mean look long term, we will you will always look for margin improvement and efficiencies of scale and we will get that we do have duplicate cost bases in a lot of places.

Speaker 3: I mean, look, long term, we're always looking for margin improvement and efficiencies of scale, and we will get that. We do have duplicate cost basis in a lot of places, but it does take time to realize that. So yes is the answer.

But it does take time to realize that so.

Matthew Proud: Our state and goal as a company is to lead the global legal software industry. This week we marked a major milestone in this journey where we announced the upcoming launch of our global unity platform. This one stop shop will bring together all our full product suite in a single destination with one sign on and one bill from our over 60,000 customers around the world. We will build back end platform into which we integrate the businesses we acquire.

Yes is the answer but that will take time.

Matthew Proud: Our new global unity platform is a result of a dedicated effort to integrate all of our customer facing applications on the front end, enabling our customers to access all of our capabilities from one frictionalist destination. This is the first of its kind and truly disruptive offering for the legal professions and is unmatched by any other provider in the market today. We're launching the global unity platform in the UK in the coming few weeks, Canada later this year and Australia Ireland in calendar 2024. Our global unity platform project is part of a larger product development strategy at Dye & Durham that supports our goals.

Speaker 5: More broadly on synergies, I mean, you've obviously been cutting costs through the downturn. Would we have seen the full impact of

More broadly on synergies I mean, you've got.

We see them cutting costs through this downturn.

Would we have seen the full impact.

Recent cost cutting initiatives in the June quarter results or might there be some incremental benefit in that regard that will flow through into Q1.

Speaker 5: recent cost-cutting initiatives in the June quarter results, or might there be some incremental benefit in that regard that will flow through into Q1.

Look as we buy businesses that continue to do that we continue to take cost out. So youll always we're always looking for that downward trajectory.

Speaker 3: Look, as we buy business and continue to do that, we continue to take costs out. So you'll always we're always looking for that downward trajectory. Do we have any kind of large. You know, large programs take costs out right now? No, but we're always looking to be efficient with our. With our cost structure.

Do we have any kind of large large program to take costs out right now, but we're always looking to be efficient with our with our cost structure.

Okay last question for me, obviously last quarter, you had given us some quarterly guidance as we think out to temper quarter, obviously, some moving parts Chris.

Speaker 5: Okay, the last question for me, obviously, last quarter, you've given us some quarterly guidance. As you think of the December quarter, obviously, some in parts, no one has a crystal ball, but

It'll ball, but.

And any broad parameters, we can think of in terms of as you look at.

Speaker 5: and any broad parameters we can think of in terms of as you look at the volume of business that you're doing currently.

The volume of business that Youre doing currently.

Speaker 5: directionally, would you expect either that to be similar, up or down, any color you can find?

Directionally would you expect similar up or down any any color you can provide that Robert.

Well look I mean given.

Speaker 3: Well, look, I mean, given, you know, we sell software to law firms and given very common adequate they open is real estate, commencing transactions. Q4 is generally our strongest quarter. But but I mean, we're seeing generally in line with what that we expected. You'll see a bit of softening in Q1 because that's just cyclical. But to be generally in line where we are now.

We sell software to law firms and given great color of advocate they open as real estate conveyancing transactions.

Matthew Proud: In the past, we received questions from the investment community regarding our total product investment. During fiscal 24, we intend to invest more than $60 million in product innovation and R&D to further enhance our industry leading practice management capabilities across the markets we operate. In addition to the global unity platform project and enhancing our practice management capabilities, the team is actively working on AI applications for our practice management software specifically in the form of document generation for law firms.

Q4 is generally our strongest quarter.

But I mean, we're seeing generally in line with that expected youll see a bit of softening in Q in Q1, because thats just cyclical but should be generally in line, where we are now.

Yes generally.

Alright, I'll pass along thanks.

Matthew Proud: This fall, this fall, our first generative AI enabled capabilities will significantly streamline and improve how law firms can create an initial draft of a will. When opening will matters in our practice management software users will seamlessly interact with the generative AI enabled capability that through a multi turn or chat or conversational experience will in seconds generate an initial draft of a will through generative AI Dye & Durham will have reduced to seconds a task that used to take hours of manual work or 30 minutes or so even using our traditional question your style workflows.

Speaker 1: Thank you. Your next question is from Robert Young from Kennecore Community. Please ask your question.

Thank you. Your next question is from Robert Young from Canaccord Genuity. Please ask your question.

Hi, Good evening, maybe I'll start off with a couple of clarifications from the prepared comments I think you said.

Speaker 3: Hi, good evening. Maybe I'll start off with a couple of clarifications from the prepared comments. I think you said

Speaker 3: that you intend to drive total leverage, including the convert below four times. And then later in the call, you'd said that the leverage is 3.7 times. I assume that's without the converter. It's a different frame.

That you intend to drive total leverage including the convert below four times and then later in the call. You had said that the leverage is three seven times I assume thats without the converter, it's a different frame.

Clear that discrepancy for me.

Speaker 3: Yeah, Rob, when I mentioned below 4 times that was including the convert. Um, and when Frank talked about senior leverage, that was without the convert.

Yes, Rob what I mentioned below four times that was including the convert.

And what Frank talked about senior leverage that was without the convert.

Okay, and maybe if you could just elaborate on what the.

Speaker 3: And maybe if you could just elaborate on what levers you have to drive leverage below four times. I assume growth in EBITDA is one, but are there any other plans to reduce debt or through free cash that you're generating or through maybe some divestiture if you just maybe walk through the different levers you have.

What levers you have to drive.

Matthew Proud: Our strategy to diversify our revenue streams across a larger total share of wallet that legal market spend can be seen in our results. As of June 30, 58% of our revenue in the quarter was related to law firms conducting matters on behalf of their clients using software, which is a significant decrease from the 68% in the same period the prior year and that's our software. More importantly, as I previously mentioned, AR has grown, growth has increased by 117% since the start of last fiscal year.

Leverage below four times I assume growth in EBITDA as one but are there any other.

Plans to reduce debt or.

Through free cash that you generate through maybe some divestiture if you just.

Maybe walk through the different levers you have there.

Speaker 3: Look, the primary focus is growing the business and as we do that, as we grow our earnings, we will naturally deliver the business and so that remains our focus.

Looked at the primary focus is growing the business and as we do that.

As we grow our earnings we will naturally delever the business.

And so that remains our focus.

Speaker 3: You know, being prudent with our capital also helps. The business does generate a lot of cash.

Being prudent with our capital also helps us as the business does generate a lot of cash.

Speaker 3: And yes, of course, if we wanted to.

And yes of course, if we if we wanted to make any rapid rapid decrease that we could always look at and getting rid of non core or non strategic assets.

Matthew Proud: We also materially strengthened the company's executive leadership came this quarter with the additions of David Nash as chief products officer and Aaron I can lob as chief revenue officer. Both David and Aaron have deep software experience with growing and innovating companies that deliver enhanced value to their B2B cup, with respect to our capital allocation priorities. We intend to drive our total leverage ratio, including the convertible adventure, below four times adjusted EBITDA.

Speaker 3: make any rapid decrease in that. We could always look at getting rid of non-core or non-strategic assets, but our primary focus is growing the business.

Primary focus is growing the business.

Okay.

Speaker 6: Okay, the second thing I want to clarify and make sure that I heard it correctly. I think you said that the ongoing...

Second thing I wanted to.

Clarify them make sure that I heard it correctly I think you had said that the ongoing.

Speaker 6: Operating costs was 40 to 50 percent or were you saying that the ongoing?

Operating costs was 40% to 50% or where you're seeing the ongoing operating.

Margin was to be 40 to 50 question I just want to make sure im clear on that.

Speaker 6: 40 to 50 percent. I just want to make sure I'm clear on that. Yeah, no, it's the operating cost per cent of revenue is 40 to 50 or, perversely, the margin would be 50 to 60 percent. Okay, and when I map that to EBITDA, is that sort of consistent with the previous guidance you've given in the past? Yeah. Yeah.

The operating cost as a percentage of revenue was 40 to 50 or Conversely.

Matthew Proud: However, we believe we can walk and chew gum at the same time, and we must balance the leveraging with our stated growth objectives. Therefore, we'll also continue to be disciplined and prudent in our acquisition strategy. And many of you know, we have a strong track record of acquiring assets and rapidly and delivering rapidly and and leveraging what we drive revenue and cost energies to get to a close energy goal. We've established clear goals for the business.

The margin would be 50% to 60%.

Okay, and then when a map that to EBITDA is that sort of consistent with the previous guide.

<unk> given in the past.

Yes, there is no there's been no change to that Rob.

Okay great.

And.

Speaker 6: The next question, I think it suggested that special charges...

Maybe the next question I think suggested that spec.

Special charges might be lower in the coming period, just because you are moving to appear with less activity with TM group.

Speaker 6: might be lower in the coming period just because you're moving to a period with less activity with TM group and

Matthew Proud: We have a set target of annually delivering 20 to 25 percent adjusted EBITDA growth, consisting of approximately 50 percent organic, meaning economic growth, wallet share growth, and pricing power, and 50 percent from M&A. An important aspect of achieving this goal is building more predictable recurring revenue streams and diversifying our revenue mix across our customer base. We have a set goal of 50 percent recurring revenue within three years. We also have a goal of diversifying our exposure to real estate transactions to less than 33 percent. We've built a world-class software business of scale. It's a business that can generate strong top-line growth with stable cash flows and very healthy margins.

Lincoln in the past I think you had said that $8 million.

Speaker 6: Excluding noncash. I maybe like, if you give it just a sense.

Excluding noncash maybe.

Maybe if you could.

Give us just a sense.

Speaker 6: what that quarterly special charge, how should we think about that decline? what would a normal...

Of what that quarterly special charge.

How should we think about that decline.

Is that normal gasoline will be for <unk>.

Speaker 4: Yeah, so I mean, you would have seen the large reduction we had in Q4. As I mentioned, the report was 9.2, but excluding the non-cash items, it was 8 million for the quarter. And that compares to 16.4 million just a year ago. So those two transactions are behind us.

Yes. So I mean, you would have seen that the large reduction we had in Q4.

As I mentioned.

Reported was $9 two but excluding noncash.

Noncash items was $8 million for the quarter and that compares to $16 4 million a year ago. So.

Those two transactions are behind us.

Speaker 4: You know, going forward, we do expect, you know, like obviously with those two transactions, you know, behind us, we don't expect the same levels of spend that we've done in the last 12 months. And we'll continue to drive that number down.

Going forward, we do.

Do you expect like obviously with those two transactions.

Behind Us we don't expect the same levels of spend that we've done the last 12 months and.

Matthew Proud: We look forward to updating our progress as we continue to grow, optimized, and diversify our global business.

And we will continue to drive that number down.

Okay and then last question for me would just be around the new sales strategy, you talked about the new hires and product management and in.

Frank Liso: Now turn it over to Frank to review the financials. Frank, thank you Matt and good afternoon everyone.

Speaker 6: And then last question for me would just be around a new sales strategy.

Frank Liso: This afternoon we reported a fourth, fourth, and full year 2020 results. I am pleased to report that we achieved the guidance we provided you in May. Our results continue to demonstrate the resiliency and consistency of the business despite the challenging market conditions and significantly lower the real estate transactions we've had to navigate during the past 12 months. This consistency demonstrates how we're able to manage through market cycles while full delivering shareholder value.

Speaker 6: I think we talked about expansion of unity into the UK, but I think last quarter you were talking about moving into the UK

And sales I think you talked about expansion of <unk> into the U K, but I think last quarter, you were talking about moving into the U K with the.

Speaker 6: current sales effort bundling practice management. So maybe we.

The current sales effort bundling practice management, so maybe you could just give us.

Speaker 6: give maybe a quick summary of how that practice management bundling strategy is moving forward, maybe the timeline if it's tied to unity, and then I'll pass.

Maybe a quick summary of how that practice management bundling strategy is moving forward, maybe the timeline if it's tied to unity and then I'll pass the line.

Speaker 3: Yes, so two different concepts here, Rob. We talked about our Unity global platform. That is, you know, single landing page, single place to access all our applications, regards what geography you're in. One bill, one view for the customer.

Yes.

And concepts here, Rob we talked about our unique global platform that is <unk>.

Frank Liso: Our diversification strategy and build out of our Pakistan solutions are working as we continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions. Annual recurring revenue contracted was 19 percent as of June 30, 2023, compared to just 10 percent in the same period last year, and revenue exposed to real estate transactions, volumes globally in Q4 was 58 percent compared to 68 percent in the same period of fiscal 22.

Single landing page single place to access all of our applications for grants what geography year end.

One Bill 1 billion for the customer.

As it relates to our practice management system, which you can see for clarity was traditionally called unity.

Speaker 3: As relates to our practice management system, which for clarity was traditionally called Unity.

Speaker 3: But Unity Practice Management, we have been in Canada bundling that with our accounting module and other capabilities we have which has significantly helped us in our take up in ARR.

But generally practice management, we have been in Canada, bundling that with our accounting module and other capabilities, we have which has significantly helped us in our take up in <unk>.

Speaker 3: as we sell that via a contractual offering. We're in the process of scaling up our team in the UK to roll that out. We haven't started rolling that out yet in that market.

As we sell that biased by a.

Contractual offering.

Frank Liso: While revenue exposed to real estate transactions in Canada was 33 percent compared to 45 percent in the same period of last year. We reported a revenue of 120.2 million during the fourth quarter, an increase of 16.1 million or more than 15 percent compared to the third quarter of fiscal 23. On a sequential basis, you can see the market has improved from the lows we saw in the second and third quarter periods of fiscal 23. Now keep in mind, our fiscal Q4 period is typically a stronger seasonal period for us.

We're in the process of.

Of scaling up our team in the UK and roll that out actually we haven't started rolling that out yet in that market.

Speaker 3: But that's something we're in the process of doing. And likewise, we've just started in Australia to sell a subscription offering.

But that's something we're in the process of doing with <unk>.

Likewise, we have just started in Australia to sell to sell a subscription offering that is very similar to.

Speaker 3: that is very similar to what I just talked about. So again, very early days, but we have started in Australia and UK will be next.

What I just talked about so again very early days, but we have started in Australia and UK will be next.

Speaker 6: Okay, and then the natural follow-on to that is how are your customers reacting to that new offering in the UK.

Okay and then the natural follow on to that is how how are your customers reacting to that new offering in the UK and Australia I'll pass line.

Frank Liso: However, we are not back to normalized levels at the stage. 4th quarter revenue decreased by 9.5 million per 7% in the same period last year. The change is primarily related to market conditions linked to lower real estate transactions versus the prior year. Physical year 2023 revenue was 100 was 451 million a decrease of 23.7 million or 5% from fiscal 22. The change is primarily resolved in the market conditions I referenced earlier.

Speaker 3: Well, it's not launched yet in the UK, it's pending, we're going to roll it out shortly. In Australia, there's already been take-up and it's just launched in the last month or so. So we're already seeing takers. So look, the value prop, as we talked about previously, is real and it's demonstrable and tremendous for the customer. And as we saw in Canada, we were able to drive significant uptake from customers who were willing to contract with us, given the value prop, this will bring the table.

Hello.

Launched yet in the U K with where he is pending we are going to rollout shortly.

Australia is already starting to take up in it's just lunch in the last kind of month or so so we're already seeing takers. So look the value prop as we talked about previously is.

It is real and it's demonstrated bowl and tremendous for the customer.

As you saw in Canada, we are able to drive significant uptake from customers.

We are willing to contract with us given the value proposition, we bring to the table.

Okay. Thanks, a lot thanks for taking the questions.

Frank Liso: We generated adjusted even a 65.7 million the fourth quarter fiscal 23 and increase of nearly 10 million or 17% compared to the third quarter of fiscal 23. Adjusted EBITDA decreased by 9.5 million or 13% compared to the same period last year. We continued to maintain our strong EBITDA margins coming at 55% this quarter which is in line with our target range of 50 to 60%. Adjusted EBITDA for fiscal 23 was 243.8 million a decrease of 23 million or 9% compared to fiscal 22.

Okay.

Speaker 1: Thank you. Your next question is from Kevin Krishna Ratna from Scotiabank. Please ask your question.

Thank you. Your next question is from Kevin Kisner Rochman from Scotia Bank. Please ask your question.

Speaker 7: Hey there, good evening. Just a clarification, you mentioned, I think you mentioned 60 million in R&D expenses. Did I hear that right? Can you just clarify, is that a repurposing, is that geared towards AI? I can't recall what you said the 60 million was related to.

Hey, there good evening, just a clarification you mentioned I think you mentioned $60 million in R&D expenses did I hear that right can you just clarify is that a repurposing.

That geared towards AI I can't recall, what you said the 60 million was related to.

Speaker 3: Yeah, so we get a lot of questions. What's your total spend on R&D and software development? And so over the next fiscal year, we plan to spend approximately 60 million dollars on that or just over 60 million dollars. And so AI is one thing it's related to. It's also related to enhancements in our practice management software as we retool and platform it for new markets and consultant applications.

Yes, so we get a lot of questions of what's your total spend on R&D and software development.

Frank Liso: The change is primarily resolved with lower revenues, firstly offset by lower operating cost net event acquisition impacts. Adjusted EBITDA margin was 54% for the entire fiscal 23. Total operating costs which includes direct costs, technology operations costs, GNA and sales and marketing expenses were 54.5 million for the quarter or 45% of revenues which is in line with the prior year period. Net of the impact of expenses from fiscal 23 acquisitions are operating costs for the quarter were 49.7 million.

And so over the next this fiscal year, we plan to spend approximately $60 million on that are just over $60 million of that.

One thing it's related to it's also related to enhancements in our practice management software as we as we retool and platform yet for new markets in consort applications.

Speaker 3: As we finish the build out for the Unity Global Platform for Canada and Australia, those are the kind of primary uses of those funds. How does that number compare to what you did in R&D?

And as we finished the build out for the unique global platform for for Canada and Australia.

So those are the kind of primary.

Uses of those funds.

How does that number compare to what you did in R&D last year.

It would be up.

Speaker 7: Again, I know you kept the guidance for your target range of 50 to 60 on margins, but given maybe some, is there any sort of cadence to that? Is it kind of like upfront spending, weaker quarters Q1, Q2, and then it uplifts through Q3, Q4? How do we think about the investment cycle?

So the top end so like again I know you kept the guidance for your target range of 50 to 60 on our margins but.

Frank Liso: Demonstrates improvements from our cost reduction issue as it implemented the earlier in the fiscal year. As we require assets, we continuously look for ways to drive cost energies and eliminate redundancies. We expect our ongoing operating cost to be within the 40 to 50% range of revenues. Net finance costs for the quarter were 37 million compared to 14.4 million in the same period of last year. The increase is due to an increase in interest rates and lower favorable non-cash impacts from the changing fair value of our convertible adventures and continued considerations and loss on several of the loans and as compared to the prior period.

Given maybe some is there any sort of.

Cadence to that does it kind of like.

Upfront spending weaker.

Quarters, Q1, Q2, and then the uplift through Q3 Q4, how do we think about the.

The investment cycle.

Speaker 3: I don't really understand the question. You want to repeat that again? Like, I'm sorry, I'm sorry. Yeah, so are you going to be investing upfront? Like, do Q1 and Q2 sort of go, you know, see margins maybe towards the lower end of that?

So that really understand the question European that again I'm sorry.

Yes. So are you going to be investing upfront to Q1, and Q2 sort of go see margins maybe towards the lower end of that.

Speaker 3: Yeah, so I mean, as with the Unity Global Platform, a lot of that has already been built. You know, there is a heavy lift as it relates to taking the practice of management applications globally. So that's the number we anticipate over the next year. It's not really typical, it's maybe flat across the year as we're kind of spending at that rate today. Yeah, Kevin, you would have noticed that Q4, the capital

Yes, so I mean as with the unique global platform a lot of that has already been built.

Frank Liso: As a reminder, IFRS accounting requires us to market market on or fair value of these instruments each quarter, so we do expect its variability and our finance costs to continue. Acquisition for structuring another cost for the quarter or 9.2 million or 8 million excluding non-cash items. This was a decrease from 16.4 million in the fourth quarter of fiscal 22. Primarily related to the TM group and link transactions being behind us and we anticipate that we're trying to continue.

Yeah.

There is a heavy lift as it relates to taking the practice management applications globally.

That's the number.

We anticipate over the next year.

Cyclical it is waving flat across the year.

As we kind of spending at that rate today.

Kevin you would've noticed in Q4 the.

Capital.

Speaker 4: the CapEx spend ticked up a bit. I think it was roughly a nine million amount in Q4. So that's reflective of what Matt was talking about in terms of getting the single sign-on and the global unity platform up and running. So we do expect that to be the current trend, but over time could bring it back to more normalized levels that we saw in the past.

The capex spend.

Tick up a bit.

Frank Liso: We announced the sale of TM group subsequent to the end of fiscal 23. As part of the transaction the company receives 75.6 million Canadian cash at closing on August 3. Net of transaction cost incurred with up to 70.9 million Canadian and potential additional earnout payments between 2023 and 2026. During the fourth quarter, we recorded a non-cash impairment charge on the sale of 66.7 million which impact the net income for the period.

I think it's roughly $9 million amount in Q4. So so that's reflective of what Matt was talking about in terms of.

Getting to single sign on and the global unity platform up and running.

We do expect that.

The current trend, but in over time getting back to more normalized levels that we saw in the past.

Speaker 7: Okay, got it. Okay, I understand. Thank you. Just the last one from me, if you can help us out. I know you did Ghost Practice, you did a few other acquisitions last year, and then you've done the ones that you just talked about subsequent to quarter end. Is there a way you can give us sort of what the total revenue number for all those acquisitions in totality could be, just to help us modeling going forward? Sorry Kevin, we don't disclose that.

Okay got it thanks, Okay I understand thank you.

The last one for me if you can help us out I know you did ghost practice. He did a few other acquisitions last year and then you've done the ones that you just talked about subsequent to quarter end is there a way you can give us sort of what the total revenue number for all of those acquisitions in totality could be just to help us modeling going forward.

Frank Liso: Now turning to our balance sheet, as of June 30th, 2023, we had approximately $132 million of liquidity. This liquidity consists of cash, the revolving credit facility, and of the delayed draw term loan. Our leverage ratio, based on fiscal 2024 consensus, and excluding the impact of the convertible venture, is currently 3.7 times as of June 30th. Subsequent to the end of the period, we use the upfront net proceeds from the Vestor of the TM Group and cash operations to pay down 84 million in debt. During the same period, we also drew 43.5 million from the delayed draw term loan to fine acquisitions. The net result of this is that we have reduced our debt by approximately 41 million.

Sorry, Kevin we don't disclose that.

Alright, no worries I'll pass the line. Thank you.

Thank you. Your next question is from Gavin Fairweather from core Mark. Please ask your question.

Speaker 1: Thank you. Your next question is from Gavin Fairweather from Comor

Oh, Hey, good afternoon, I thought I'd start out on the global platform I guess to what extent do you expect this to be revenue accretive as some of your clients can access kind of more of your product from within a kind of single sign on environment.

Yes, we do anticipate to see revenue accretive it makes the cross sell easier.

Speaker 3: Yeah, no, we do anticipate this to be revenue creative. It makes the cross sell easier. The way you go to market, interact with your customers easier. Having, you know, instead of having, for example, five or six different places you go to, to access your applications in one market, it's all available in one place.

Frank Liso: This afternoon, we announced the normal course issue of bid, as the existing program terminates on September 29th, 2023. The NCIV will allow us to acquire up to 2.75 million outstanding common shares, or approximately 5% of the total 55 million issue that standing shares as of September 13th, 2023. We view our shares as a great opportunity in the market available to us.

The way, we go to market interact with their customers easier having incentive.

Having both example, five or six different places you go to back to your applications in one market is all available in one place.

Speaker 3: And a lot of the use cases, you look at small and medium law markets that we serve, they need the same products, the same demands as they take on work for their clients. And we provide those products to them. So having it all in one place.

And a lot of the use cases, you look at small and medium law the markets that we serve there.

Need the same products the same demands as they as they as they take on work for their clients and we provide those products to having it all in one place we think naphtha used to cross sell it also makes it easier either under contract.

Frank Liso: We'll continue to be disciplined in our approach to double allocation as we grow the business.

Speaker 3: we think naturally leads to a cross-sell. It also makes it easier to get them under contract as you have it all available by one place, by one invoice, et cetera. That's helpful. And is this a pretty seamless kind of migration? Is it kind of switching over the UI for the most part? Or is there a decent amount of kind of hand-holding you need to do?

Frank Liso: With that, I'll turn it back to the offer for Q&A. Thank you.

As you have it all available and one by one place via one invoice et cetera.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question? Please press the star followed by the one on your touchstone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request? Please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any piece. Once again, that is door one. Should you wish to ask a question?

That's helpful and is this a pretty seamless kind of migration is that kind of switching over the you are for the most part or is there a decent amount of kind of handholding you need to deal with you roll this out.

And it did seem us at various analyst.

Okay, Great and then just as we think about transactions kind of bottom bouncing to potentially starting to rebound.

Are you seeing any kind of areas in the business, where you need to kind of add some cost to support higher volume or any other kind of investment priorities you call out just trying to think about kind of operating leverage and in a recovery here.

Thanos Moschopoulos: Your first question is from Santa's Moscopolo from BMO Capital. Please ask your question. [inaudible] We might say. I mean, look, long term, we're always looked for margin improvement in efficiencies scale and we will get that we do have duplicate cost basis in a lot of places, but it does take time to find to realize that so yes is the answer, but that will take time. More broadly on on synergies. I mean, you've obviously been cutting costs through the downturn.

Speaker 3: Yeah, no, the great thing about our business is it's a fairly fixed cost base. We sell software to law firms, so there's no people involved in processing transactions because whatever type of work the clients are doing on the software, the computer does it. So you don't need to add bodies as there's more transactions going through your, through any kind of software application. So that's one of the operating leverage of our business is good from that perspective. So the answer is no, no bodies need to be added.

Yes, no the great thing about our business is it's a fairly fixed cost base and we sell software to law firms. So theres no people involved in processing transactions. It's just whatever type of work the clients are doing on the software. The computer does it. So you don't need to add bodies as as is more transactions going through the year.

Any kind of software application.

So that's one of the operating leverage to get our businesses is good from that perspective. The answer is no nobody would need to be added.

Okay. That's it for me thanks, so much.

Speaker 1: Thank you. Your next question is from Scott Fletcher from CIBC. Please ask your question.

Thank you.

Next question is from Scott <unk> from CIBC. Please ask your question.

Hi, there I wanted to ask a question on the revenue in the quarter relative to the guidance you provided at Q3, you sort of broke out the build into a few categories.

Speaker 8: Hi there. Um, I wanted to ask a question on the revenue in the quarter, relative to the guidance you provided at Q3, you sort of broke out the build into a few categories. Um, is there a specific category that helped you get to the top end of that guide relative to what you laid out?

Is there a specific category that helped you get to the top end of that guide relative to what you laid out in the Q3 presentation.

Yes, thanks costs with your question.

Speaker 4: Yes, and thanks for asking the question. Generally in life Scott with the revenue guidance that we brought, we brought the range of 150 to 120.

Generally in line Scott with regard to the revenue guidance that we provided a range of $1 15 to $1 20.

Speaker 4: And then we did see strength in the ARR as we alluded to previously. Given a seasonal high period of time, we were able to close a lot of contracts in the May and June time frame. And also, you know, some of the revenue contribution from TM was a little higher than expected as well.

And then we did see strength in the ER as Greg alluded to previously.

Given given the seasonal high period of time, we were able to coldwater contracts.

In the May June timeframe.

And also.

Some of the some of the.

But the revenue contribution from from Tim was little higher than I expected as well.

Speaker 8: Okay, thanks. And as a follow up, can you is there anything you can give us in terms of numbers of TM in the quarter just

Okay, Thanks, and as a follow up can you is there anything you can give us in terms of numbers of Tim in the quarter. Just so we can look at modeling going forward.

Speaker 4: Yes, sorry, we don't disclose those numbers, Scott. But you can look back to previous disclosures around percentage of revenue that we previously disposed about a year and a half ago. It'll be that line.

Yes, sorry, we don't disclose those numbers Scott.

But you can look back to previous disclosures around percentage of revenue that we previously disclosed.

Ago, it'll be generally that line.

Thanos Moschopoulos: Would we have seen the full impact of. Recent cost cutting initiatives in the June quarter results, or might have been incremental benefit in that regard that I'll flow through into Q1. But look as we buy business and continue to do that, we continue to take costs out. So you'll always, we're always looking for that downward trajectory. Do we have any kind of large, you know, large program state cost right now? No, but we're always looking to be efficient with our, with our cost structure.

Okay.

Understood and sorry, one thing just a clarification again from the market can you can you just.

Speaker 8: understood and and sorry one thing just a clarification again from the market can you can you just walk us through how much you paid down on the term debt is that

Walk us through how much you paid down on the term debt subsequent to the quarter.

Speaker 4: Yeah, for sure. So on the term debt, we paid down roughly $59 million. That was from the proceeds, direct proceeds from the sale of TM. And then also, so that's been to your end, we paid down an additional $25 million in the revolver, largely from both the TM proceeds, either reimbursements of past costs as well as cash flow operations.

Yes for sure so.

On the term debt, we pay down roughly.

A $59 million that was developed from the the proceed direct proceeds from the from the sale of PM and then also.

Subsequent to year end, we paid down an additional $25 million in the revolver.

Thanos Moschopoulos: If you have any last question for me, obviously last quarter, you've given us some, some quarterly guidance, as you think of the temper quarter, obviously some in parts, no one has a crystal ball, but any broad parameters we can think of in terms of as you look at the volume of business that you're, you're doing currently directionally. Did you expect you to do similar up or down and any covers and find that right?

Largely from both the TM proceeds either reimbursements of past costs as well as.

Cash flow from operations.

Okay, Great I'll pass the line. Thank you.

Speaker 1: Thank you. Ladies and gentlemen, once again, please press star 1 to ask a question. Your next question is from Steven Boland from Raymond James. Please ask your question.

Thank you ladies and gentlemen, once again, please press star one should you wish to ask a question.

Thanos Moschopoulos: Well, look, I mean given, you know, we sell software to law firms and given very common advocate, they open is real estate, commencing transactions. Q4 is is generally our strongest quarter, but I mean, we're seeing generally in line with with that we expected you'll see a bit of softening Q and Q1 because that's just technical, but should be generally in line with where we are now. And generally. All right, I'll pass the line. Thanks. Thank you.

Your next question is from Stephen Volkmann from Raymond James Please ask your question.

Speaker 8: Thanks guys, not to beat this to death, but the unity role of it.

Thanks, guys not to beat this to death, but the unity rollout I just wondered when you move it over to U K Australia.

Speaker 8: move it over to UK, Australia, like all you're doing is

All Youre doing is.

Speaker 8: combining the legacy products that you have with the Unity rollout so it like you said it's just going to one you're not actually getting rid of legacy products that are in those other jurisdictions is that the right way to think about it

Basically combining the legacy products that you have.

With the unity rollout.

You said, it's just going to one you're not actually getting rid of the legacy products that are in those other jurisdictions is that the right way to think about it.

Speaker 3: Yeah, all of our products for the most part are cloud-based. So you're going to one Diane Durham website to log in, one Diane Durham account, one Diane Durham landing page, and being able to access all the applications that you're used to using and more someplace.

Yes, all of our products for most private cloud base. So.

You go into one one <unk> website to log in.

Robert Young: Your next question is from Robert Eung from kind of core community. Please ask your question. Hi, good evening.

<unk> account, one guy in Durham landing page and being able to access all the applications that you used to using and more.

Robert Young: Maybe I'll start off with a couple of clarifications from the prepared comments. I think you said that you intend to drive total leverage, including the convert below four times. And then later in the call, you'd said that the leverage is 3.7 times. I've assumed that's without the convert or it's a different frame. They've just cleared that discrepancy for me. Yeah, Rob, when I mentioned below four times, that was including the convert. And when Frank talked about senior leverage, that was without the convert.

<unk>.

Speaker 8: Okay, and this new, the acquisitions that you did subsequent or in this quarter Q1, you did say it was UK practice, medical software, those will all be integrated into Unity as well, is that correct?

Okay and this new the acquisitions that you did subsequent or in this quarter Q1.

You did say that UK practice management software those will all be integrated into <unk> as well is that correct.

Correct, yes.

Speaker 8: Okay, and then I guess my last question, when you mentioned that your goal is that the 20 to 25% EBITDA growth, 50% organic, 50% M&A, the 55 that you've spent, if I use multiples that you may have paid in terms of whether it was 10 to 15 times, I'm not sure what the multiples are right now in the market, Matt, maybe you could explain that. But...

Okay, and then I guess my last question. When you mentioned that your goal is the 25% $20 to 25% EBITDA growth.

50% organic that you said.

M&A the 55 that you've spent.

These multiples that you may have paid in terms of.

Robert Young: Okay, and maybe if you could just elaborate on what the, you know, what levers you have to drive leverage below four times. I assume growth in EBITDA is one, but are there any other, you know, plans to reduce debt or, you know, through free cash that you're generating or through maybe some divestiture. If you just maybe walk through the different levers you have there. Look, the primary focus is is growing the business.

Whether it was 10 to 15 times I'm not sure what the multiples are right now and then.

And the market, maybe you can explain that.

Speaker 8: Basically the thought is that to get to 12.

Basically the thought is that.

Get to 12 and a half.

Speaker 8: of M&A, you're probably gonna have to do more M&A. Is that a fair assessment?

M&A.

Probably going to have to do more M&A is that a fair assessment as well.

Speaker 3: To get to the 20%, you have to emanate. That is correct, yes. Okay, and what kind of multiples are you saying?

To get to yes, correct.

Robert Young: And as we do that, as we grow our earnings, we will naturally deliver the business. And several mains are focused. You know, being prudent with our capital also helps with the business does generate a lot of cash. And yes, of course, if we, if we wanted to make any rapid, rapid decrease in that, we could always look at. At getting rid of non core or non strategic assets, but our primary focus is growing the business.

Get to 20% you have to do M&A that is correct yes.

Okay, and what kind of multiples are you seeing in the market right now okay.

Speaker 3: Okay, so it's too expensive to be careful. We're being very, you know, very, very selective.

Okay. So there is still expenses being careful we're being very very selective.

The reality is.

Speaker 3: You know, our market we serve is fast growing, has a lot of favorable characteristics to it.

Or the market. We serve is SaaS growing has a lot of favorable characteristics to it.

Speaker 3: And we are focusing more on businesses that have steady AR bases.

And we are focusing more on businesses that have steady basis.

Speaker 3: So look, multiples are still in the mid to high teens often.

So look multiples are and they're still in the mid to high teens often.

There is sometimes you can find better deals and we look to be as prudent as we can.

Speaker 3: Sometimes you can find better deals and we look to be as prudent as we can. So you've got to be very selective, try to use structure where possible to share risk with sellers. But, but they're still high.

Robert Young: The second thing I want to clarify, make sure that I heard it correctly, I think you said that the ongoing operating costs was 40 to 50% or were you saying that the ongoing operating margin was to be 40 to 50% I just want to make sure I'm clear on that. That's sort of consistent with the previous guidance you've given in the past. Yeah, there's been no change to that Rob. Okay, great.

So you've got to be very selective and try to use structure, where possible to share risk with sellers, but they are still high.

Okay. That's all I have thanks.

Thanks, guys.

Speaker 1: Thank you. There are no further questions at this time. I will now turn the call back over to Ross Marshall for the closing remarks.

Thank you.

No further questions at this time I will now turn the call back over to Ross Marshalls further closing remarks.

Speaker 4: Thanks, everyone, for joining us this afternoon. We look forward to speaking with you in the coming weeks and on our next call in November . Night.

Thanks, everyone for joining this afternoon, we look forward to speaking with you in the coming weeks and on our next call in November .

Robert Young: And maybe the next question, I think it's suggested that special charges might be lower in the coming period just because you're moving to appear with less activity with TM group and link in the past. I think you'd said that 8 million of excluding non cash. I mean, maybe like if you give it just a sense of what that quarterly special charge. How should we think about that decline of what would a normal number be for Dye & Durham?

Speaker 1: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.

Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.

Yeah.

Robert Young: Yeah, so I mean, you would have seen the large reduction we had in Q4. As I mentioned, reported was 9.2, but it's leading the non cash items. It was 8 million for the quarter and that compares to 16.4 million just a year ago. So, you know, those two transactions are behind us. You know, going forward, we do expect, you know, like obviously with those two transactions behind us. We don't expect the same levels of spend that we've done the last 12 months and will continue to try that number down.

Robert Young: Okay, and then last question for me would just be around the new sales strategy. You talked with the new hires product management and sales. I think we talked about expansion of unity into the UK. I think last quarter, you were talking about moving into the UK with the current sales effort, bundling practice management. So maybe we would just give a maybe a quick summary of, you know, how that practice management, bundling strategy is moving forward.

Robert Young: Maybe the timeline if it's tied to unity and then I'll pass the line. Yeah, so two different concepts here. We're talking about our unity global platform. That is, you know, single landing page, single place to access all our applications for grads, what geography you're in. One bill, one view for customer. I was released for practice management system, which for clarity was traditionally called unity. But unity practice management, we have been in Canada, bundling that with our county module and other capabilities we have, which is has has significantly helped us in our take up an ARR.

Robert Young: As we sell that bias by a contractual offering. We're in the process of scaling up our team in the UK to roll that out. That actually we haven't started rolling that out yet in that market. But that's something when the process of doing. And likewise, we've just started in Australia to sell to sell subscription offering that is very similar to what I just talked about. So again, very, very early days, but we have started in Australia and UK will be next.

Robert Young: And then the natural follow on to that is how are your customers reacting to that new offering in the UK? Australia. I'll pass. Well, this is again, we're not launched yet in the UK that we're expanding. We're going to roll that out shortly. I mean, there's already been take up and it's just launched in the last kind of month or so. So we're already seeing takers. So look, the value prop, as we thought of previously, is real and it's demonstrable and tremendous for the customer. And as we saw in Canada, we're able to drive significant uptake from customers. We're willing to contract with us, given the value proposition will be good table.

Unknown Executive: Okay, thanks a lot. Thanks for taking the questions. Thank you.

Kevin Krishnaratne: Your next question is from Kevin Krishnaratne, Scotia Bank. Please ask your question. Hey, hey, there. Good evening. Just a clarification you mentioned. I think you have an experience. Did I hear that right? Can you just clarify? Is that a repurposing? Is that geared towards AI? I can't recall what you said. The 60 million was related to. Yeah, so we get a lot of questions. What's your total spend on R&D and software development?

Kevin Krishnaratne: And so over the next, this fiscal year, we plan to spend approximately $60 million on that or just over $60 million. So AI is one thing it's related to. It's all related to enhancements in our practice management software as we, as we retool and platform it for new markets and consolidate applications. And as we finish the build out for the unique global platform for Canada and Australia, those are the kind of primary uses of those funds.

Kevin Krishnaratne: How does that number compare to what you did in R&D last year? It would be up. It's up. And so like again, I know you kept the guidance for your target range of 50 to 60 on margins, but given maybe some, is there any sort of cadence to that? Is it kind of like upfront spending, weaker, you know, quarters Q1, Q2, and then uplifts through Q3, Q4. How do we think about the investment cycle?

Kevin Krishnaratne: I don't understand the question. Are you going to be investing upfront like the Q1 and Q2 sort of go, you know, see margins maybe toward the other end of that? Yeah. So, I mean, as with the unique global platform, a lot of that has already been built. You know, there was a heavy left, there's a way to take into practice the management applications globally. So that's the number, you know, we anticipate over the next year.

Kevin Krishnaratne: It's not really typical. I would anticipate being flat across the year, as we're kind of spending at that rate today. Kevin, you would have noticed the Q4, the capital, the capital spend, take up a bit. I think it's roughly a 9 million by mountain Q4. So that's what Matt was talking about in terms of just, you know, getting the single sign on and then the global unique platform up and running. So we do expect that, you know, to be the current trend, but in over time, good going back to more normalized levels that we saw in the past.

Kevin Krishnaratne: Got it. Thank you. The last one for me can help us out. I know you did ghost practice. You did a few other acquisitions last year. And then you've done the ones that you just talked about subsequent quarter.

Kevin Krishnaratne: Is there a way you can give us sort of the total revenue number for all those acquisitions and totality to be just to help us modeling going Sorry, Karen, we don't disclose that. All right, no worries, I'll pass the line. Thank you.

Gavin Fairweather: Your next question is from Gavin Fairweather from Cornwall. Please ask your question.

Gavin Fairweather: Oh, hey, good afternoon. I thought I'd start out on the Unity Global Platform. I guess to what extent do you expect us to be revenue accretive as some of your clients can access kind of more of your products from within a kind of single sign-on environment? Yeah, no, we do anticipate this to be revenue accretive. It makes the cross sell easier. The way even to, you know, go to market, interact with your customers easier.

Gavin Fairweather: Having, you know, instead of, you know, having, I would example, five or six different places you go to access replications and one market, it's all available in one place. And a lot of the use cases, you look at small and medium-law, the markets that we serve, they need the same products, the same demands as they, as they, as they take on work for their clients, and we provide those, those products too.

Gavin Fairweather: So having all the one place, we think naturally to a cross sell. It also makes it easier to get them under contract as you have it all available in one by one place, by one invoice, etc. That's how fun.

Gavin Fairweather: Is this a pretty seamless kind of migration? Is it kind of switching over the UI for the most part, or is there a decent amount of kind of hand holding you need to do as you roll this out? No, this is seamless. It's very seamless.

Gavin Fairweather: Okay, great. And then just as we think about transactions, kind of bottom-bouncing to potentially starting to rebound, you know, are you seeing any kind of areas in the business where you need to kind of add some cost to support our volume or any other kind of investment priorities? You call out just trying to think about kind of operating leverage in recovery here. Yeah, no, the great thing about our business is it's a fairly fixed cost base.

Gavin Fairweather: Again, we sell software to law firms so there's no people involved in processing transactions because whatever type of work the clients are doing on the software, the computer does it. So you don't need to add bodies as there's more transactions going through your through any kind of software application. So that's one of the operating leverage we get our businesses is good for that perspective. So the answer is no, no bodies need to be added.

Gavin Fairweather: Okay, that's it for me. Thanks so much. Thank you.

Scott Fletcher: Your next question is from Scott Plepture from CIBC. Please ask your question. Hi there. I wanted to ask a question on the revenue in the quarter relative to the guidance you provided at Q3. You sort of broke out the build into a few categories. Is there specific category that helped you get to the top end of that guide relative to what you laid out in the Q3 presentation?

Scott Fletcher: Yes, and thanks Paul for the question. Generally in life, Scott, with, for example, the revenue guidance that we provide, we had to provide a range of 115 to 120. And then we did see strength in the ARR as we alluded to previously. Given given the season of higher period of time, we were able to cause a lot of contracts in the main June timeframe. And also, you know, some of the some of the. That's the revenue contribution from TM with little higher expected as well.

Scott Fletcher: Okay, thanks. And as a follow up, can you, is there anything you can give us in terms of numbers of TM in the quarter? Just so we can look at modeling, going forward. Yes, sorry, we don't disclose those numbers that Scott, but you can look back previous disclosures around percentage of revenues that we previously disclosed about a year and a half ago, it'll be generally that line.

Scott Fletcher: Okay, I understand, and sorry, one thing just a clarification again for the market, can you, can you just walk us through how much you paid down on the term debt? Is that subsequent to the quarter? Yeah, for sure. So on the term debt, we paid down roughly $59 million dollars that was deducted from the, the direct proceeds from the, from the sale of PM, and then also, so the year ends, we paid down an additional 25 million in the revolver largely from both the TM proceeds, either reimbursements of past costs, as well as capital corporations.

Operator: Okay, great, I'll pass on it, thank you. Thank you. Ladies and gentlemen, once again, please press door one to the rich to ask a question.

Stephen Boland: Your next question is from Stephen Boland from Raymond James, please ask your question. Thanks, guys, not to beat this to debt, but the unity rollout, I just wondered when you move it over to UK, Australia, like all you're doing is basically combining the legacy products that you have with the unity rollout. So it, like you said, it's just going to one.

Stephen Boland: You're not actually getting rid of the legacy products that are in those other jurisdictions. Is that the right way to think about it? Yeah, like all of our products are the most one, one, one, one Dinder website to log in, one Dinder account, one Dinder landing page, and being able to access all the applications that you used to using and more on place. Okay, and this new, the acquisitions that you did subsequent to in this quarter, Q1, you did say is UK practice management software, those will all be integrated into unity as well as it is correct.

Stephen Boland: Correct, yes. Okay, and then I guess my last question, you know, when you mentioned that your goal is that the 25% 20 to 25% EBITDA growth, 50% organics if you're sent M&A, the 55 that you've spent, if I use multiples that you may have paid in terms of, you know, whether it was 10 to 15 times, I'm not sure where the multiples are right now in the market map that you could explain that.

Stephen Boland: But basically the thought is that to get to 12 and a half of M&A, you're probably going to have to do more M&A, is that a fair assessment as well? To get to, yes, correct. To get to 20%, you have to do M&A, that's correct, yes. Okay, and what kind of multiples are you seeing in the market right now? Look, it's still expensive, it's been careful, we're being very selective. The reality is, you know, our market we serve is fast growing, it has a lot of favorable characteristics to it, and you know, we are focusing more on businesses that have steady AR bases.

Stephen Boland: So look, multiples are still in the mid to high teens often. Sometimes you can find better deals and we look to be as prudent as we can. So you've got to be very selective, try to use structure where possible to share risk with sellers, but they're still high.

Unknown Executive: Thank you, there are no further questions at this time.

Ross Marshall: I will now turn the call back over to Ross Marshall for the closing remarks. Thanks everyone for joining this afternoon. We look forward to speaking with you in the coming weeks and on our next call in November. Nice. Thank you.

Operator: Ladies and gentlemen, the conference has now ended. Thank you all for joining.

Operator: You may all disconnect.