Q1 2024 Dye & Durham Ltd Earnings Call
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Speaker 1: transcript
Speaker 1: Tonight
[music].
Speaker 2: transcript
Speaker 2: Good afternoon ladies and gentlemen, my name is Jenny. And now will be your conference operator today.
Good afternoon, ladies and gentlemen, my name is Jenny and I will be your conference operator today.
Speaker 2: transcript
Speaker 2: At this time, I would like to welcome everyone to the Dianne Durham First Quarter Fiscal 2024 earnings.
At this time I would like to welcome everyone.
During the first quarter fiscal 2024 earnings call.
Speaker 2: transcript
Speaker 2: I would not like to turn the co-over to Ross Marshall. Invest the relations on behalf of Diane Durham. Mr. Marshall?
I would now like to turn the call over to Marshall.
Mr Relations on behalf of Bryan Jordan, Mr. Marshall You May begin your conference.
Speaker 3: transcript
Speaker 3: Thank you, Jenny. Good afternoon. Welcome to the Dine Derm earnings call. Before we start, we'd like to remind you that all amounts discussed on this call are denonied in Canadian dollars from us otherwise indicated.
Thank you Jenny and good afternoon, welcome to the <unk> earnings 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 3: transcript
Speaker 3: Please note that statements made during this call may include forward looking statements and information and future orientated financial information regarding DineDerm and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation to grow for results of operations, business performance, 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 dine Durham, and its business and disclosure regarding possible events conditions or results that are based on information currently available to management, which indicate managements' expectations to growth results of operations business performance business prospects.
Speaker 3: transcript
Speaker 3: Such statements are made as of this day hereof and dined or assumes no obligation to update or revise and reflect events to closures or circumstances except as required by applicable securities law.
Opportunities.
Our statements are made as of this date hereof, and <unk> assumes no obligation to update or revise them to reflect events disclosures or circumstances, except as required by applicable securities law.
Speaker 3: transcript
Speaker 3: Such statements involve significant risk on certainties and are not a guarantee of future performance or results. A number of these risks are uncertainties, could cause results to differ materially from the results discussed today. Given these risks on uncertainties, one should not place undreamer lines on these statements and information. Please refer to the forward-looking statements and information and future orientated financial information section of our public filings without limitation. Our MDNA, our earnings press release issued today for initial information.
Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.
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 information. Please refer to the forward looking statements and information and future oriented financial information section of our public filings without limitation in our MD&A Our earnings press release issued today for additional information.
Speaker 4: transcript
Speaker 4: Join us on the call today, our Matt Proud, Dianne Durham, Chief Executive Officer, and Frank Delizzo, Dianne Durham, Chief Financial Officer. A question and answer session will follow the formal remarks for research channels. I now turn the call over to Matt for his open remarks. Matt, thanks Ross, and good afternoon everybody. The business performed extremely well in the quarter, which was our second best in terms of adjusting EBITDA and third best on a revenue basis. Adjust the EBITDA also will perform the formal remarks.
Sure.
Joining us on the call today are Matt Brown, <unk>, Chief Executive Officer, and frankly, though dine Durham, Chief Financial Officer, a question and answer session will follow the formal remarks for research analysts I'll now turn the call over to Matt for his opening remarks, Matt. Thanks, Ross and good afternoon, everybody the business performed extremely well in the quarter, which.
It was our second best in terms of adjusted EBITDA and third best on a revenue basis. Adjusted EBITDA also outperformed on a sequential basis.
Speaker 4: transcript
Speaker 4: In addition to that in the quarter, we paid back 45 million in net debt.
Addition to that in the quarter, we paid back $45 million in net debt.
Speaker 4: transcript
Speaker 4: Our corn business is doing very well. And its performance underscores the strength and consistent ability to generate cash flow to fuel our growth and finance or operations.
Our core business is doing very well and its performance underscores the strength and consistent ability to generate cash flow to fuel our growth and finance our operations.
Speaker 4: transcript
Speaker 4: We heard investors and reducing our leverage ratio is a priority for us. Our aim is to bring the business down to below four times total net debt to adjust the EBITDA as soon as possible. And we're looking at all available options to help us achieve this goal. As I mentioned,
We heard investors and reducing our leverage ratio is a priority for us. Our aim is to bring the business down to below four times total net debt to adjusted EBITDA as soon as possible and we're looking at all available options to help us achieve this goal as.
As I mentioned.
Speaker 4: transcript
Speaker 4: In the first quarter, we reduced our debt by 45 million, and we're focused on growing earnings and increasing our cash flow conversion to continuously pay down debt.
In the first quarter, we reduced our debt by $45 million and we're focused on growing earnings and increasing increase our cash flow conversion to continuously pay down debt.
Speaker 4: transcript
Speaker 4: Making significant improvement into our free cash flow performance is also a top priority. To that end, we've launched a business performance improvement plan targeting improvements of greater than 70 million free cash flow performance to be realized by the end of Q3 fiscal 24 on an annualized basis compared to Q1 fiscal 24 i.e. the current quarter.
Making significant improvement to our free cash flow performance is also a top priority.
To that end, we've launched our business performance improvement plan targeting improvements of greater than $70 million of free cash flow performance to be realized by the end of Q3 fiscal 'twenty four on an annualized basis compared to Q1 fiscal 'twenty four I E. The current quarter.
Speaker 4: transcript
Speaker 4: In our COVER, we've already actioned 40 million of annualized improvements towards this target, with the full benefit of this action being realized in Q3 at fiscal 24.
In October we've already actually $40 million of annualized improvements towards this target with the full benefit of this action being realized in Q3 of fiscal 'twenty four.
Speaker 4: transcript
Speaker 4: We're implementing a series of measures to achieve this goal, including a reduction in capital expenditures, product price optimization, and further reducing one-time charges as we're lowering and lowering our operating.
We're moving to a series of measures to achieve this goal, including a reduction in capital expenditures product price optimization and further reducing onetime charges as we are lowering and lowering our operating costs.
Speaker 4: transcript
Speaker 4: As you recall, over the past two years, we made a dedicated effort to diversify our business and focus it on the legal practice maintenance software market.
As you'll recall over the past two years, we've made a dedicated effort to diversify our business and focus it on the legal practice management software market.
Speaker 4: transcript
Speaker 4: We've had, we've made meaningful progress in this regard, which has put us in a much stronger position today and made the business stronger off.
We've had we've made meaningful progress in this regard which has put us in a much stronger position today and made the business stronger off the.
Speaker 4: transcript
Speaker 4: The impact of real estate on our business, to be honest is quite misunderstood. To be clear, we sell SaaS software to law firms to help them grow and efficiently manage their practice.
The impact of real estate on our business to be honest is quite misunderstood to be clear, we sell SaaS software to law firms to help them grow and efficiently manage their practice. This software is mission critical to legal professionals regardless of not.
Speaker 4: transcript
Speaker 4: This software is mission critical to legal professionals, but rather, subnaught if they're conducting real estate trends.
If they are conducting real estate transactions or not.
Speaker 4: transcript
Speaker 4: To quantify this, the downside risk to die in Durham from the entire Canadian real estate market was only 27% of total revenue in the first quarter.
To quantify this the downside risk to die in Durham from entire Canadian real estate market was only 27% of total revenue in the first quarter.
Speaker 4: transcript
Speaker 4: We view this as comfortably manageable, especially when you consider that some businesses have revenue concentration of more than 20% in the hand of a single customer, not an entire end market.
We view this as comfortably manageable, especially when you consider some businesses have revenue concentration of more than 20% in the hand of a single customer not an entire end market.
Speaker 4: transcript
Speaker 4: Shifting our focus to selling practice business software has served to improve and diversify our business including increasing our annual recurring ravages
Shifting our focus to selling practice has been our software has served to improve and diversify our business, including increasing our annual recurring revenue.
Speaker 4: transcript
Speaker 4: ARR was $170 million as a September 30th, 2023. That's one in double what it was at the same time last year and represents highly, highly quality revenue growth across our full portfolio software solutions. ARR...
<unk> was $117 million as of September 32023, just wanted to double what it was at the same time last year and represents highly highly quality revenue growth across our full portfolio of software solutions.
<unk> is 27% of our total revenue.
Speaker 4: transcript
Speaker 4: compared to basically nothing we started two years ago. And we're making meaningful progress towards our target at 50%. Our air arch today is made up of two broad categories.
Compared to basically nothing we started two years ago, and we're making meaningful progress towards our target of 50%.
Our AOR today is made up of two broad categories.
Speaker 4: transcript
Speaker 4: The first being the gold standard per seat per user revenue, and the second being minimum spend contract.
The first being the gold standard per seat per user revenue and the second being minimum spend contracts.
Speaker 4: transcript
Speaker 4: We continue to be very disciplined and thoughtful though, our pricing strategy.
We continue to be very disciplined and thoughtful though our pricing strategy.
Speaker 4: transcript
Speaker 4: During the quarter, we announced a variety of price changes across our global portfolio. In some cases, you offset higher input cost to inflation. And in other cases, to bring our prices in line with other market providers.
During the quarter, we announced a variety of price changes across our global portfolio in some cases to offset higher input costs due to inflation and.
And in other cases to bring our prices in line with other market providers.
Speaker 4: transcript
Speaker 4: Case in point. Today, we're arguing the largest provider of legal practice management software in the United Kingdom and Ireland, thanks to our recent acquisitions. However, the per-sea per user price for our practice management software solutions being offered is still significantly lower than market. We're in the process of addressing this over the remainder of fiscal 24 across more than 20,000 users in that market.
Case in point today, where arguably the largest provider of legal practice management software in the United Kingdom and Ireland. Thanks to our recent acquisitions. However, the per seat per user price for our practice management software solutions being offered is still significantly lower than market. We're in the process of this process of addressing this oh.
The remainder of fiscal 'twenty four across more than 20000 users in that market.
Speaker 4: transcript
Speaker 4: And at the high level, we believe that price can consistently contribute roughly 10% annual growth to revenue.
And at a high level, we believe believe that pricing consistently contribute roughly 10% annual growth to revenue.
Speaker 4: transcript
Speaker 4: At the same time, we've also improved our task in version.
At the same time, we've also improved our cash conversion.
Speaker 4: transcript
Speaker 4: You started to see this in Q4 fiscal 23 results. And we continue to make progress in Q1 fiscal 24 with approximately six million in acquisition restructuring addbacks that were cash-based.
You're starting to see this in Q4 fiscal 'twenty three results and we continue to make progress in Q1 fiscal 'twenty four with approximately $6 million and acquisition restructuring add backs that were cash based we believe we can continue to show improvement in this area. We believe for a business of our scale with $250 million or more in <unk>.
Speaker 4: transcript
Speaker 4: We believe we can continue to show improvement in this area. We believe for a business of our scale, with 250 million or more in adjusted EBITDA, that's a reasonable goal. And reducing charge is a 10 to 15 million on an annualized basis over time, which will free up more cash flow for our capital allocation priorities. It's we...
At EBITDA, Thats, a reasonable goal and reducing charges of $2 15 to $10 million to $15 million on an annualized basis overtime, which will free up more cash flow for our capital allocation priorities.
It's really a healthy business.
Speaker 4: transcript
Speaker 4: Our payments infrastructure and banking technology business also performed well in the quarter. It's a business that has a lot of upside in it and we're seeing significant growth. It offers best in class digital infrastructure to most major Canadian Australian lenders providing critical technology and products which support essential functions like payments, information services, property settlement, and core banking infrastructure.
Our payments infrastructure in banking technology business also performed well in the quarter.
It's a business that has a lot of upside in it and we're seeing significant growth.
It offers best in class digital infrastructure to most major Canadian Australian lenders, providing critical technology and products, which support our central functions like payments information services property settlement and core banking infrastructure.
Speaker 4: transcript
Speaker 4: This business has trusted long-term relationships with more than 95 lenders in financial institutions.
This business has trusted long term relationships with more than 95 lenders and financial institutions.
Speaker 4: transcript
Speaker 4: It represents an opportunity for us to generate more cash in the near term.
Represents an opportunity for us to generate more cash in the near term.
Speaker 4: transcript
Speaker 4: To build this momentum, we're working to further professionalize the minute team of that business and hire a new CEO for that business. We're also looking at ways to highlight the value of this business, better to investors in the coming quarter.
To build this momentum we're working to further professionalize the madden team in that business and hire a new CEO for that business. We're also looking at ways to highlight the value of this business better to investors in the coming quarters.
Speaker 4: transcript
Speaker 4: Before turning over to Frank to highlight the financials, I'll briefly address the recent Comfortable Adventure Transact.
Before turning it over to Frank to highlight the financials I'll briefly address the recent convertible debenture transaction.
Speaker 4: transcript
Speaker 4: The terming out of approximately one-third of our griddle ventures by two and a half years or five years of runway and total in a highly undiluted piece of paper that only increased the yield to maturity by 2.4% and a nominal amount of increased cash increase of two million when looked at in the aggregate was the right move for the company.
The terming out of approximately one third of our debentures by two and a half years or five years of runway in total in a highly undiluted piece of paper that only increased the yield to maturity by two 4% and a nominal amount of increased cash interest of $2 million when looked at in the aggregate.
Was the right move for the company.
Speaker 4: transcript
Speaker 4: I talk to some people who look at only one side of the trade and say it's expense.
I've talked to some people who look at only one side of the trade and say it's expensive. We believe both sides of the trade should be considered to draw a fair and accurate conclusion. We believe it was the right grade for the business that reduces the convertible convertible debt and reduces risk on our overall capital structure.
Speaker 4: transcript
Speaker 4: We believe both sides of the trade should be considered to draw fair and accurate conclusion. We believe it was the right and great for the business that reduces the conventional debt and reduces risk on our overall capital store.
Speaker 4: transcript
Speaker 4: Without a doubt, it's been a challenging few weeks for us. I understand that shareholders are frustrated. We are frustrated too. But our interests...
Without a doubt it's been a challenging few weeks for us I understand Sam that shareholders are frustrated we're frustrated too.
Our interests are aligned with yours.
Speaker 4: transcript
Speaker 4: Today's results demonstrate the improved performance of the business delivered in the past quarter and show our strategies working. We believe we have all the ingredients to build on from here. We operate a different, a differentiated global business with a large diversified customer base of small and medium sized law firms with a sticky best in class practice man in offering that is mission critical to customers. I'll now turn over to
Today's results demonstrate the improved performance of the business delivered in the past quarter and show our strategy is working we believe we have all the ingredients to build on from here, we operated <unk> diversion.
Differentiated global business with a large diversified customer base of small and medium sized law firms with a sticky best in class practice management offering that is mission critical to customers.
I'll now turn it over to Frank to review the financials.
Speaker 5: transcript
Speaker 5: Thank you, Matt, and good afternoon, everyone. This afternoon, we reported our first quarter fiscal 2024 result.
Thank you, Matt and good afternoon, everyone. This afternoon, we reported our business our first quarter fiscal 2024 results.
Speaker 5: transcript
Speaker 5: Our results continue to demonstrate the resiliency and consistency of the business independent of market-sized cycles and ability to generate cash flow.
Our results continue to demonstrate the resiliency and consistency of the business independent market sites cycles and speed to generate cash flows.
Speaker 5: transcript
Speaker 5: Our diversification strategy and build out of our practice management solutions are working.
Our diversification strategy and build out of our practice management solutions are working.
Speaker 5: transcript
Speaker 5: We continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions.
We continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions.
Speaker 5: transcript
Speaker 5: Annual Recurring Revenue Contracted was 27% as is September 30th, 2023, compared to just 13% in the same period last year.
Annual recurring revenue contracted was 27% as of September 32023, compared to just 13% in the same period last year.
Speaker 5: transcript
Speaker 5: Revenue exposed to real estate transactions globally in Q1 was 49% compared to 62% in the same period of fiscal 2023 while revenue exposed to real estate transactions in Canada was only 27% compared to 37% in the same period of last year
Revenue exposed to real estate transactions globally in Q1 was 49% compared to 62% in the same period of fiscal 2023, while revenue exposed to real estate transactions in Canada.
Only 27% compared to 37% in the same period of last year.
Speaker 5: transcript
Speaker 5: We reported a revenue of 120.1 million during the first quarter, which is in line with the same period in Cisco 2023.
We reported revenue of $120 1 million during the first quarter, which is in line with the same period in fiscal 2023.
Speaker 5: transcript
Speaker 5: In that prior period, there was an additional 9.3 million of revenue from TM Group, which was divested on August 3rd, 2023. Exuding the impact of TM Group, revenue has grown by more than 8% in the first quarter of fiscal 24.
In that prior period, there was an additional $9 3 million of revenue from TM group, which was divested on August three 2023, excluding the impact of TM group revenue has grown by more than 8% in the first quarter of fiscal 'twenty four.
Speaker 5: transcript
Speaker 5: We generated adjusted EBITDA of 68.7 million in the first quarter of fiscal 2024, an increase of 4.3 million or 7% compared to the same period of fiscal 23, our highest quarterly amount since Q4 of 2022.
We generated adjusted EBITDA of $68 7 million in the first quarter of fiscal 2024 and.
An increase of $4 3 million or 7% compared to the same period of fiscal 'twenty three our highest quarterly amount since Q4 of 2022.
Speaker 5: transcript
Speaker 5: This is primarily a result of lower adjusted operating expenses and growth in revenue after taking into consideration of the TM group divestiture.
This is primarily a result of lower adjusted operating expenses and growth in revenue.
Taking into consideration of the TM group divestiture.
Speaker 5: transcript
Speaker 5: We continue to maintain our strong emergence coming at 57% this quarter, our highest level since Q4 of 2022, and is in line with our target range of 50 to 60%.
We continue to maintain our strong EBITDA margins coming at 57% this quarter, our highest level since Q4 of 2022 and is in line with our target range of 50% to 60%.
Speaker 5: transcript
Speaker 5: Total adjusted operating expenses, which includes direct costs, technology costs, GNA, sales and marketing, were 51.4 million for the quarter, or 43% of revenues, an improvement of 4.3 million, or 8% compared to the prior period, when total operating costs were presented 46% of revenues.
Total adjusted operating expenses, which includes direct costs technology costs, G&A sales and marketing were $51 4 million for the quarter were 43% of revenues an improvement of $4 3 million or 8% compared to the prior year period. When total operating costs represented 46% of revenues.
Speaker 5: transcript
Speaker 5: Net of the impact of expenses from fiscal 2023 acquisitions are operating costs for the quarter for 43.6 million, which demonstrates improvements from our cost reduction if it is implemented early in the second quarter of fiscal 23.
Net of the impact of expenses from fiscal 2023 acquisitions, our operating costs for the quarter were $43 6 million, which demonstrates improvements from our cost reduction initiatives implemented early in the second quarter of <unk>.
23.
Speaker 5: transcript
Speaker 5: As we acquire assets and manage the broader business, we continuously look for ways to drive cost energies and eliminate redundancies.
As we acquire assets and manage the broader business, we continuously look for ways to drive cost synergies and eliminate redundancies.
Speaker 5: transcript
Speaker 5: This is one of the methods to continually improve casual performance, which Matt addressed earlier.
This is one of the methods to continually improved cash flow performance, which match, which Matt addressed earlier.
Speaker 5: transcript
Speaker 5: We expect our ongoing operating costs to be within the 40 to 50% range of revenue.
We expect our ongoing operating cost to be within the 40% to 50% range of revenues.
Speaker 5: transcript
Speaker 5: Net finance costs for the quarter were $35.1 million compared to $16.2 million in the same period of fiscal 23.
Net finance costs for the quarter were $35 1 million compared to $16 2 million in the same period of fiscal 'twenty three.
Speaker 5: transcript
Speaker 5: The increase is due to the increase in increase in interest rates in higher net debt levels, as well as lower favorable non-cash impacts from the change in fair value of our Our converbal adventures as compared to the prior period.
The increase is due to the increase and increase in interest rates and higher net debt levels as well as lower favorable noncash impacts from the change in fair value of our convertible debentures as compared to the prior period.
Speaker 5: transcript
Speaker 5: Acquisition, restructuring and other costs for the quarter were $6.4 million. This was a decrease from $18.5 million in the first quarter of fiscal 23. As Matt mentioned earlier, improving capital conversion is one of the paths towards driving down our leverage ratio below four times.
Acquisition restructuring and other costs for the quarter were $6 4 million. This was a decrease from $18 5 million in the first quarter of fiscal 'twenty three as Matt mentioned earlier, improving cash flow conversion is one of the path towards driving down our leverage ratio below four times.
Speaker 5: transcript
Speaker 5: We believe we can deliver additional improvements in this cost-bendom over time.
We believe we can deliver additional improvements in its cost item over time.
Speaker 5: transcript
Speaker 5: We are targeting $10 to $15 million acquisition restructuring net of costs on an annualized basis.
We're targeting 10% to $50 million acquisition restructuring and other costs on an annualized basis.
Speaker 5: transcript
Speaker 5: You should expect continued improvements in the second quarter and beyond, as this is one component of our $70 million annualized business improvement plan mentioned earlier.
You should expect continuing continued improvements in the second quarter and beyond as this is one component of our $70 million annualized business improvement plan mentioned earlier.
Speaker 5: transcript
Speaker 5: Now, turning to our balance sheet, we reduced our overall debt by $45 million during the quarter, mainly with the proceeds of the sale of PM, and at the same time, this quarter, we closed small deals in legal practice management space that we locked into in late fiscal 23.
Now turning to our balance sheet will reduce our overall debt by $45 million during the quarter, mainly with the proceeds of the sale TN and at the same time. This quarter, we closed small deals a legal proxy management space that we locked into in late fiscal 'twenty three.
Speaker 5: transcript
Speaker 5: Our leverage ratio, based on fiscal point of view or consensus, including the impact of the convertible venture is currently 5.1 times as September 30th. We have sufficient resources to manage our debt levels.
Our leverage ratio based on fiscal 'twenty, where consensus including the impact of the convertible debenture is currently five one times as of September 30th.
We have sufficient resources to manage our debt levels.
The business generates strong sustainable cash flows.
Jenny: Good afternoon ladies and gentlemen, 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 first quarter fiscal of 2024 earnings call.
Speaker 5: transcript
Speaker 5: But we understand the necessity to drive down our leverage ratio and we have set a clear target to reduce it below four times total net debt to adjust the EBITDA.
So we understand the necessity to drive down our leverage ratio and we have set a clear target to reduce it below four times total net debt to adjusted EBITDA.
Speaker 5: transcript
Speaker 5: We're taking actions to increase our cash flow performance and placing a greater emphasis on this measure.
We're taking actions to increase our cash flow performance and placing a greater emphasis on this measure.
Ross Marshall: I would now like to turn the call over to Ross Marshall, Investor Relations on behalf of Dye & Durham.
Speaker 5: transcript
Speaker 5: Our Q1 cash flow operations increased by 4% versus the prior year.
Our Q1 cash flow operations increased by 4% versus the prior year.
Ross Marshall: Mr. Marshall, you may begin your conference. Thank you Jenny, and good afternoon.
Speaker 5: transcript
Speaker 5: Built a business of scale that's mission critical for small and media sized law firms and financial institutions.
We've built a business of scale is mission critical to small and medium sized law firms and financial institutions.
Unknown Executive: Welcome to the Dye & Durham earnings 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. Please note that statements made during this call may include forward looking statements and information and future orientated financial information regarding Dye & Durham and its business in disclosure regarding possible events, conditions, or results that are based on information currently available to management, which indicate management's expectations to growth, results of operations, business performance, business prospects and opportunities.
Despite the challenging macro.
Speaker 5: transcript
Speaker 5: Market conditions, today's Ms. Fulton plans demonstrate the resiliency of the business and the opportunity in front of us.
Market conditions, today's results and plans demonstrate the resiliency of the business and the opportunity in front of us.
Speaker 5: transcript
Speaker 5: With that, I'll turn it back to the operator for Q&A.
With that I'll turn it back to the operator for Q&A.
Thank you.
Speaker 2: transcript
Speaker 2: Ladies and gentlemen, we will now begin the questioning and answer session. Should you have a question? Please press the star followed by the one on your touchstone found. You will hear a few tone prompt acknowledging your...
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 Touchtone phone.
You will hear with Teton prompt acknowledging your request.
Unknown Executive: Sus statements are made as of this day hereof, and Dye & Durham assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities law. Such statements involve significant risk uncertainties and are not a guarantee of future performance or results. 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 unreliable lines on these statements and information. Please refer to the forward looking statements and information and future orientated financial information section of our public filings with the implementation of our MD&A, our earnings press release issued today for additional information.
Questions will be taken in the order received.
Speaker 2: transcript
Speaker 2: So do wish to cancel your request. Please press the star, follow.
Do you wish to cancel your request. Please press the star followed by the tail.
Speaker 2: transcript
Speaker 2: If you're using a speaker phone, please hit the handset before pressing any keys. Once again, that is...
If you are using a speaker phone please lift the handset before pressing any changes.
Once again that is star one should you wish to ask a question.
Speaker 2: transcript
Speaker 2: Your first question is from a Thanos, Mr. Fulon from VML Capital Markets. Please ask your question.
Your first question is from Mcmanus, Mr. Nicolas <unk> from BMO capital markets. Please ask your question.
Speaker 6: transcript
Speaker 6: Hi. Good afternoon. Matt, maybe just to clarify regarding the focus on deleveraging, should we be thinking that you'll be taking a pause on M&A for the next few months in order to deleverage, or will you still consider opportunities, albeit more selectively?
Hi, good afternoon.
Matt maybe just to clarify regarding the focus on deleveraging.
Should we be thinking that youll be taking.
Ross Marshall: Join us on the call today, our Matt Proud, Dye & Durham Chief Executive Officer, and Frank Lizo, Dye & Durham Chief Financial Officer. A question and answer session will follow the formal remarks for research channels.
A pause on M&A for the next few months hard to deleverage or would you still consider opportunities, albeit more selectively.
Speaker 4: transcript
Speaker 4: The car main focus is, you know, we heard investors the leveraging is a priority and look as we deliver it, that will free up more cash flow that in the future will let us to, you know, to get back to business. But, you know, we kind of heard the message loud and clear. So for us in the near term, if we're getting that debt to you address at EBITDA as a metric to look at below four times, ASAP. And look, we, as you would have seen in last quarter, there was a side from...
Look our main focus as we heard investors day.
Matt Proud: I now turn the call over to Matt for his open remarks. Matt, thanks Ross, and good afternoon everybody. The business performed extremely well on the quarter, which was our second best in terms of adjust the EBITDA and third best on a revenue basis. Adjust the EBITDA also well performed as a sequential basis. In addition to that in the quarter, we paid back 45 million in net debt. Our corn business is doing very well, and its performance underscores the strength and consistent ability to generate cash flow to fuel our growth and finance or operations.
Deleveraging is the priority and look as we deleverage that will free up more cash flow.
That in the future will lead us to get back to business, but.
We kind of heard the message loud and clear.
So for us in the near term, it's or getting that debt to adjusted EBITDA as a metric to look at below four times Asap.
And look we as you would have seen last quarter there was a.
Aside from.
Speaker 4: transcript
Speaker 4: the practicing and application that was announced in the queue for results. There was a couple million dollars of very small acquisitions we did that were creative, given what we paid for them, but they were very, very small.
The proximity of advocate acquisition that was announced in the Q4 results. There was a couple of million dollars of very small acquisitions, we did.
Matt Proud: We heard investors, and reducing our leverage ratio is a priority for us. Our aim is to bring the business down to below four times total net debt to adjust the EBITDA as soon as possible, and we're looking at all available options to help us achieve this goal. As I mentioned, in the first quarter, we reduced our debt by 45 million, and we're focused on growing earnings and increasing our cash flow conversion to continuously pay down debt. Making significant improvement into our free cash flow performance is also a top priority.
That were accretive given what we pay for them, but they were very very small.
Speaker 6: transcript
Speaker 6: Okay. Now as far as your end markets, you have better real time visibility than we do with data that gets a bit lagged. Is it still the case that we're kind of bouncing around the bottom or are you seeing any trends across the GDR?
Okay.
Now as far as your end markets, you have better real time visibility than we do it even if it gets a bit lagged.
Still the case that we're kind of bouncing around the bottom or are you seeing any trends across your geographies.
Speaker 4: transcript
Speaker 4: So, I mean, our business performing really well, if you consider that compared to Q4, you know, we sold PM yet, still came in sequentially with the same amount of revenue as we have Q4, which is generally always seasonally slow, that it implies that our core business is doing really well. Look, I assume your question relates to kind of real estate transactions, which are now a minority of our revenue. Look, we're still kind of...
So I mean look at our business is performing really well if you consider that compared to Q4.
Matt Proud: To that end, we've launched a business performance improvement plan targeting improvements of greater than 70 million free cash flow performance to be realized by the end of Q3 fiscal 24 on an annualized basis compared to Q1 fiscal 24 i.e, the current quarter. In our cover, we've already actioned 40 million of annualized improvements towards this target with the full benefit of this action being realized in Q3 of fiscal 24. We're implementing a series of measures to achieve this goal, including a reduction in capital expenditures, price optimization and further reducing one time charges as we're lowering and lowering our operating costs.
We sold TM, yet still came in sequentially with the same amount of revenues. We had Q4, which is generally always seasonally slow then that implies that our core business are doing doing really well.
Look I assume your question relates to kind of real estate transactions.
Which are now a minority of our revenue.
Look we're still kind of.
Speaker 4: transcript
Speaker 4: If you look at kind of the numbers we see and kind of correlate with businesses we have that...
So if you look at the kind of the numbers, we see in kind of correlate with businesses we have that.
Speaker 4: transcript
Speaker 4: that do track purchase and sales, yeah, they may still have really depressed market out there. But at some point, PENTAF domain comes back.
Do track purchase and sales, yes, I mean, it's still a fairly depressed market out there.
But at some point pent up demand comes back.
Speaker 4: transcript
Speaker 4: And that will be great upside in the future. But today, even though you're seeing great performance in the business as demonstrated by the results, we were able to sell about 16% of our revenue. And still, in a quarter's generally sequentially down, kind of be flatter in the last quarter. Which, again, speaks to the strength of the business. So...
Great upside in the future.
But today, even without that Youre seeing great performance in the business as is demonstrated by by the results we were able to sell.
Matt Proud: As you'll recall over the past two years, we made a dedicated effort to diversify our business and focus it on the legal practice managed software market. We've had, we've made meaningful progress in this regard, which has put us in a much stronger position today and made the business stronger off. The impact of real estate on our business, to be honest is quite misunderstood, to be clear, we sell SaaS software to law firms to help them grow and efficiently manage their practice.
<unk> cell.
About 16%, 16% of our revenue.
And still in it.
And a quick corners, John it's sequentially down kind of B, B, B flattening, where last quarter, which speaks to the strength of the business.
So.
So I hope that answers your question.
Speaker 6: transcript
Speaker 6: Yeah, it does. And then just as we think about the December quarter, just giving seasonality into your market.
Yes, it does.
And then just as we think about the December quarter, just given seasonality and some of your markets.
Matt Proud: This software is mission critical to legal professionals who would rather subnaught if they're conducting real estate transactions or not. To quantify this, the downside risk to Dye & Durham from the entire Canadian real estate market was only 27% of total revenue in the first quarter. We view this as comfortably manageable, especially when you consider that some businesses have revenue concentration to more than 20% in the hand of a single customer, not an entire end market.
Speaker 6: transcript
Speaker 6: and given a bit of TM going away, I guess would it be reasonable to expect that revenue but that will be down a little bit sequentially versus the timber quarter?
And given a bit of TM going away I guess would it be reasonable to expect that revenue and EBITDA will be down a little bit sequentially versus September quarter.
Speaker 4: transcript
Speaker 4: Yeah, generally we have our Q3 or Q2 is a bit softer than Q4 and Q1.
Yeah. So generally we have our Q3 two is a bit softer than than Q4 and Q1.
Speaker 5: transcript
Speaker 5: Um, I'll put that in. I don't think I just, yeah, just, uh, just remember that in E Q1 , we still had just a month less of TM revenue. So that's the, that will fall off in Q, Q2 .
Okay.
Yes, just.
Just remember that in Q1, we still had just a month left of TM revenue. So naturally that will fall off in Q in Q2.
Matt Proud: Shifting our focus to selling practice business software has served to improve and diversify our business, including increasing our annual recurring revenue. ARR was 117 million as a September 30th, 2023. That's one of double what it was at the same time last year and represents highly, highly quality revenue growth across our full portfolio software solutions. ARR is 27% of our total revenue compared to basically nothing we started two years ago, and we're making meaningful progress towards our target of 50%.
Speaker 6: transcript
Speaker 6: Maybe just to confirm that amount, from the disclosure, it seems maybe 16 and a half million of PM revenue is that in the general ballpark.
Maybe just to confirm that the disclosure it seems maybe $16 5 million of Cam revenue is that in the general ballpark.
Speaker 5: transcript
Speaker 5: Yeah, that's good number. But as I mentioned before, the year over year impact on revenue was that 9.3 million. So that's three months to the birth of one month.
Yes, yes, yes, that's a good number.
As I mentioned before the year over year.
Pack on revenue was was 993 $9 3 million, so thats three months compared to one month.
Yes.
Alright, thanks for that line.
Speaker 2: Thank you. Your next question is from Kevin Christian and Antonio from Corsair Bank. Please ask your question.
Thank you. Your next question is from Kevin Cristian <unk> from Scotiabank. Please ask your question.
Matt Proud: Our ARR today is made up of two broad categories. The first being the gold standard per se per user revenue, and the second being minimum spend contracts. We continue to be very disciplined and thoughtful though our pricing strategy. During the quarter, we announced a variety of price changes across our global portfolio. In some cases, you offset higher input cost due to inflation, and in other cases to bring our prices in line with other market providers.
Speaker 7: transcript
Speaker 7: Hey there, good evening. Just a question on the 70 million recache flow. There's a number of categories that the benefits are coming from, can you give us a sense of where the greater impacts are to come from with catbacks? Is it the product price changes, op-ax, any color there?
Hey, there good evening, just a question on the on the $70 million free cash flow there is a number of categories.
The benefits are coming from can you give us a sense of.
Where the greater impacts Arctic I'm pregnant with Capex is that the product price changes opex any any color there.
Speaker 5: transcript
Speaker 5: Yeah, I could take that Kevin. So they are, we have purposefully put them in order of significance. So as you mentioned, the first couple being the reduction in cap-axe would be something that we've ready actioned and then followed by reduction in one-time chargers and then the price optimization issues that we have.
Yes, I can take that Kevin so there they are.
Purposely put them in order.
Significant so.
Matt Proud: Case in point, today we're arguing the largest provider of legal practice management software in the United Kingdom and Ireland, thanks to our recent acquisitions. However, the per se per user price for our practice management software solutions being offered is still significantly lower than market. We're in the process of addressing this over the remainder of fiscal 24 across more than 20,000 users in that market. At the high level, we believe that price can consistently contribute roughly 10% annual growth to revenue.
As you mentioned the first the first couple of being the reduction in Capex.
Would be would be something that we'd already actions.
And then followed by a reduction in one time charges and then the.
Price optimization initiatives that we have.
Speaker 7: transcript
Speaker 7: Okay, gotcha. And then thought it was interesting, the comments you made on the opportunity and practice management, I think it was in UK and Ireland. I might have missed her. Did you say 20,000 users there? There's an opportunity for an uplift there, which is curious to know how do we think about the level of that uptick? And then did you say going forward, you would think that that's a business that you could do 10% increases year-to-year? I'm just curious about the commentary that you made there.
Okay Gotcha, and then I thought it was interesting the comments you made on the.
The opportunity in practice management with a UK and Ireland.
I might have misheard did you say 20000 users there and there is an opportunity for an uplift there, but just curious to know how do we think about the level of that.
Matt Proud: At the same time, we've also improved our cash conversion. You started to see this in Q4 fiscal 23 results, and we continue to make progress in Q1 fiscal 24 with approximately 6 million in acquisition restructuring addbacks that were cash-based. We believe we can continue to show improvement in this area. We believe for a business of our scale with 250 million or more in adjusted EBITDA, that's a reasonable goal. And reducing charges to 10 to 15 million on an annual basis over time, which will free up more cash flow for our capital allocation priority.
Uptick and then did you say going forward you would think that that's a business that you could do 10% increases year over year I'm just curious about the commentary that you made there.
Speaker 4: transcript
Speaker 4: Yeah, it's Matt Kevin. It looked, it was, it was kind of case of point example.
Yes. It is.
Back Kevin look it was.
It was kind of a case in point example.
Speaker 4: transcript
Speaker 4: You know, some of the upside we have in our business when you're just you're looking at business we have and your your price points, you know, quite deeply below market. So this is not the case in point. We have 20,000 users that are that are paying in many cases, you know, it's under the $100, you know, a month below market. We've got a good vertical Canadian dollars. That's just one example of some opportunities we have in the business, but you kind of back up and look at it kind of, you know,
Some of the upside we have in our business when you adjust youre looking at business, we have an EHR.
Your price points quite deeply below market.
So is that the case in point, we have 20000 users that are that are paying in many cases.
$100.
Below market.
Could you kind of compare it to Canadian dollars. So that's just one example of the kind of opportunities we have in the business, but you kind of back up and look at kind of.
Matt Proud: Police. It's really a healthy business. Our payments infrastructure and banking technology business also performed well in the quarter. It's a business that has a lot of upside in it, and we're seeing significant growth. It offers best in class digital infrastructure to most major Canadian Australian lenders, providing critical technology and products which support essential functions like payments, information services, property settlement and core banking infrastructure. This business has trusted long-term relationships with more than 95 lenders and financial institutions. It represents an opportunity for us to generate more cash in the near term. To build this momentum, we're working to further professionalize the management team of that business and hire a new CEO for that business.
Speaker 4: transcript
Speaker 4: because when you got to look at all the things we have, every year you can grow it, you know, got 10% and we've consistently done that for many years and in most cases, you know, been delivering that.
Okay.
Because when you guys.
We look at all of it.
Every year you can grow it.
Tennessee, and we've consistently said that for many years in.
In most cases.
Been delivering that.
Speaker 7: transcript
Speaker 7: Okay, gosh, gosh, I think so that the 19 to 20, 19% ARR to 27% ARR on the court of a nice jump. Was that mainly driven by my M&A and also how is progress being made on the minimum volume contract?
Okay got you thanks for that.
The 19 point, 19% <unk> to 27%.
Sure.
A nice jump was that mainly driven by M&A.
And also how are how's progress being made on the minimum volume contracts.
Speaker 4: transcript
Speaker 4: This was driven by both. There was a press expanded application, you know, acquisition in there that we talked about in our Q4 financials, that there would also be in these financials. But there was also a lot of that was driven from kind of minimum spent contracts, particularly at Canada.
It was driven by both.
There was a perhaps standard application.
Acquisition in there that we talked about in our Q4 financials.
Matt Proud: We're also looking at ways to highlight the value of this business, better to investors in the coming quarters.
That would also be in these financials.
But there was also a lot a lot of that was driven from kind of minimum spend contracts, particularly out of Canada.
Matt Proud: Before turning over to Frank to highlight the financials, I'll recently address the recent comfortable-to-venture transaction. Determining out the approximately one-third of our griddle ventures by two and a half years or five years of runway and total in a highly undiluted piece of paper that only increased the yield to maturity by 2.4% and a nominal amount of increased cash increase of $2 million when looked at in the aggregate was the right move for the company.
Speaker 5: transcript
Speaker 5: Kevin, the increase is actually 13 to 27 year of year. But the given Q4 was very obvious, using high period as management mentioned. There were a lot of contracts that were signing Q4 that had partial benefit and Q4, so you're getting the full free length benefit and Q1.
Yes, hi.
Yes, Kevin the increase is actually 13% to 27% year over year.
But.
But given that Q4 was already obviously using high period as Matt mentioned, there were a lot of contracts that were signed in Q4 that had partial benefit in Q4, so youre getting the full the full three month benefit in Q1.
Speaker 7: transcript
Speaker 7: Sorry, was, uh, did you not do, you did 19% in Q4, right? Some others going from, from 19 and Q4 to 27. Yeah. Okay.
Alright.
You did 19% in Q4 right. Some of it is going from from <unk> 19 in Q4 2017, yeah. Okay, correct, Yes, Im sorry, I thought you meant year over year.
Speaker 7: transcript
Speaker 7: Right. I thought you were over here. Yeah. Oh good. Last one for me, just on some cash items, they're number one. How do we think about cash taxes for the year? They were a little bit elevated at...
Matt Proud: I talked to some people who look at only one side of the trade and say it's expensive. We believe both sides of the trade should be considered to draw fair and accurate conclusion. We believe it was the right grade for the business that reduces the convertible debt and reduces risk on our overall capital structure.
Okay last one for me just on some cash items there number one how do we think about cash taxes for the year. They were a little bit elevated I think in 23, just wondering where they landed in 'twenty four it looked like it was pretty modest in Q1, and then the second one on cash and can you remind us of.
Speaker 7: transcript
Speaker 7: Where they land in 24, it looked like it was pretty modest in Q1. And then the second one on cash is, can you remind us of?
Matt Proud: Without a doubt, it's been a challenging few weeks for us. I understand that shareholders are frustrated. We are frustrated too, but our interests are aligned with years.
Speaker 7: transcript
Speaker 7: You know, any, you're a rough estimate for whole backs and potential urn out that you're going to be paying out in that in 2024.
I'll wrap asking a pullback and potential earn out.
But youre going to be paying out in that in 2024.
Speaker 5: transcript
Speaker 5: Yeah, so for for fast access we have animated series of plants in Canada.
Yeah, so for cash taxes, we have eliminated a series of plants in Canada.
Matt Proud: Today's results demonstrate the improved performance of the business delivered in the past quarter and show our strategies working. We believe we have all ingredients to build on from here. We operate a diversion at differentiated global business with a large diversified customer base of small and medium-sized law firms with a sticky, best-in-class practice man in offering that is mission-critical to customers.
Speaker 5: transcript
Speaker 5: to get a better handle of our uses of cash. And we do expect reductions in cash relative to the fiscal 2024 amount. You should look at a effective rate of about 25%, but given that we have a large loss carry forwards of approximately 200 billion, we do tend to put the good use in the fiscal period in Canada and your question on pullbacks. We do have a disclosure in our notes about the pull-in amount of pullbacks.
So you get a better handle of our uses of cash and.
We do expect.
Reductions in cash relative to fiscal 2024.
You should look at effective rate of about 25%.
But given that we have the large loss carry forwards of <unk>.
$200 billion, we do tend to good use in in this fiscal period in Canada and your question on Pullbacks, we do have a disclosure in our notes about the the total amount of pullbacks.
Frank Liso: I'll now turn over to Frank to review the financials. Thank you Matt and good afternoon everyone.
Frank Liso: This afternoon we reported our first quarter of fiscal 2024 results. Our results continue to demonstrate the resiliency and consistency of the business independent of market-sized cycles and stability to generate cash flows. Our diversification strategy and build out of our practice management solutions are working. We continue to increase our annual recurring revenue contracted and reduce our exposure to real estate transactions. Annual recurring revenue contracted was 27% as the September 30th 2023 compared to just 13% in the same period last year.
Speaker 5: transcript
Speaker 5: So you can refer to that given, but you know, on top of my head, I think it's roughly round, you know, the 10 to 15 million of the next 12 months.
You referred to that Kevin, but part of my head I think it's roughly round.
$10 million to $50 million in the next 12 months.
Perfect. Thanks, a lot I'll pass the line.
Speaker 2: transcript
Speaker 2: Your next question is from Gavin Pimaver from Cornmart Securities.
Thank you. Your next question is from Gavin Panther from core Mark Securities. Please ask your question.
Speaker 8: transcript
Speaker 8: Oh, hey, good afternoon. Congrats on the results. Just a clarification for some 79 free cash flow and was increased. It sounds like you've actually had about 49 in the current quarter. Which we think about a leg to some of the benefits both on the cost side and pricing side.
Oh, Hey, good afternoon, congrats on the results just.
<unk> first on the 79 free cash flow annualized increase.
It sounds like Youre, oxy and about $40 million in the.
Frank Liso: Revenue exposed to real estate transactions globally in Q1 was 49% compared to 62% in the same period of fiscal 2023. While revenue exposed to real estate transactions in Canada was only 27% compared to 37% in the same period of last year.
Current quarter should we think about a lag to some of the benefits both on the cost side and pricing side.
Speaker 4: transcript
Speaker 4: Yeah, that's right. We saw in the month of October , we actually got 40 million of it. And there's some more going to come on at the rest of the quarter. So you'll see that impact happen.
Yes.
That's right we saw in the month of October we react we actually about $40 million of it.
And theres, some more going to come on.
And the rest of the quarter.
Frank Liso: We reported a revenue of 120.1 million during the first quarter which is in line with the same period in fiscal 2023, in that prior period there was an additional 9.3 million of revenue from TM Group which was divested on August 3rd, 2023, excluding the impact of TM Group, revenue has grown by more than 8% in the first quarter of fiscal 24. We generated a just a debita of 68.7 million in the first quarter of fiscal 2024 and increased of 4.3 million or 7% compared to the same period of fiscal 23.
So you'll see that impact happened in.
Speaker 4: transcript
Speaker 4: In the results we release in February for this quarter, but then you'll see the full 70 million annualized impact on a quarterly basis, next quarter.
The results we released in February for this quarter and then you'll see the full 70 million annualized impact on a quarterly basis next quarter.
Speaker 8: transcript
Speaker 8: Okay, make sense. And then in your prepared remarks, you talked about some of the pricing actions that you've done.
Okay makes sense and then in your prepared remarks, you talked about some of the pricing actions that you've done.
Speaker 8: transcript
Speaker 8: being undertaking recently. I'm sure you're watching kind of revenue per customer and churn trends pretty closely. Are those kind of generally falling in line with your expectations? How would you...
Been undertaking recently.
I'm sure you're watching kind of revenue per customer and churn trends pretty closely are those kind of generally falling in line with your expectations. How would you describe that.
Speaker 4: transcript
Speaker 4: Yeah, I see everything's in line with with expectations. I mean, we have a you know, churn is generally very low across the business. We have multiple, you know, multiple products in many cases sold across the same customer, which generally leads to a sticky customer. And so there's a real focus on, on getting more customers on the contract, which which even helps to use that more.
Yes, I'd say I'd say everything is in line with expectations I mean, we have a <unk>.
Churn is generally very low across the business we have multiple.
Frank Liso: Our highest quarterly amount since Q4 of 2022. This is primarily a result of lower adjusted operating expenses than growth and revenue after taking into consideration of the TM Group divester. We continue to maintain our strong EBITDA margins coming at 57% this quarter, our highest level since Q4 of 2022 and is in line with our target range of 50 to 60%. Total adjusted operating expenses which include direct costs, technology costs, GNA, sales and marketing were 51.4 million for the quarter for 43% of revenues and improvement of 4.3 million or 8% compared to the prior period when total operating costs were presented 46% of revenues.
Sure.
Also products in many cases sold across the same customer, which generally leads to a sticky guys sorry.
And so there is a real focus on on getting more customers of the contract, which which even helps it gives them a lot.
Speaker 8: transcript
Speaker 8: Next for me, you referenced the, you know, for turns, a blowered target a few times. Would you be willing to put a kind of timeline around that or any kind of thoughts on one of my PhD?
Next for me.
You referenced the four turns of leverage target a few times would you be willing to put a timeline around that or.
Any kind of thoughts on when that might be achieved.
Speaker 4: transcript
Speaker 4: No, we're not going to commit to a timeline today. Well, let's do an ASAP. I would say though, like in the kind of longer term, we'll give you a below that. We kind of know you got to be between two and three and a half times given what our, you know, the ability of our business to perform, our cash generation perspective. But in the near term, we have to get an ASAP below four times. We think that's an important kind of number to demonstrate that we can quickly bring it down to.
No, we're not going to commit to a timeline today, but let's do it asap.
I would say, though like in the kind of longer term.
We're going to get it below that we kind of know you've got to be between two and three five times.
Given what are the ability of our business to perform a cash generation perspective.
Frank Liso: Net of the impact of expenses from fiscal 2023 acquisitions are operating costs for the quarter or 43.6 million which demonstrates improvements from our cost reduction if it is implemented early in the second quarter of fiscal 23. As we acquire assets and manage the broader business, we continuously look for ways to drive cost energies and eliminate redundancies. This is one of the methods to continually improve capital performance which matched which matched earlier. We expect our ongoing operating costs to be within the 40 to 50% range of revenues.
But in the near term relate to get.
Below four times.
We think that's an important kind of number to demonstrate that we can quickly bring it down to.
Speaker 8: transcript
Speaker 8: Okay, and then lastly, maybe for Frank, just on the working capital, it looks like a little bit of an outflow this quarter. Is that just timing? Should we think about a reversal in the quarters ahead?
Okay, and then lastly, maybe for Frank just on the working capital it looks like a little bit of an outflow. This this quarter is that this timing as we think about a reversal in the quarters ahead.
Speaker 5: transcript
Speaker 5: I don't think there's a reversal or expecting Gavin. So we actually get them as you know paid a lot of upfront for some of the services that we offer. So that will continue. And there's nothing extraordinary that I can remember that's in the book and capital this before.
I don't think.
As a reversal or expecting Gavin so.
We actually get.
Paid a lot of upfront for some of the services that we offer.
Frank Liso: Net finance costs for the quarter were 35.1 million compared to 16.2 million in the same period of fiscal 23. The increase is due to an increase in increase in interest rates in higher net debt levels as well as lower favorable non-cash impacts from the change in fair value of our convertible adventures as compared to the prior periods. Acquisition restructuring other costs for the quarter were 6.4 million. This was a decrease from 18.5 million in the first quarter of fiscal 23.
So that will continue and.
There's nothing extraordinary that I can remember that's not working capital this quarter.
Okay pipeline. Thanks, so much.
Speaker 2: transcript
Speaker 2: Thank you. Your next question is from Scott Plescher from CIBC. Please ask your question.
Thank you. Your next question is from Scott <unk> from CIBC. Please ask your question.
Speaker 9: transcript
Speaker 9: Most of my questions have been answered, so I will just ask one. On the, you were sort of spoke to the potential for 10% revenue growth as a result of price increases. Last quarter you talked about targeting, you know, between, I think, 20 to 25% total growth with half of that organic.
Hi, good afternoon, good evening.
My questions have been answered so I will just ask one on the.
You were sort of spoke to the potential for 10% revenue growth as a result of price increases last.
Frank Liso: As Matt mentioned earlier, improving capital conversion is one of the past towards driving down our leverage ratio below four times. We believe we can deliver additional improvements in this cost minimum over time. We are targeting 10 to 15 million acquisition restructuring another cost on an annualized basis.
Last quarter, you talked about targeting between I think it was 20% to 25% total growth with half of that organic so that would sort of imply sort of limited growth from new customers or customer expansion. If youre doing 10% from pricing is that is that the case or is there sort of.
Speaker 9: transcript
Speaker 9: So that would sort of imply, you know, sort of limited growth from new customers or customer expansion
I think there is additional upside from winning new customers to that time to that 10% to 12, 5% organic growth number.
Frank Liso: You should expect continued improvements in the second quarter beyond as this is one component of our 70 million annualized business improvement plan mentioned earlier.
Speaker 4: transcript
Speaker 4: We have like large market share across the lot of the markets we're in. Where the name of the game is, and adding new logos with adding more services, existing customers. That's what we focus on, the cross fell, and the cross fell under contract. It's been a big, big focus of ours. So, that's the way I would look at it's got.
Large market share across a lot of a lot of the markets. We're in.
Where the name of the game as it added new logos with adding more services to existing customers.
Frank Liso: Now turning to our balance sheet, we reduced our overall debt by 45 million during quarter, mainly with the proceeds of the sale of PM. And at the same time, this quarter we close small deals on legal prox management space that we've locked into in late fiscal 23. Our leverage ratio based on fiscal point of work consensus, including the impacts of convertible adventure, is currently 5.1 times as September 30. We have sufficient resources to manage our debt levels.
And that's what we focus on the cross sell and the cross sell under contract is going to take a big focus of ours.
So so kind of thats the way I would look at it Scott.
Okay. Thanks.
Speaker 9: transcript
Speaker 9: And then I get, yeah, one question I'll ask Jeremy, it's just the gross margins were.
And then I guess one question I'll ask Jamie just on the gross gross margins work.
Speaker 9: transcript
Speaker 9: that's the level we can look at going forward.
Really improved in the quarter or is that is that at that level. We can look at going forward.
Speaker 5: transcript
Speaker 5: Yeah, I mean, I think that one of the bigger implications of my mission before Scott was the best year of PM. So they.
Yes, I think that one of the bigger implications that Glenn mentioned before Scott was the divestiture FTM so they.
Frank Liso: The business generates strong, sustainable capsules. But we understand it is necessary to drive down our leverage ratio, and we have set a clear target to reduce it below four times total net debt to adjust the bidup. We're taking actions to increase our capital performance and placing a greater emphasis on this measure. Our Q1 casual operations increased by 4% versus the prior year. We've built a business of scale as mission critical for small and media size law firms and financial institutions.
Speaker 5: They would have carried a lot of ore margins. So yeah, that's the level you should expect. And given that there was a one month contribution of TM in Q1, you know, expected to rise slightly higher.
It would have carried a lower margin so.
That's the level you should expect.
Given that there was a one months.
Attributes should at TN in.
Q1.
Two to rise slightly higher.
Okay, great. Thanks.
Speaker 2: transcript
Speaker 2: Thank you. Your next question is from Robert Young from Kennecore Genuity. Please ask your question.
Thank you. Your next question is from Robert Young from Canaccord Genuity. Please ask your question.
Frank Liso: Despite the challenging macro market conditions, today's results and plans demonstrate the resiliency of the business and the opportunity in front of us.
Speaker 10: transcript
Speaker 10: Hi, the progress on AR expansion. Is that all driven by Canada at this point or is that expanded into other geographic jar?
Hi.
Progress on our expansion.
Is that all driven by Canada at this point or has that expanded into other geographic geographies.
Unknown Executive: With that, I'll turn it back to the operator for Q&A. Thank you.
Speaker 4: transcript
Speaker 10: So we started both in the UK and Australia, but most of what you would have seen was the pipeline built over the last year in Canada coming online, particularly as Frank mentioned towards the end of Q4.
So we started both in the UK and Australia.
Unknown Executive: Ladies and gentlemen, we will now begin the questioning and answer session. Should you have a question, please press the star followed by the one on your touchstone phone. You will hear a few 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're using a speaker phone, please give the handset before pressing any piece. Once again, that is star one should be asked a question.
But most of what you would've seen was the Playboy built over last year in Canada coming online.
Particularly towards.
Towards the end of Q4.
Okay.
Speaker 10: transcript
Speaker 10: and the plan to reduce CAPEX that you're highlighting within that $70 million.
And the plan to reduce capex that you highlighted within that $70 million.
Speaker 10: transcript
Speaker 10: better free cash. Would that have an impact on any of the initiatives to consolidate under unity and then expand that strategy, even if it started in the UK and Australia?
Better free cash would that have an impact on any of the.
The initiatives.
Consolidate under unity, and then expand that strategy.
Even if it started in the UK and Australia.
Unknown Shareholder: Your first question is from the first question from the capital markets. Please ask your question. I could have a minute. Maybe just to clarify regarding the focus on the leveraging. Should we be thinking that you'll be taking a pause in M&A for the next few months or to the leverage or will you still consider opportunities on the more selective way? The main focus is we heard investors. The leveraging is a priority and look as we leverage that will free up more cash flow that in the future will let us to get back to the business, but we kind of heard the message loud and clear.
Speaker 4: transcript
Speaker 4: No, a lot of that work is coming towards an end, so that's why we're having a big reduction in that span. That's part of the reduction in CapEx is due to that being concluded or towards conclusion.
No a lot of that work his guys come to close coming towards an end. So that's why we are having a big reduction in that spans that's part of the reduction in Capex is due to that being concluded towards conclusion.
Speaker 10: transcript
Speaker 10: Okay, and then you added a new head of product, a new CRO head of sales. And so maybe we just give us a sense of the changes and how that's going relative to the expectations.
Okay, and then you added a new head of product a new CRO.
Crowe head of sales and so maybe if you guys give us a sense of.
The changes in how thats going relative to your expectations.
And then I'll pass the line.
Speaker 4: transcript
Speaker 4: Yeah, so we brought in a new CRO, and you know, it really was a build upon the success we'd had in Canada and selling contracts and taking that.
Yes, so we brought in a new CRO.
And you don't really want to build upon the success, we've had in Canada, and the selling contracts and taking that and building that infrastructure to be able to do that globally. So.
Speaker 4: transcript
Speaker 4: I'm building that infrastructure to be able to do that globally. So, you know, when the process is kind of rebuilding part of our global teams, a lot of that's already happened. And so, you're seeing us continue to grow AR, even through the first quarter, as Aaron came on board. So, really excited on board.
Unknown Shareholder: So for us in the near term, it's about getting that debt to adjust to EBITDA as a metric to look at below four times ASAP. And look, we, as you would have seen last quarter, there was a side from the practicing and application acquisition that was announced in the queue for results. There was a couple million dollars of very small acquisitions we did that were creative given what we paid for them, but they were very, very small.
We're in the process of kind of rebuild and part of our global teams a lot of that's already already happened and so you're seeing us continue to grow.
Through the first quarter, but.
As Aaron came on board, so really excited onboard.
Speaker 4: transcript
Speaker 4: You know, a veteran when it comes to technology sales. So real strong ad.
You know.
Veteran when it comes to technology sales.
So real strong add to the team.
Speaker 4: transcript
Speaker 4: Our David Nash, our chief product officer, also joined in the quarter. These are two kinds of hires you were looking for. For better part of last fiscal year, is there were two areas we knew we wanted to do better in. So also happy to have David on board, is he kind of looks and helps us kind of prioritize a bit better our product strategy, really relates to having more focus on our global legal practice and software business.
R. David Nash, our chief product Officer.
Unknown Shareholder: Okay, now as far as your end markets, you have better real time visibility than we do the data gets a bit lagged. Is it still the case that we're kind of bouncing around the bottom or are you seeing any trends across the geography? So, I mean, look at our business performing really well. If you consider that compared to queue for, you know, we sold TM yet still came in sequentially with the same amount of revenue we have, queue for which is generally always seasonally slow, the men blinds that our core business are doing doing really well.
We're also joined in the quarter. These are two kind of hires you are looking for for better part of last fiscal year as they were two two areas. We knew we wanted to do better in so also happy to have David on board as he kind of looks it helps us prioritize a bit better our product strategy really as it relates to.
Having more focus on our global legal practice in the software business.
Speaker 10: transcript
Speaker 10: Okay, and if I can ask one last question, he talked about some of the businesses and payments and information service property set on the core banking, all of that piece. Could you just expand on what you were, I might have missed the very beginning of that. What's the point of putting special emphasis around that piece of the business? What are you doing with that going forward? Any other color there would be helpful.
Okay, and if I could last one ask one last question you talked about some of the businesses in payments information service property set on the core banking all of that piece.
Could you just expand on what you were.
Unknown Shareholder: Look, I assume your question relates to kind of real estate transactions, which are now a minority of our revenue. Look, we're still kind of. If you look at the numbers we see and correlate with businesses that we have that do track, purchase and sales, yeah, they're still a fairly depressed market out there. But at some point, end up the main income's back. That will be great upside in the future. But today, even though you're seeing great performance in the business as it demonstrated by the results, we were able to sell about 16% of our revenue.
I might have missed the very beginning of that what's the point of putting special emphasis around that piece of the business. What are you doing with that going forward any other color there would be helpful.
Speaker 4: transcript
Speaker 4: Well, it's points to give the market just enhanced disclosure around a business that we see a lot of opportunity in. It's a business that is somewhat different to our core vehicle tech business. Sales cycles are different.
Those points to give.
Give the market.
This enhanced disclosure around a business that we see a lot of opportunity in.
This is a business that is somewhat different to our core legal tech business.
Sales cycles are different.
Unknown Shareholder: And still, you know, in a quarter's generally sequentially down, kind of be flat through our last quarter. Which, again, speaks to the strengths of the business. So yeah, I hope they answered your question. Yeah, it does. And then just as we think about the December quarter, just giving some of your markets and giving a bit of TM going away, I guess would it be reasonable to expect that revenue but that will be down a little bit sequentially versus September quarter?
Unknown Shareholder: Yeah, generally, we have our Q3 or Q2 is a bit softer than Q4 and Q1. I just remember that in EQ1, we still had just a month less of TM revenue. So naturally, that will fall off in Q2. Maybe just to confirm that some of the disclosure, it seems to be 16 and a half million of TM revenue. Is that in general ballpark? Yeah, generally, yeah, that's a good number. But as I mentioned before, the year over year impact on revenue was that 9.3 million. So that's three months to further one month. All right. Thanks. That's one. Thank you.
Kevin Krishnaratne: Your next question is from Kevin, Krishna, not me from the Cultural Bank. Please ask your question. Hey, they're a good evening. Just a question on the 70 million recast flow. There's a number of categories that the benefits are coming from. Can you give us a sense of, you know, where the greater impacts are to come from with catbacks? Is it the product price changes, op-backs, any color there? Yeah, I could take that.
Kevin Krishnaratne: Kevin, so they are, we have purposefully put them in order of significance. So as you mentioned, the first couple being the reduction in catbacks would be something that we've already actioned, and then followed by reduction in one-time charges. And then the price optimization issues that we have. Okay. Gotcha. And then thought it was interesting, the comments you made on, you know, the opportunity and practice management. I think it was in UK and Ireland.
Kevin Krishnaratne: I might have misheard. I did you say 20,000 users there. And there's an opportunity for an uplift there, which is curious to know how do we think about the level of that, you know, uptick. And then did you say going forward, you would think that that's a business that you could do, 10% increases year over year. I'm just curious about the commentary that you made there. Yeah. It's not Kevin. It was, it was kind of case of point example of, you know, some of the upside we have in our business when you're just you're looking at business we have and your chart, your price points, you know, quite deeply below market.
Kevin Krishnaratne: So this is not the case in point. We have 20,000 users that are that are paying in many cases, you know, under the hundred dollars, you know, a month below market. We kind of give it to Canadian dollars. That's just one example of some opportunities we have in the business, when you kind of back up and look at it kind of, you know, from, when you got to look at all the things that we have, every year you can grow it, you know, got tennis, we've consistently done that for many years and in most cases, you know, been delivering that.
Kevin Krishnaratne: Okay, gosh, gosh, I think so that. The 19 to point, 19% ARR to 27% ARR are, you know, in the quarter, a nice jump. Was that mainly driven by my M&A and it's an also, you know, how are, how's progress being made on the minimum volume contracts? It was driven by both. There, there was a press band application, you know, acquisition in there that we talked about in a Q4 financials that would also be in these financials, but there was also a lot, a lot of that was driven from kind of minimum spent contracts, particularly out of Canada.
Kevin Krishnaratne: Kevin, Kevin, the increase is actually 13 to 27 year of year, but the given Q4 was our, you know, obviously using high periods as management mentioned, there were a lot of contracts that were signing Q4 that had partial benefit in Q4, so you were getting the full, the full free month benefit in Q1. Sorry, was, did you not do, you did 19% in Q4, right? So I was going from 19 in Q4 to 27.
Kevin Krishnaratne: Yeah, okay. I'm sorry, I thought you were over here. Yeah, all good. Last one for me, just on some cash items. They're number one. How do we think about cash taxes for the year? They were a little bit elevated, I think, in 23, just wondering where they land in, in 24. It looked like it was pretty modest in Q1. And then the second one on cash is, can you remind us of, you know, any, you're a rough estimate for whole backs and potential earnouts that you have, that you're going to be paying out in that in 2024?
Kevin Krishnaratne: Yeah, so for cash taxes, we have a series of plants in Canada to get a better handle of our uses of cash. And, you know, we do expect reductions in cash relative to the fiscal 2024 amount. You should look at a effective rate of about 25%, but even that we have a large loss carry forwards of approximately 200 billion. We do tend to the good use in in the fiscal period in Canada and your question on whole backs.
Kevin Krishnaratne: We do have a disclosure in our notes about the total amount of whole backs, so you can refer to that again. But, you know, on top of my head, I think it's roughly round, you know, the 10 to 15 million of the next 12 months. Perfect. Thanks a lot. I'll pass mine.
Unknown Executive: Thank you.
Gavin Fairweather: Your next question is from Gavin. If you're other from former securities, please ask your question. Oh, hey, good afternoon.
Unknown Shareholder: Congrats on the results. Just a clarification for some 79 free cash flow and was increased. I'm telling you accent about 40 million in the, you know, current quarter. We think about a leg to some of the benefits, both on the cost item pricing side. Yeah, that that that's right. We saw in the month of October, we react, we actually got 40 million of it. And there's some more going to come on at the rest of the quarter.
Unknown Shareholder: So you'll see that impact happen in the results we release in February for this quarter. And then you'll see the full 70 million annualized impact on a quarterly basis next quarter. Okay, make sense. And then in your prepared remarks, you talked about some of the pricing actions that you've been undertaking recently. I'm sure you're watching kind of revenue per customer and churn trend pretty closely. Are those kind of generally falling in line with your expectations?
Unknown Shareholder: How would you start that? Yeah, I say, I say everything's in line with with expectations. I mean, we have a churn is generally very low across the business. We have multiple, you know, multiple products in many cases sold across the same customer, which generally leads to a sticky customer. And so there's a real focus on getting more customers on the contract, which, which even helps to use that more. Next for me, you referenced the, you know, for turns, a blubberage target a few times, would you be willing to put a kind of timeline around that or any kind of thoughts on one of my BTC?
Unknown Shareholder: No, we're not going to commit to a timeline today. Let's do an ASAP. I would say, though, like in the kind of longer term, we're giving it below that. We kind of know you've got to be between two and three and a half times, given what our, you know, the ability of our business to perform a cash generation perspective. But in the near term, we have to get an ASAP, below four times.
Unknown Shareholder: We think that's an important kind of number to demonstrate that we can quickly bring it down to. Okay, and then lastly, maybe for Frances on the working capital, a little bit more flow this this quarter, that this timing, we think about a reversal in the corners ahead. I don't think there's a reversal or expecting Gavin, so we, you know, we, we actually get them as you know, paid a lot of upfront for some of the services that we offered. So that will continue and there's nothing extraordinary that I can remember that's in the working capital this this quarter. Okay, I'll have fun. Thanks so much. Thank you.
Scott Fletcher: Your next question is from Scott Fletcher from CIBC. Please ask your question. Hi, good afternoon. Good evening. Most of my questions have been answered, so I will just ask one on the, you were sort of spoke to the potential for 10% revenue growth as a result of price increases. Last quarter, you talked about targeting, you know, between, I think it's 20 to 25% total growth of half of that organic. So that would sort of imply, you know, sort of limited growth from new customers or customer expansion.
Scott Fletcher: If you're doing 10% from pricing is that the case or is sort of, you know, if there's additional upside from winning new customers to that 10 to 12.5% organic growth number. So we have like large market share across a lot of a lot of the markets we're in. Where the name of the game isn't any new low, it's adding more services existing customers. That's what we focus on the cross fell and the cross fell under contracts, but a big big focus of ours. So, so kind of that's that's the way I was, I would look at it's got.
Scott Fletcher: Okay, thanks. And then I get, yeah, one question last time is just on the gross, gross margins were, you know, materially improved in the quarter. Is that that enough level we can look at going forward? Yeah, I think that one of the bigger implications of when mentioned before spot was the, the fester of PM, so they. Be Would Have Carried A Lot More Markings. So, yeah, that's the level you should expect. And, you know, given that there was a one month contribution of TM in Q1, you know, expected to rise slightly higher.
Unknown Executive: Okay, great. Thanks.
Unknown Executive: Thank you.
Robert Young: Your next question is from Robert Young, from Ken Accordian Unity. Please ask your question. Hi. The progress on. So, is that all driven by Canada at this point or is that expanded into other geographies? So, we started both in the UK and Australia. But most of what you would have seen was the point when we built our last year in Canada, coming online, particularly Frank mentioned towards the Q4. Okay. And the plan to reduce capex that you're highlighting within that $70 million of better free cash.
Robert Young: Would that have an impact on any of the initiatives to consolidate under unity and then expand that strategy, even if it started in the UK and Australia? A lot of that work is coming towards the end. So, that's why we're having a big reduction in that spend. That's part of the reduction in capex is included towards inclusion. Okay. And then you added a new head of product, a new zero head of sales.
Robert Young: And so maybe we just give us a sense of the changes and how that's going relative to expectations. And then I'll pass on. Yeah. So, we brought in a new CRO and you know, really was to build upon the success we'd had in Canada and selling contracts and taking that. I'm building that infrastructure to build and do that globally. So, you know, when the process is kind of rebuilding part of our global teams, a lot of that's already already happened.
Robert Young: And so you're seeing us continue to grow AR even through the first quarter. As Aaron came on board. So, so really excited on board. You know, a veteran when it comes to technology sales. So real strong add to the team. Our David Nash are our chief product officer also joined in the quarter. These are two kind of high as you were looking for for better part of last fiscal year is there were two, two areas we knew we wanted to do better in.
Robert Young: So also happy to have David on board as he kind of looks and helps us kind of prioritize a bit better. Our product strategy really relates to. You know, having more focus on our global legal practice and stuff or business. Okay.
Unknown Executive: And if I can last one, ask one last question. He talked about some of the businesses and payments information service property set on the core banking all of that piece. Can you just expand on what you were. I might have missed the very beginning of that. What's the point of putting special emphasis around that piece of the business. What are you doing with that going forward any other color there would be helpful.
Unknown Executive: Well, it's points to give you know, give the market. Just enhance this closure around a business that we see a lot of opportunity in. You know, it's a business that that is somewhat different to to our core legal tax business.
You know, sales cycles are different.