Mach7 Technologies Limited

Good morning, everyone, and welcome to the Mark 7 third quarter FY25 business update. My name is Françoise Dixon, and I'm Head of Investor Relations for Mark 7. Today, our CEO, Mike Lampron, will provide an overview of our Q3 result. We will then open it up for questions, which can be submitted via the Q&A text box at the bottom of the screen. I'll now hand over to Mike.

Thank you, Francoise. Good morning, everyone, and welcome to Mach 7's FY25 third quarter business update. We'll start off with some highlights and then go into a bit more detail on the third quarter results. So some highlights for us this quarter. CAR contracted annual recurring revenue of $30.8 million, slightly down on a constant currency basis by a little over 2%, 2.2%. annual recurring revenue run rate of 24.4 million at the end of March. That's down about just under 2%, 1.9%, again, constant currency basis. Sales orders of 5.1 for the quarter. Cash receipts were a highlight of 11.4 million, up a little over 28%. Remain operating cash flow positive in Q3 and for the nine months ending 31 March. We remain to have cash on hand of just under $25 million, $24.9 million, up slightly from where we ended Q2, the first half of the year, and we still have no debt. We were able to complete some cost-out initiatives in Q3. That will result in about $2 to $3 million in annualized savings. We'll talk more about that in a minute. And we were also able to commence our on-market share buyback. And through that buyback, we've bought about 1.9 million shares in March and about 3.3 million shares bought back to date. And we think still finding value in doing that. We did announce mid-quarter CEO transition. That was announced at the beginning of April. Terry Thomas has been appointed as Managing Director and CEO, commencing on the 1st of July. And I'll comment on that at the end. And we're also reaffirming our FY25 guidance, remembering 15 to 25% growth in car and revenue and off-necks growth to be less than revenue growth. So, you know, as we think about Q3, you know, the message for Q3 is simply that we remain on track. to meet FY25 guidance. We continue to deliver on our cost controls throughout the quarter. We've remained cash flow positive for the year and cash collections were strong, again, over 11 million in Q3, which among many different metrics shows the strength of our customer relationships. We began to move forward throughout the quarter on our plan buyback, again, a total of 3.3 million shares bought back to date. Further to our continued focus on operational improvement in Q3, we announced the succession plan for myself and are going through that transition to welcome Terry to the Mock7 team as our newest CEO and more on that later. All in all, from my perspective, this quarter and this year are on track with expectations and we expect to have a strong sales quarter in Q4 to finish off the year. So as we sort of get into the meat of the business update for everyone, we'll talk about sales orders first. You know, sales orders for the third quarter, $5 million, $5.1 million. The majority of those sales orders received were ARR type sales. The remaining sales orders were capital licenses and professional services, about $1.1 million in professional services, $600K in capital licenses, about $3.4 million in recurring revenue sales. When you look through the business update, you'll see a chart there that's been included. And this is a chart that we tend to include on every quarterly now. It just sort of shows you that we continue to have lumpiness in our quarter over quarter results, right? This isn't a sign of any predictable seasonality, but is really the result of a growing business. And as our total book of business grows, we'll see that lumpiness start to smooth out. And in regard to our pipeline and sales growth, while we're talking about sales, we have a very strong near-term pipeline for this fiscal year. I mean, look, knowing there's only about 60 days left in Q4, we still feel strongly that we have the supporting pipeline to meet our guidance and to build our net new customer by two to four net new logos, as I indicated we would earlier. We have a very healthy short-term and long-term pipeline for the business. And remember what I've said previously, a healthy pipeline for us is somewhere in the realm of having at least three times coverage in the pipe. All right. So moving on from sales to revenue. First, I'll talk about annual recurring revenue. We produced about 24.4 in ARR on a run rate. Of course, that's calculated by annualizing the revenue earned from subscription and maintenance and support fees. The run rate did decrease slightly by about half a million dollars since the 31st of December in constant currency. And that was a reflection of we did have a customer leave us. And they shifted away from our solution to a vendor that was more local to their facility. They were up for renewal. And although disappointing, We do know that this will happen on a rare occasion. We also know though that our ARR will grow as new customers achieve first productive use and existing customers expand through more licensing or add-on products and Or as they renew with increased rates or it's your chief first productive use on add-ons. So all that will help increase our ARR over time. So difficult to look at little things like a contract like that in isolation. Best to look at it on the aggregate, but always disappointing to lose a customer for sure. The contracted annual recurring number, the CAR number. it's about 30.8 at the end of March. That decreased by about 700K in constant currency. And that meant that our growth from renewals and expansions was offset by this customer loss, right? Mach 7's car consists of the 24.4 ARR run rate for customers that have achieved first productive use of the software, plus another 6.4 of subscription and maintenance and support fees not yet recognized as revenue. So once again, as a reminder for everyone, the gap between our car and ARR represents future revenue once first productive use is achieved from new customers. Moving on from revenue, talk about cash for a moment, sort of a bright spot for us for the quarter. Cash receipts from customers in Q3 were 11.4. It's actually up 28% compared to Q3 of FY24. and up 18% on Q2 of FY25. And again, reflecting the signing of expansion renewal agreements, as well as the achievement of project milestones during the quarter. And I would say also an indicator to, again, not to be looked at in isolation, but an indicator of having a happy customer base as well, customers that are paying their bills, right? So, Lock 7 was also operating cash flow positive for Q3 and FY25 for a second consecutive quarter, with operating cash flows of 2.6 million, increasing from 900K. And for nine months on 31 March, we were also operating cash flow positive, and we remain on track to achieve this objective at FY25. Financial position of the company remains strong, no debt, 24.9 million cash on hand. So as we move on, we think about the outlook for the business and a couple of additional things I'd like to highlight for you. First, the VA project, NTP, that continues to move forward. We mentioned in the past that they're choosing a new workflow orchestrator. They have completed that selection and we continue to work closely with the VA and the new vendor to ensure that all the right pieces are in place for the VA. At this stage, though, I'm uncomfortable committing to a timetable because the new vendor is likely to have some development work that needs to be completed. And we do not have insight into that work as of yet. Now, hopefully we'll be able to give you a more firm date by the end of Q4. But again, this is work that is dependent on a third party. It's not our timetable. It's not our product roadmap. It's between that vendor and the VA. We're the beneficiary of that work once it's done. You know, we need to get some more insight into that to be able to hand it over to you. I'd also like to just make the comment that, you know, we continue to have a strong financial position with no debt, growing cash balances, disciplined approach to cost and cash management, as indicated through the two to three million and costing out that we did complete in Q3. And lastly, just to highlight the fact that we are reaffirming our FY25 guidance and we feel comfortable with that, we will have an excellent Q4 to support that. So I think with that, Francoise, I'll hand it back over to you to take questions and then I'll have a couple of closing comments.

Thanks, Mike. We've received a couple of questions in advance via email from Mike Woodson. So we'll start with those. The first question is, would you please discuss the market reaction to UnityView?