Dye & Durham Ltd

TSX:DND

I'm joined today by our CFO, Jenni Pilcher, who will provide more detailed insights into the numbers before we take some questions.

Firstly, I want to highlight our success in reducing expenses while keeping Whispir actively working to grow our revenue and build new business. We have reduced expenditure from operating and investing activities by 21% compared to the previous quarter. This is matched by progress across all other areas of our operations.

Meanwhile, we've maintained our sales efforts to ensure Whispir expands its footprint in both Asia and ANZ. In ANZ, our strong blue-chip customer base continues to build on the way they use the Whispir platform, while we have also had success in entering new contracts. For example, during the quarter, we signed a substantial contract to provide electronic prescription messaging as part of Australia's national digital health strategy. This is a great example of the diversity of applications of the Whispir platform.

In Asia, Whispir continues to drive growth through its channel partners. The region has secured multiple new high-quality customers, which serve as valuable entry points for growth sales. Our land-and-expand approach remains a key part of our strategy, with initial engagements often growing significantly as customers appreciate the many ways Whispir can contribute to their operational efficiencies and also deliver compelling business outcomes.

And finally, our progress on improving margins and reducing costs means we're on track to achieve our goal of generating free cash in FY '24. The fact that we have achieved such a significant reduction in cash outflows, while still ensuring we build on our existing client base and revenue stream, is a testament to the hard work and dedication of our team.

Now I'll hand over to Jenni for a more detailed breakdown of the numbers before we take any questions. Jenni, over to you.

Thank you, Jeromy. As Jeromy noted, the key feature in these results is the significant improvement in free cash outflows, which have decreased from a $9.2 million outflow in Q1 to a $1.3 million outflow in Q4, with the current quarter showing a 73% improvement on the prior quarter. This result is despite a softening in cash receipts in the second half and is a direct result of our diligent approach to cost reductions throughout the year.

And looking at receipts and payments more specifically, the receipts was stronger in the first half of the year as the business still benefited from some COVID-related revenue. But with that now having washed through, the second half of the year has broadly leveled out, and we are seeing receipts be quite consistent month-to-month.

Receipts from customers for this quarter were $13.4 million. Whilst this represents a slight decline of 2.6% on the previous quarter, it's important to note that this softening is primarily due to timing of collections, with underlying revenue being up 1% for the quarter compared to the PQ. And recent contract wins suggest receipts will pick up again in the first quarter of FY '24.

The main driver of the improvement in free cash flow has been on the expense side of the business as we have reduced our cost base to rightsize the business in the wake of economic- and market-related conditions. The effects of these cost reductions can be seen across all areas of the business. But more specifically, for this quarter, staffing costs, including capitalized development labor, were down 23% on the prior quarter at $6.9 million, largely reflecting the downsizing of the U.S. operations.

Corporate and administration costs were down 28% on the PQ to $1.1 million. Sales and marketing payments saw a similar size reduction of 21% on the prior quarter to $1 million. And finally, product-related cash payments for the quarter was 16% down on the prior quarter at $4.9 million as we continue to drive improvements in gross margins across all regions.

On the financing side, as previously reported, during the quarter, we successfully secured a debt facility from RiverFort Capital, a U.K.-based investment fund, which provided us with an immediate cash injection of $0.94 million after costs and, importantly, access to a further $6.5 million upon approval by RiverFort. The initial drawdown has given us the flexibility needed to manage our monthly working capital needs, and we do not intend to make any further drawdowns in the short term as the business verges on being self-sustainable. We anticipate commencing the repayment of this loan in Q2 of FY '24, and further information on this facility can be found in our ASX announcement that was released on the 23rd of June.

Finally, the company closed the quarter with $4.3 million cash at bank, plus a further $1 million of restricted cash and $6.5 million in unused credit facilities, including the RiverFort facility. This places us in a comfortable position with more than 7 quarters of free cash flow coverage.

Our core business operations also give us the confidence in the outlook for Whispir. Asia offers us huge potential, and our sales and marketing teams are committed to building on the impressive revenue trajectory of recent months. Our ANZ business, which provided the foundation for the company, remains the primary revenue generator. And it was pleasing to again secure new business from the health sector, adding to our substantial reputation for streamlining health processes and efficiencies for both patients and providers.

With the new reduced cost base and leveling out of cash receipts, combined with recent sales wins, we are very confident of delivering free cash flow positive result across FY '24. Whilst quarter-to-quarter, we'll likely see some variability due to this being a cash flow report, we are expecting that across the whole of FY '24, the business will be self-sustainable and to report a cash flow positive result.

That concludes our commentary on Whispir's Q4 FY '23 performance. And now I'll hand over to you, Andrew, to moderate any questions that people might have.

Thanks, Jenni, and good morning, everyone. A reminder for participants, if you'd like to ask a question of Jeromy or Jenni, please drop it into the Q&A box, and I'll gladly facilitate that on your behalf.

A couple of questions in already. First one for you, Jenni. You made a comment there about your expectations for FY '24 free cash and it being positive across the financial year. A quarter ago, you were expecting Q1 to be cash flow positive. I'm just reconciling those 2 positions. Maybe you have any comments there.

Yes. Thanks, Andrew. Look, it's fair to say we expect to see continuous improvement quarter-on-quarter in free cash outflow from here. But there is still some variability due to when cash payments go out, receipts come in. So I'm reluctant to say, to pin it down to Q1 specifically, but very confident that FY '24 will be cash flow positive as a whole.

Thank you. Next question for you, Jeromy. You mentioned the Whispir signing of the e-prescription messaging contract in Q4 as part of Australia's national digital health strategy. Are there any more comments or some context you can share with us today? And take yourself off mute, too, please.

Apologies. Look, this one is quite strategic. It was a competitive process. Importantly, Whispir was successful unseating an incumbent, in part for a number of reasons: the quality of the Whispir platform, the ability to support a more aggressive evolution of this solution with off-the-shelf functionality, which is really an outcome of the R&D efforts that we've been making. It's a validation of the profile of the business on the back of the vaccination rollout and the credibility we've built in this industry.

But importantly, this contract was signed in late June and will be operational and revenue generating, revenue accretive, in less than 30 days, which is also another section of the work we've been doing to enable the more rapid onboarding of customers and to simplify the whole customer journey. So it's a very important strategic win, and it is part of the whole industry trend to increase digitization and digital experiences. And we have a road map to further enhance this service, which will, in turn, support greater utilization of this platform.

Thank you. Another question, which has come in, I'll direct this to you, Jenni. Have you now rightsized the business for the foreseeable future following the changes and the restructures that have been made in the last 6 months?

Yes. The short answer to that is we have, Andrew, but we do continue to review the business always for efficiencies and any price reductions we can get on licensing and things like that. But yes.

Okay. Thank you. And another question for Jeromy. Can you provide any more color on the progress of the Asian business? And relative to how it's performed this year, what are your expectations for the growth in that business next year?

Look, we anticipate continued acceleration of the Asia business. And in fact, we anticipate Asia will grow faster than Australia through the course of FY '24. There's been a lot of excellent work being done with our channel partners. But interestingly, obviously, with our key channel partner in the region, we've had excellent sponsored engagement with the subsidiaries, in particular making real progress in the Philippines.

Like all of these things, though, it is a process when you're engaging with talk-overs, that they are not quick to move. But once you become their incumbent, preferred supplier, they become very powerful channels to market. And we've recently signed some commercial deals whilst the dollar value isn't material. They're quite strategic in nature, and they're enabling us to become part of the architectural and the technology stack within that market, which will create and get further growth opportunities through this year and the years to come. So look, we're really focused. We're obviously lean but are really optimistic about what we can achieve through the course of FY '24, I'd imagine.

Thank you, Jeromy. One more open question at the moment. I'll push this to you, Jenni. You mentioned that underlying fourth quarter revenue was up 1% on the third quarter or the pcp. Can you provide any more color around revenue for the quarter or the second half of the year and, if it helps, sort of the split there between Asia and ANZ revenue or performance?

Yes, sure. Thanks, Andrew. I'll probably just keep the answer to that question that we are on track to meet our guidance, which we released earlier in the year, which was $53 million to $54.5 million across FY '24. And we'll provide a lot more color around regional split and what's happening there when we release our full year results in August.

Okay. Thank you. There are no more open questions. We will bring to an end the webinar then today. Thanks to all the participants for dialing in this morning, and thank you to Jeromy Wells and Jenni Pilcher. Have a great day.

Thanks, everyone.

Thank you.