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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
All right. Let's get going. As you know, I'm Sam Riley, CEO, one of the [indiscernible]. I'm joined here today with James Drake, our CFO. It was a really good quarter for us. It was a strong quarter, and I'll take you through our results. But there's 3 key takeaways to focus on.
Firstly, we continue to grow our revenue with growth 45% year-on-year to $48 million, and we maintain positive cash flow. Secondly, we executed what we said we would to put the business in a strong position. And as we do that, we're transforming it to better and better quality of revenues, making the business more scalable, more efficient, and we're expanding into much larger addressable markets. So that was done.
And lastly, we've got a positive outlook on FY '23, and that's underpinned by our strong deferred revenue that will be recognized in future quarters. We believe we're going to convert a lot of the customers into subscribers. And of course, we know how to generate customer growth as well. So that's a lot of things that we're really excited about.
A couple of points to take you very quickly. Customer growth was a big highlight, and we focused on getting people into our products quicker, easier with no risk, 52% growth versus last year. We maintained cash flow positivity, and we used that to fund growth and fund our transformation from our own cash flows.
The subdued M&A market really started kicking in, in, I'd say, the last couple of months or the last month. You can see that the willingness to -- for some M&A volumes started affecting us, but we've made good progress building new recurring revenues in other areas that are not subject to M&A cycles. So that's something we'll continue doing.
Big focus is transforming our business into a much higher quality recurring business model. Part of that is implementing product-led growth methodology, things like freemium to get customers in the door easier, less risk for them. We did that. And as a result, we ended the quarter with 5,200 customers, and that's a great opportunity for us and significantly higher than when we ended last year. So we'll capitalize on that. We continued growing our subscribers, but there's a natural lag on that growth. For us, customer growth is a focus for us to continue improving there.
And yes, our position now with product sets to momentum and funnels and pipelines is much stronger in a much larger scalable market around board, tenders, for infrastructure, governance risk and compliance and even ESG solutions that I'll be excited to showcase to you shortly. We made massive investments into digital, data, expanding our channels, getting smarter, more efficient, more scalable, more nimble and more agile to ensure that we can sustain our performance.
And as I said, we've got a positive outlook on FY '23 because of the level of deferred revenue we have, because we know how to acquire and grow customers and also because we're seeing improvements in products and conversion to subscribers.
So one chart we always bring up is our customer growth. I'd reiterate again, regardless of economic cycles, we always grow customers. And it's no different in this environment. And we start the year in a much stronger position. You'll see there's a delta on the customers that have shot up. That is because we've made it so easy to jump into our products, start using them for free. And as customers get value from that, they naturally convert into subscribers. This is a much better growth model, and it's the ones that have underpinned companies like Slack, Canva, Atlassian. All of the fast-growth SaaS companies exploit this model, and it's something where we transitioned to in the last couple of years. And you can see the momentum we're now getting.
So at a glance, look, it's worth reflecting on how far we've come in the last 12 months and how our business is so much different and better to this time last year. First is our customer base. So our opportunity set is much bigger. Our product solutions are broader and more sophisticated. Our TAM is much larger, and we've established some strong bases in new markets where we're not subject to M&A cycles as we were last year.
So we are going after a big prize, and we are expanding the business into new markets. And we are confident we can be successful, firstly, because we've done this before. We've entered new markets. We've built profitable fast-growth solutions. And secondly, as you'll see on this slide, we've consistently thought hard and worked really well to earn the support and trust of our large client base for over 15 years. So we have over 0.5 million users, and we're trusted by the pros in business all across the world.
Now one thing I found in the current economic environment is it's a time of uncertainty. And in times of risk and uncertainty, people turn to and rely on solutions and companies they trust. So these times force people as well to be much more efficient in their operations and their processes and also speed of execution. And that's where our solutions in the deals market and in M&A are even more attractive. So like I said, we've gone through several up-and-down M&A cycles. But when there's a down cycle and there's pressure to perform and have an edge and do so efficiently, that's where technology and process solutions actually become more attractive. So we'll be capitalizing on that.
And lastly, our business is so much more nimble and agile because of our digital strengths and how we're able to use data to pounce on opportunities as they arise very quickly.
So I'm not -- I won't read through all of my commentary here, but I really encourage you to do that. But basically, we established a much better business model. We've maintain cash flow positivity. We radically improve the customer's experience. So it's simpler and easier to [indiscernible] by us, massive differentiation versus competitors on that. We also believe very strongly that when information and processes are structured correctly in an organization, they gain better insights and they [indiscernible] to achieve better outcomes. And that's the nature of the solutions we bring to not just M&A [indiscernible].
So despite the subdued [indiscernible] and the increased volatility and uncertainty in the market, our solutions allow organizations to increase the order to the management of their information and their processes. And those solutions are in more demand [indiscernible]. So there's more to come from us.
And lastly, I'd really like to thank our team. In everything that we do here, it comes from our team, and they delivered big time in FY '22. We've got exciting plans for the year ahead. They're very courageous and committed, and a big thanks to the team behind the results. James?
Thanks, Sam. So as you just heard, Ansarada continues to grow with solid fundamentals and is delivering a healthy financial performance. Our strategy in financial year '22 was to drive more to the top of the funnel, and that's evidenced with 52% year-over-year growth in our customers. Customers include freemium, and that's been part of our strategy. And what it does is it provides a [ considerable growth further ] to convert to paid subscribers. It's worth noting that a large part of our customer growth was due to freemium products and initiatives launched midway through the second half, which means they're still early in the funnel to conversion into a paid subscriber. In the year, financial year '23, we'll be focusing heavily on converting these customers into paying subscribers.
Our subscribers in financial '22 year-over-year grew 11%, and our ARPA grew 31%. We maintained our ARPA quarter-on-quarter, but it is worth noting that our blended ARPA does not capture the different strategies we are executing. For example, our enterprise subscribers, which are those contracts or customers that do multiple deals on the platform or have multiple products, have a higher ARPA than some of the sort of single transaction solutions that we offer. And some of our new products that are focused on individual users, they also have a lower ARPA. So the 31% year-over-year ARPA is a strong driver and an indicator of future growth alongside of our subscribers.
We also ended the year strongly with revenue, 43% Q4 financial year '22 versus Q4 '21 and increased our deferred revenue balance to 21%. As our contracts are largely billed up front, we collect the cash up front. But for accounting revenue recognition purposes, we recognize that revenue over the life of the subscription. So for example, a 12-month contract signed and billed in June, only 1/12 of that revenue will be recognized in financial year '22. But the remaining 11/12 would be recognized in financial year '23. And that is why the deferred revenue balance is such a strong indicator of future performance and revenue recognition. And while we are happy to see record deferred revenues, it underpins our confidence in the financial year '23.
The growth achieved in the quarter was self-funded as well, as we continue to invest in top line growth but maintain a less than 4-month CAC payback. Cash receipts in the quarter hit $13.3 million and adjusted cash flow from operations of $3.3 million. For the year, our cash receipts were over $52 million, and adjusted cash flow from operations were over $12.5 million. The adjustments are just due to the TriLine acquisition costs, which are very much onetime. We ended the quarter with $22.4 million in cash and 0 debt.
So when all these key metrics are combined, it illustrates the sustainable trend in our business and is evidence of executing the strategy we outlined during the year. This first graph is our last 12 months in revenue over the last 4 quarters, thereby smoothing out any seasonality and shows a consistent growth profile, the revenue achieved through financial year '22, including Q4, and a period of subdued M&A volume. But we did see an increasing demand for our new solutions across non-M&A transactions, board, risk, compliance, ESG, specifically in areas of insolvency, refinancing, infrastructure and tenders and governance risk and compliance.
And as mentioned, the graph on the right is our deferred revenue. It has also consistently increased up to $16.9 million. And as I said, the majority will be recognized in financial year '23. Our high deferred revenue also reflects the strong end of the year, particularly June that we saw in financial year '22.
So the key takeaways from the financial performance perspective are, we continue to drive profitable top of the line, top of the funnel growth, which is translating into customer subscribers and revenue growth, with revenue growing 45% year-over-year. We are -- continue to self-fund our growth with cash flow positivity and 0 debt, and we are continuing to expand our product offering and moving to more recurring customer relationships.
With that, I will hand back to Sam.
Thanks, James. Yes, this is an exciting slide. This really highlights some of the wins we had in the quarter with solutions that are purely recurring. So we have some great progress there, a couple of wins, and I'll just talk through.
Mortgage Advice Bureau standardized on us for end-to-end GRC implementation, which was great. As did WestOne Capital, but they also decided to bundle in our board product, so multi-solution subscription there. Our solutions for infrastructure planning and delivery continue to generate more multiyear subscriptions, and there's a couple of exciting ones I look forward to announcing soon as they close. Optus, their corporate development team selected Ansarada as their default platform for a multi-deal and a multi-capital markets use cases, which is great, lots of expansion opportunity there, too.
One of the things we are really good at that I've [indiscernible] is higher levels of secure collaboration. And with our workflow management tool, that task management, project management, combined with high levels of document control and security, is very attractive for a highly sensitive, highly risk work. So the Victorian Government Solicitor's Office standardized on Ansarada with a subscription for running use cases where they're collaborating with their client and third parties but also for matters as sensitive as the Royal Commission. So that's the type of environment where we're trusted, and that's a good relationship we have there.
One of the ones I was most excited about was ABC Business Sales in New Zealand. So ABC Business Sales signed up to run dozens and dozens of projects on our platform and standardized on that because they're in search of a lot of efficiency and also risk reduction. So it's worth diving in there to talk about what they do because they're selling cafés, cleaning businesses, childcare, transport, manufacturing. And so obviously, the deal value is a bit lower, but the deal volume is higher. So increasing efficiency in that environment is critical. And if you can increase the speed of execution, that's also critical to maintain or increase your profit margin as an adviser there.
So our product is highly attractive for people needing and wanting to do that. So that's actually the case for every single adviser in the world, especially in this environment. And whilst advisers that run larger value deals can get away with absorbing some inefficiencies in their process, those days are rapidly changing.
So the work we've done is to build a subscription platform for advisers. And the validation from people that run the highest volume and need that efficiency, most like ABC Business Sales, is really positive. And we see it as a market opportunity in the current environment to continue growing those subscriptions and help advisers move away from legacy deal by deal, e-mail, Excel, inefficient processes.
So great stuff there. We've got more to share in coming quarters. And yes, it's a really good validation of the strategy.
Lastly, I put this slide up every quarter last financial year. And basically, we did what we said we would do. It strengthened the business overall. It accelerated our transformation, and we put in place a lot of scalable foundations that delivered record customers. We increased recurring revenue. We increased our own efficiency and scalability, and we also accelerated our GRC ambitions with the successful acquisition of the market-leading solution, TriLine GRC. So some great outcomes we've achieved.
And with all that being said, I'll hand over to [ Zoe ] for some Q&A.
Thanks, Sam. The first question I have, and this is for you, James. Customer adds in Q3 to Q4 slowed at roughly similar rate to the decline of your advertising and marketing spend. Can you please flesh this out a little? I'm trying to understand if this is entirely seasonality or did the market slow down in Q4 FY '22.
Thanks, Nick. So that's a multi -- I'll answer it in 3 ways. In terms of our sales and marketing cash expenditure, it was lower in Q4 than Q3 but only as a result of timing. June being our largest -- our strongest month, and we -- the money that we spend in marketing there, particularly on the online channels, has a 30-day term. So we don't actually cash -- expense that until July. So it's a timing thing. I mean, our sales and marketing, particularly our non-head count marketing, is maintained as a percentage of our revenue, and that was consistent with Q3 and Q4. So that was not the driver.
Moving to the second part of the question, the subdued M&A volume, in particular, that we saw was mostly in April and May. I mean, April is usually a slower month compared to other months with Easter holidays, et cetera. And this year, in Australia, we had the election in May. So we were watching those trends closely. June was a strong month for us, but the volume in April and May definitely affected the quarter.
The other aspect of it is Q4 '21, we introduced a 3- and 6-month subscription packages to go alongside our monthly and annual. So that also influences the length of the subscriber, depending on what's going on in the market. So that subdued M&A volume, combined with the 3- and 6-month on top of the annual and monthly, that dynamic caused less adds than we saw in the prior year.
I'm going to leave -- give another one for you, James, again from Nick Harris. On ARPA, noting that SaaS [ consumption ] can increase and decrease along with the [indiscernible] customer needs, would it be sensible or reasonable to think that ARPA may decline in FY '23 due to lower M&A activity?
So the answer to that is no. We don't expect ARPA to decline due to the activity. And the reason is across all of the horizontals in which we participate, our customers come from all the verticals. We're very horizontally integrated. It doesn't matter what type of deal it is. The ARPA is pretty consistent.
Now the only other factor in that is the dynamic between the enterprise or the larger transactions, the highly recurring transactions that we're focusing on in financial year '23. They all have a higher ARPA than we've seen historically. So there's that trend that should see the ARPA higher. However, when we blend it with some of the products and initiatives we're looking to launch in financial year '23, there may be some subset of our customer that pays a lower ARPA, not necessarily on the deals product, but on other products that we're launching. However, we do expect our deals ARPA to continue to increase because of that enterprise strategy.
I have questions from Nick Harris. In your commentary, you noted non-M&A revenue growth from 11% to total revenue in Q3 FY '22 to 15% in Q4 FY '22. Is this entirely organic growth? I mean, yes, is it reasonable to expect rather that sort of trajectory to continue over the next few years?
So good question. It's not entirely organic. About a little over 3% of that increase in total revenue results from the TriLine acquisition. However, overall, the company grew at 45% revenue. So we grew our non-M&A -- our tenders and GRC -- sorry, our tenders business to maintain that level, so we saw significant growth in that area, and then TriLine over the top, which brought it up to the 15%.
In terms of what we expect going forward, yes, we do expect to continue to grow those 2 arms as we have done historically -- organically, sorry.
Sorry, James. I have a question for you, Sam. Is the subdued M&A market across all jurisdictions? Or are there countries where it's hitting harder than others?
Yes. I wouldn't say we're seeing massive geographical differences. But when you look at it by industry sector, there are different industry sectors that are experiencing uplift in volume and others that are experiencing more decline based on sector. So we're able to navigate through that. But also, different size of deals like different volume around mid-market and lower middle market, a lot more activity there. And no surprise that some of the lower volume but mega $1 billion deals, there's less of that occurring in the current environment. But yes...
I'd just add. I mean, there's some that are very obvious. IPOs are way down globally. The finance industry is down. But energy and other sectors like that, particularly in M&A, are holding their volume.
I mean, renewables and -- yes, there's also a lot of opportunistic activity in the market from private equity, who are in a position and willing to invest and looking for acquisitions quite aggressively. And naturally, that's leading to increased volume for the things that they're targeting as well.
Another question. This is for you, James. Congrats on the good results. Subscribers to ARPA is 2,851 by $1,281, which equals $3.65 million. Why is it so much lower than annual revenue of $48 million?
The ARPA that we're reporting is a monthly ARPA. So if you get an accurate annualization of that, if you multiply that $3.6 million by 12, you'll get much closer to the $48 million number and the difference being our nonsubscribers, so some of that tenders business and some of our legacy products.
I've got a few questions here from [ David Meehan ]. Firstly, are you able to talk about where we saw the growth in new subscription customers by use cases? For example, have you seen changing mix and [indiscernible] from those M&A-related deals to increasing restructuring [ we saw with the ] use cases?
Yes. We saw mainly -- you might remember, we invested a lot in workflow solutions to automate who's doing what by when and standardize that for different processes. And for an organization or an advisory firm that runs multiple deals of different clients, having that in place as a standard process, that's where we're generating subscriptions. So it's moving away from single deals, leading to every deal on the platform end-to-end orchestrated in workflow. So that's where we're seeing subscriptions.
Also, back in the TriLine acquisition, we're seeing subscriptions for GRC. We're seeing massive customer growth in the board product. We put out an exciting freemium offer that generated more than 200 new customers into the board products. So most of our subscriptions are a mixture of deal volume standardization for efficiency and GRC.
The other area of the business which we're seeing consistently more subscriptions now is for infrastructure and tendering. So government agencies that have massive investments in multiple projects they're running. Similar to deals, they're moving away from tender by tender into standardizing every tender process on our platform and subscribing.
Another question from [ David Meehan ]. We grew total customers very strongly in the period, which was led by the freemium customers. But are you able to give us a sense of your conversion rate now for turning freemium customers into paying subscribers and how this conversion rate has moved on time into increased conversion?
So on our deals platform, we're still seeing roughly 13, 14 days from freemium into a paid conversion. That's mostly on our deals platform. On some of our newer initiatives, including the announced Microsoft freemium, that's a 12-month freemium product. So we're still too early to sort of see conversion rates there. And obviously, that's a key thing for us to look at value adds and engagement there over the course of 12 months.
So it's a little early on our new products to give a conversion rate. But on our deals, which is still obviously clearly as the primary driver of our revenue, it's maintaining the same level. We're just getting more on the top of the funnel.
Yes. And I think that the Microsoft for Startups freemium offer is very similar to what we did with our board product where a couple of hundred people have come in, they're running meetings, they're adding directors to the meetings. And over the next sort of 6 to 12 months, we will monetize that into subscribers. But it's very -- it was a very deliberate customer acquisition strategy. But like James says, the deals business has a much faster velocity to paid.
Another question from [ David Meehan ]. Are you able to talk a little bit to the movement in employee costs that you were seeing? Talk through your experience over the past few months in relation to hiring and retaining staff.
I'll start. And Sam, maybe you can add something. We've actually said this a couple of times during the last 12 months, but we've been very thankful to have our Vietnam operation very much in-house. We have a great team over there, and we've grown the developers and engineers there. And they've been hugely helpful for us achieving our strategic objectives.
Over the last 12 months, it's actually been very difficult to hire in that particular type of employees. So Vietnam has been fantastic. I think we're seeing a little bit of a slowing of the hot market a little bit, but it's still very competitive for talent in Sydney.
Yes. Yes, all of the metrics we measure on employee -- talent acquisition and retention improved as the year went on. And most recently, every year, we enter the Great Place to Work awards so that we can be benchmarked against the best and recognized for what we do. And our -- the awards are announced in August. But our engagement was 96%. So that's up from 88% last year.
So that's a positive indicator of the culture, and it's the best I've ever seen it. And we've had no real massive difficulty hiring and retaining staff because of the strength of the culture. And we've got exciting things we're doing. We've got highly challenging and technical problems to solve, which engineers love. And yes, we found the [ land ] and run, and we're still super entrepreneurial. So yes -- and our people and culture team have done a fantastic job navigating the challenges in the market. And like James has said, we've maintained cash flow positivity during those challenges as well.
What percentage of the tendering sales are coming from existing customers? Is there a pipeline for those enterprise deals [indiscernible] companies involved?
The answer is yes. Our team in the -- our tenders team was specifically targeting those repeat customers that used our platform and have used our platform for multiple projects. And similar to that, the Department of Infrastructure [ replacing ] the Department of Transport New South Wales, they have used us multiple times on a single contract-by-contract basis and then moved to that enterprise solution. And there are many others like that, that we're talking to. So those types of deals, the enterprise transactions mostly come from our existing customer base because they've used the product and understand its value.
Yes. And it's a natural pipeline where our tenders team are introducing a freemium offer where in the first phase of the project is a feasibility study. So traditionally, people hesitate to pay for solutions at that point. But what we're saying, look, you know our product can add value there. Why don't you do the feasibility part for free and see what you think of the platform? And that will lead to a lot of growth. And then people
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each part of that funnel, we're building to freemium, to people, to any individual. And like James said, as they do more and more, we convert them into subscriptions.
In -- next question. In a subdued M&A environment, do you see data rooms open longer while deals are shelved?
So we see -- we have seen people starting earlier. And our freemium solution, which has no risk, gets started before you're engaging or inviting people into the room, which is the trigger for payment. So we are seeing that increase in customers, which does, I think, correlate somewhat to people being unsure but happy to get started in the product.
In terms of data rooms being open longer, we haven't seen that trend play out yet. But it's something we definitely watch, and we would benefit from that as well.
Historically, when we've seen M&A, the current environment back in '08 and other periods, yes, that ends up occurring, but we're not seeing it yet.
I have a question here from [ Ben Richards ]. Can you please talk about churn metrics?
So at the moment, we're not releasing churn metrics. And the main reason being across all our products, they're very different. Board has a different churn than our government risk and compliance products. We have the enterprise contracts and then we have monthly and 3 months, which are much shorter duration in our annual and multiyear agreements. But it is something we will report on in the future as we break out those customer subsets.
Next question. Who are our major competitors? And how is the overall market growing? Is the market growing faster? Or are we taking market share?
I think over the last 12 months, it's been a pretty strong global market across the transaction space. And I think we've all benefited from that, and I say that in terms of competitors as well. In the deals space, we still have the 2 main competitors, Intralinks and Datasite, and they're consistent globally.
I think where we grew faster than the market is in places like Europe, I think also in the U.S. And I do think we captured market share in Australia and New Zealand as well but in different industries because we are #1 in this market. But Europe, in particular, we saw some stronger growth in demand.
Sorry, on the competitive side, Intralinks and Datasite on the deals side. But in terms of some of our other products, the competitors are far more fragmented than that. I mean, across board, there's Diligent, which is the most well-known brand, but there's a lot of local players in different markets. Across government risk and compliance, there's too many to name, which is -- what we see as an opportunity.
This is an extension on the investment in Europe, James. You spoke about -- last call, you spoke about increasing sales investments in Europe. How will that progress?
So our Chief Revenue Officer has been over in -- in London, but we can't call it Europe any more, in the U.K. in Europe from September last year. He's a key part of that strategy, and he's brought on a number of new people into the London office and also in Amsterdam where, in the Benelux region, we're the #1 brand there as well. And our marketing spend is also becoming more targeted across Europe. We're sponsoring a number of events in our industry, more than we have historically across Europe, helping to build that brand and then obviously capture some of the volumes over there in markets where we are not #1.
What percentage of our revenue are recurring in nature?
That's another metric that, I think, links to my answer on the churn question. We will be reporting on that in the future. But at this time, we're not disclosing exactly the breakout of each customer subset and products. But we will in the future.
Thank you, James. And [ over to you ].
Okay. Well, look, thanks, everyone. As you heard, all of that great stuff has put us in a strong position for FY '23. As you would expect, our priorities this year are very much based on maintaining cash flow positivity. We're going to be increasing recurring revenues further and also not just growing customers, but increasing the conversion rate to subscribers, utilizing the various solutions that we established, validated and are now growing in the market. So we see a lot of opportunity out there amidst all the turmoil, and we're getting on with the job harvesting it and look forward to speaking you -- speaking with you in about a month when we have our annual results at the end of August. Thank you very much.