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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. Yes, I'm Sam Riley, one of the cofounders and CEO, and I'm joined by James Drake today, our CFO, and we'll take you quite swiftly through our Q4 results, highlights and some great things and just give some insight for the year ahead.
So if we skip to the next slide. Yes, for those that don't know, Ansarada, it might be new, I'll just run through what we do and why, what gets us out of bed and really, we believe that if people structure their information and processes really well, they can use that to execute their strategy, get more insight, be confident making decisions, manage risk and better and ultimately, that leads to better outcomes to their business. So really where we apply our skills is anytime organizations face chaos, with information and processes, how can we bring order to that? So our main brand proposition is around order and more order, we think is good. So the way we do that is apply our values and being hyper curious how we can do that [ courage ] us with innovation, helping people manage change, but also introducing a lot of positive change ourselves.
So on the next slide, you will see we have a -- we've been around for 17 years. So we've got tons of customers around the world, we operate truly globally. Roughly half of our business is outside of ANZ. We are a very trusted brand, the world's top companies trust us, top governments, top banks, top law firms, but most of our customer base is actually small to medium enterprise and thousands of mid-market and lower middle market advisers and things like that. So the product we have really things that are used at the highest level in business when things are most critical. So we don't manage general information and general business process. We really apply ourselves where there's high risk and high value. So companies raising capital, companies doing M&A deals. There's a lot of critical information that has to be put together for that process and due diligence. There's a lot of security and controls and [ orderability ] around sharing that information with a potential investor or buyer, managing the collaboration between all the parties, and that's our flagship Deals product, which is where we started. Another area of our business where information being ordered and secure and efficient is that in the Board room. The Board meetings, committees, the processes and structures there, helping Board of Directors make confident decisions, that's our Board product. 1 area of chaos in the world now, especially for companies who don't have heads of sustainability or heads of risk or heads of ESG is how the companies take advantage of the sustainability revolution. There's a right way to go about doing that and putting together a strategy for your business on ESG or sustainability and then having a plan to execute that strategy and report on it, and align with the right standards and compliance and best practices. So that's a product we have, and we've been building out that brings order to that process, makes it easier for any company to get on that journey and do it with confidence. And it's a similar thing with risk and compliance, businesses have a lot of risk to manage, a lot of compliance. And typically, these stats are being done on a spreadsheet or multiple generic software storage tools and e-mail. And it gets to the point where it's too chaotic. It usually falls on the shoulder of the CFO or the finance team and then on top of everything else they have to do. So our GRC software is a SaaS solution like everything else we do. That brings a lot of order structure and efficiency for companies as they have to derisk compliance properly, including operational resilience. And lastly, a lot of the major infrastructure projects that happen run on Ansarada like roads, ports, rail, precinct renewals, these are high-value, high risk, multibillion dollar infrastructure projects, people are tendering for them. There's a very strict process for the submission of those bids, how they're evaluated, how contracts are awarded. There's a lot of risk to manage for the consultant in roles and also the owners of the asset and usually, that's the taxpayer. So we built our product there to manage that high risk, high value procurement process. They are our products, and we're really proud of them, and we're improving them every day.
So the next slide. Yes, the key points in Q4, like we've got an aspiration to build a $100 million ARR business. And so Q4 very much was just continuing on with executing that strategy. Really encourage you to read our investor strategy presentation. It's available on the ASX. It's really -- you're getting insight into our plans over the next few years. So a big part of that plan was turning our transactional revenue flow, which is from reoccurring customers, but we want to turn that into annual reoccurring revenue. That was a big focus, and we grew that by 42%, our largest growing team in our business, and that's great. The next thing that we did was a lot of investment for growth goes into our ESG products. I spoke to and also GRC and the Procure product. Combined, 31% growth there. We've released 2 major products. One that helps people with materiality and where risk and compliance is going, is into actually operational resiliency. So that's actually a mandated legal compliance obligation if you're in financial services industry. That is quickly cascading it down into the future of GRC is actually governance, resiliency and compliance. So we took the decision to build the most modern product to manage that and sort of leapfrog competitors and companies that are moving on spreadsheets and all of that, they really should go into resiliency. And we got that solution out in market and it's got some fantastic feedback. It's going to be a good growth engine for us next year.
Lastly, our Procure business, that really expanded a lot with some wins globally. We had a major rail project win in Canada. Continue to grow our business in the Middle East, which has around $1 trillion of infrastructure investment there and also some wins in the U.S. We also see early potential there with corporates undertaking a lot of high risk, high-value procurements, particularly as there's a lot of major renewable energy projects coming online around the world and increasingly around water. So we secured a couple of major, the Waratah Super Battery project in New South Wales was run on Ansarada and we're doing a lot of work in the Middle East with water and elsewhere. So just really great business, great team, continuing to grow that lots of demand there. Lastly, next point freemium customers. A couple of years ago, we took the decision to make it easy for people to sign up to Ansarada, no cost, no risk, try the products out, get yourself prepared for these projects, right? There's no point trying to execute a deal with all the information and collaborating with your advisers at the last minute, that's chaos. So we said, why don't you get prepared early. We've got tools to help you prepare, you can sign up and do that for free. And when you go live, we will charge you then. So good news is we've got over 7,000 customers on those free plans and more than 10,000 customers in total. So that's a great opportunity for us to convert them into paid subscribers. But a couple of years ago, that was a strategy to put in place, and it's working really, really well. Next point is all on -- yes, you would have read about the challenging M&A markets in the Deal market. There's lots of reports M&A volume at 10 years 10-year lows. So it's really coming off a low base M&A, but despite that depending on which article you read, 30% to 40% decline in M&A. We were still able to grow year-on-year. So that's a remarkable effort by our team to grow in a declining market. And there's a lot of talk out there at the moment around things looking much more positive and kicking up, and we're positioned to capture that growth. And yes, another thing we introduced was a lot of operational efficiency by putting in a digital channel for customers to launch these deals in less than minute online, and we transitioned our sales team and marketing into a lot more ARR generation. But good news is last year, 17% of our revenue came through that digital channel in Q4. This year, it was 31%. So that reduces our customer acquisition cost. We've also done a number of other operational initiatives to once again this quarter be cash flow positive, and we're really proud of how we're running the business to be profitable. But we are, as you can see, investing in a lot of macro, high growth areas like ESG and GRC and procurement. And so we're positioned for growth that we're doing it profitably. And lastly, all of that coming together, I was just reflecting on where we were last year. But given these new products we have in market, given the amount of freemium customers, given our execution ability now with digital and a ton of other stuff, we are really in the strongest position we've ever been in, and we're really excited about what we're going to do in FY '24. So moving on, I'm going to hand you over to James, and James will take you through all the numbers that underpin that.
Great. Thank you, Sam. As I outlined in our Investor Day in March, our strategy is to grow our recurring revenue across multiple products and generate positive cash flows. In Q4, we progressed despite the challenging or continuing macroeconomic conditions. Our customers, for example, which includes both paid and those in the freemium acquisition funnel, reached record levels at 10,312, which as Sam said, represents an opportunity to convert in the future. The big increase was due to the successful scaling of our corporate freemium channel which we launched very late in the second half -- sorry, in the first half of last year. And this allows our corporate customers to access the platform and experience value in advance of a trigger event for conversion to a paid subscriber. The reason for the big jump is that we add new corporate freemium customers on a monthly basis and has seen constant conversion rates in the month. If the customer converts in the month, they are included in the subscriber count. We find, however, that some customers are not ready to convert in the month as deals certainly take longer, which gives us the opportunity to retain the customer in our funnel and the optionality of converting at a later date up to 12 months later. That's the reason for the big jump, the accumulation of those in the freemium funnel that didn't convert in the initial months. There is no cost to retaining them in the funnel. And as said, that gives us an opportunity to continually assist them and looking at ways to get those trigger events for conversion. So customer numbers grew but as you can see, our subscribers year-over-year dropped about 6%. This was driven by the first half M&A volumes across the globe being materially down year-over-year. So our new win volume affected our subscriber count in that first half. However, we have now returned to growth in our subscribers with Q4 being greater than Q3, and we expect that to continue. Revenue was up 3% year-over-year for Q4 and on a stable average revenue per account or customer of $1,296.
Adjusted cash flow from operations was $3 million, and we generated $1.4 million in cash and ended the year with $21.6 million in the bank and no debt.
The big highlight as Sam called out in his first point of his commentary, was the continuing growth in our annual recurring revenue. It continues to be a focus of the company, and we're up 42% year-over-year. We have 190 ARR subscribers, and they renewed at 89% and had a net dollar retention of 115%. This last -- that means that those that were ARR subscribers a year ago, are spending 16% more with us than they did last year. And this reflects the increased usage of our platform correspondingly to a higher revenue for us. This remains a key focus, and it's worth pointing that the ARR growth was across all regions and all products. And GRC, Procure and Deals, all saw growth in this customer subsets. This slide illustrates the additional level of diversification, not just in the addition of ARR. The first pie chart shows where revenue was sourced regionally around the world and we were stable with 57% of revenue from Australia and New Zealand for financial year '22. All regions grew, however, which is good. ANZ grew 8% and overall we grew 7%.
In terms of product diversification, we now have 20% of our revenue from non-Deal sources, up from 14% last year, and this trend is expected to continue. Our growth in Deals revenue was up around 1%, but the growth in non-Deals revenue was 40%. And as you have heard from Sam, lastly, the last 2 pie charts show we continue to see growth in the digital acquisition channel, with over the year, 23% of revenues sourced digitally, it was 12% in the prior year.
The efficiency of the digital channel means we can handle more volume, especially at the high volume, low-value range, leaving our go-to-market teams to focus on the higher-value customers and the recurring relationships. We ended the financial year with $51.5 million in revenue, up 7% year-over-year and $16.9 million in deferred revenue. As we mostly go upfront for our subscriptions, we are required to spread the revenue over the life of the subscription. So for example, if we sign a 12-month subscription in June, only 1 month of the revenue would be recognized with the remaining 11 months deferred to be recognized in financial year '24. The $16.9 million represents that revenue that is deferred with the majority to be recognized in financial year '24. And this drives revenue stability and confidence in the new year. Our cash flows continue to be positive, with only 1 quarter in the last 7 below zero, which was due to some annual payments and onetime items made in that quarter. And at the end of the year with $21.6 million and zero debt and are well placed to continue to fund our strategies.
So the takeaway describe the sort of challenging markets. We continue to grow our top line revenue ending with $51.5 million in revenue, but also the quality of revenue continues to improve with a 42% growth in ARR ending at $11.4 million. We have more customers in our funnel with the future potential conversion and subscribers are now returning to growth from Q3 to Q4. We ended the year with more products in market across Procure, GRC and ESG, $16.9 million in deferred revenue to be recognized mostly in financial year '24. Positive cash flows and a strong pipeline has given us confidence in performance for the coming year. And with that, I will hand back to Sam.
Thank you, James. Yes. So you can just click through to put it all up there. There's 5 key things for us that we've been working on and you can hear them from me and James reflected in the numbers today, but our intention is to keep self-funding our growth. We are a growth company. That's our primary objective. But we by no means want to burn cash to achieve it. So maintaining cash flow positivity. We've got a great handle on all the operational inputs that are required to do that and we've evidenced that for the last couple of years, and we'll keep doing that. We are investing a lot in product and validation and marketing and scaling and partnerships around ESG and GRC. We put some great stuff out in market in the last sort of 3, 6 months, and we're going to scale that a lot in FY '24. All of our solutions have ARR that is generated and growing, whether it's Deals, Procure, Board, ESG, GRC. So ARR continues in focus. We still think there's a lot of operational efficiency we can gain in our business. I suppose that we've got no means finished there, a lot more automation, a lot of application of AI into both our products and the way that we run our business. And we can talk about some exciting things there in the future. And lastly, a big opportunity with those 10,000 customers or 7,000 on freemium, analyzing that, delivering them more value faster and working out how to convert them into subscribers is a key focus, too, and we'll get better at that in FY '24. So with that said, we can move on to a bit of Q&A if anyone has got any questions.
[indiscernible] or James, I'm not sure if you're reading any questions out, but can't hear.
Can you hear me now, Sam?
Yes. I've got you now.
CapEx is down in Q4. Does this signal a lower CapEx rate going forward?
Thanks, [ Lisa ] that's one for you, James.
Yes. When we think about where we're investing R&D and what's capitalizable, we're really focused on the Deals on operational efficiencies. GRC, ESG and the newer sort of products in market continue to be invested in. And that's why we have seen a bit of a drop with operational efficiency focus and Deals being a larger product. It has lowered the rate slightly. Going forward, I think you can probably expect relatively consistent CapEx rate as we continue to sort of balance that operational efficiency, the new products and features that we're launching in market.
Thanks, James. ESG, GRC and Board products, are they mostly sold directly to the end customer or through advisers?
Yes, good question. They're sold through both, but predominantly at this stage, they sell direct to the end customer. There is a number of like risk consultants and consultants on sustainability and ESG, a lot of the professional services firms like the Big 4 and even second-tier firms like BDO, Grant Thornton, Findex, like every professional services firms looking to help their customers on that ESG, GRC journey. So the value we bring to consultants and advisers on that is our products digitize a lot of the manual work that they have to do.
And because our products follow the best practices, it lets the consultants that uses Ansarada to deliver those services. They can add a lot more value to their clients, a lot more execution and strategy work a lot faster. So the combination of Ansarada and advisers and consultants is always a great one. And we've got some exciting conversations and potential partnerships on the go. Nothing to announce yet, but there is some great distribution opportunities that we're focused on that we hope to convert soon.
Thank you, Sam. What is the [indiscernible] sales cycle for freemium that's become paid subscriber?
James, you can jump in with a bit of detail, but the short answer is it depends on the product. Different products have different sort of cycle times, but James, is it worth breaking them out because I'm not sure.
I think it's probably -- yes, you're right. It does differ on products. I will say on the larger sort of customer -- freemium customer base, which is the Deals product, it's less than 30 days, approximately sort of 20 days, because we launched the corporate freemium really sort of scaled and tested it through Q3, we're still -- it's a bit immature as to what converts month 2, 3, 4, 5 6, 7, 8, 9 10, et cetera after the initial sign-up. So we're still looking at that. But the average sales time is still approximately about 20 days on Deal product.
Thank you. Can you give me on the R&D road map on this point onwards? And do you expect to manage total spend to a percentage of revenue?
Yes, with R&D, it's really -- it's hard for us to fully disclose our R&D road map. We're 1 of the only publicly traded company whereas our competitors are not, but I could say a lot of it is around building out a full fleet of solutions, ESG, GRC, capturing a lot of the demand that's coming out of Europe for that. And on our Deals product, there is a hell of a lot of opportunity for AI to be applied. If you didn't really know, Ansarada is a leader in that space, and we launched several AI products, including a big 1 last quarter for people to do redaction of the information that may be sensitive before they disclose it in a deal. So you can imagine you might have 10,000 documents and you cannot disclose tax file numbers or e-mail addresses or things like that. So our AI will automatically detect all those different patterns and say, hey, there's 647 tax file numbers here and you just click a button and they're all redacted across every document that contained them in a matter of seconds. So you're applying AI is a big one. Partnerships is a big one and making it easier for SMEs to start on sustainability and growth is another one, but further details hard to give. And as a percentage of revenue spend, it is 1 that we fixed and we monitor quite closely. James, do you want to add more detail on that?
No, no, that's it. Obviously, we manage the cash flow positivity over the -- in our Investor Day, we stated that we're looking to increase our margins, and that's going to come through the operational leverage. So we will be spending more year-over-year in R&D, but it should end up being a smaller percentage of revenue as revenue grows faster than our cost base.
Can you give a rough idea of average half life of the Board, GRC and ESG products?
One for you, James.
Yes. It does vary greatly. But just roughly, look, our Board products averages sort of around the 500, 600 a month, but it does vary greatly depending on size of the organization. ESG, we're filling the product market fit, so we expect each sort of module to be somewhere on the 5,000 to 10,000 type range. Again, that's one of the product in market at this stage. Then GRC ARPA in terms of average revenue per account is sort of in the 40 to 50 annual kind of range. However, that did vary fairly depending on the size of the organization.
Thanks, James. Has there been any significant changes in the competitive landscape, especially GRC?
No, not significant changes. I think there's a lot of incremental innovation. Like I comment briefly, we made a decision to build an operational resilience product, which is where business continuity processes and risk is like the level up from that and the better approach is operational resilience. So that's something we collaborated with a lot of our banking customers and financial services and designed and built and launched the product over the last year.
And that's probably we don't see too many people doing that. There's a lot of established like risk compliance products out there. So there hasn't been a huge innovation there that we've noticed. And we're particularly focused on the SME, people with $20 million to $200 million revenue, 50 to 500 employees in that space.
Thank you, Sam. Can you speak to the seasonality in your cost base? And do you expect continued operating cash flow positively each quarter going forward?
One for you, James.
Yes, sure. We don't have seasonality in our cost base, apart from our sales and marketing, particularly in non-headcount marketing. As 57% of our revenue comes from Australia, New Zealand, we still have the seasonal world around the holiday period in December and January, and we dropped our marketing spend correspondingly and in different parts of the world, August in Europe, for example, we would adjust there. But the rest of our cost base doesn't change that much.
In terms of operating cash flow positivity, we target that on a full year basis, half year basis. There may be some quarter-on-quarter movements, particularly in Q1, where we have some annual cash outflows, but we will maintain cash flow positivity over the first half and over the full year as an objective.
Thank you, James. This is a question from Nick Harris. Can you understand why freemium customers jump so much in Q4 as lead indicators on capital market activities jump in?
Thanks, Nick. We rolled out corporate freemium as a offering or strategy very late in the first half. We then tested it through Q3. We did not include the corporate freemium number in the March customer count. If we had, we would have increased that number by about 2,000. That's one of the reasons why it looks like there's been a big jump. Once we made the call that, that was the right strategy going forward, we obviously now are including that in our total customer count.
But the real reason for the acceleration is that, the team is driving monthly sign ups to get the customers into the funnel. When you -- when those convert, they go to subscribers. But those who don't, they do stay in the funnel. So there's a little bit of a cumulative sort of cohort build of freemium customers as you add month-on-month. And we keep them in the funnel for 12 months. So that's why you're seeing that big jump in corporate freemium customers in particular. As we add more each month, we convert those in the month and then we roll the funnel onto the following month and look to convert those as well as the new sign-ups in that second month as well. So you get the compounding layering. Hope that makes sense.
Thanks, James. This is an extension of the question that Sam was asked before, [indiscernible] can you provide an update on the competitive landscape in a more subdued M&A environment, [indiscernible] other life instruments still aggressive in marketing?
Good question. We're not seeing much aggression in marketing. Also, you probably may have read that a lot of advisory firms have trimmed back on their staff. So with our digital solution that's more efficient, saves a lot of the advisers a lot of time. Also, we have a workflow product that can save them a lot of time or a lot of manual tasks. That's a product that insurance doesn't have. So the combination of we have a digital channel and our competitors don't, we have automation and efficiency tools, which they don't, which insurance doesn't. In this environment where there's less money to be spent on things like marketing. We're not seeing them do that, but also our customers are finding more value in the solution that we're offering, given the challenges they're dealing with.
This is a question from [ Andy Gracy ] your ARR was $11.4 million from 190 customers, which equals $60,000 per customer. Are we seeing a growth in average deal size?
Yes. I might grab this, and James, you can jump in at the end. It's a good -- there is a higher deal size in ARR customers for sure versus ARR [indiscernible] like you said your annualize ARR, you're sort of getting more around $12,000 or something like that, $15,000 maybe. That ARR, 1 of those customers, Andy, as new Southwest Department of Transport is like $1.5 million per annum. So if you sort of take that out, you're still in the $50,000 sort of range for deal size as an average.
So these are customers that are doing multiple deals, either from acquisition or it might be real estate industry or something. So it's really rolled up multiple uses, whereas average deal size for ARPA is usually 1 deal or 1 use of their product. So the Deal component of ARR because it covers multi deals that we standardize on their platform, subscribe annually, it's always higher. GRC is usually a 2-year, if not a 3-year agreement and the GRC product average ARPU is around the size that you're referring to.
And then we've got other solutions out there life for Board, which is a lot lower on ARR, but it's compensated by some of the higher Procure contracts. So really, the short answer is it depends on the product, like the Board ARR sort of a lot lower than $50,000. Procure is a lot higher. Deal ARR is around there. So it's a blend, but yes, ARR is higher Deal value for us than single transactions.
I'll just add 1 extra. That 116% net dollar retention, it is indicating that 16% higher that they spent this year than last year. That's very much around how much they're utilizing the platform. So it might be in the Deals ARR contract, how many more deals are they doing because it's easier to do it on our standardized platform than they were previously.
Yes. And actually, while we're at it, 1 of the trends there is we are seeing more customers using multi-products. So they might have an ARR subscription because they're using Deals, they're using Board, they are using GRC. One of our early sign-ups and customers for our ESG solutions, they're doing an IPO, and so they're improving their governance as well. So they subscribed to Deals products for their IPO. They ran our ESG materiality process and that product as well. And also they took the Board products. And so there's a number of other customers, multiproduct is where we see a lot of growth in ARR deal, so we'll actually be getting customers on to multiples.
There are no more questions.
All right. Well, thank you, everyone. We'll be back out shortly with our full year results. And we'll go into a bit more detail on some customers and strategy. And thanks to everyone, for your support, and thanks to the Ansarada team for doing an awesome job, and we'll see you shortly.
Thanks, everybody.