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Thank you for standing by, and welcome to the LiveTiles investor conference call. [Operator Instructions]I would now like to hand the conference over to Mr. Karl Redenbach, CEO. Please go ahead.
Great. Thank you. Good morning, and good evening, wherever you are for those joining this call, and thanks for joining. For those that don't know who I am, my name is Karl Redenbach, CEO and Co-Founder of LiveTiles. And I'm calling from Melbourne. And we also have joining us from Melbourne in separate locations because we're, unfortunately, all in lockdown here, for those that don't know, is Maureen Baker, who's Head of our IR; and Rowan Wilkie, our Chief Financial Officer. So thanks for joining. Today, we'll plan to do some quick commentary around the results that we've just posted. And then importantly, leave some time for questions and answers in relation to the results we posted.So the first thing I would say is that we have met an absolute major milestone for LiveTiles today. We're very pleased to announce that whilst we've been Australia's fastest-growing technology company, and continually growing extremely fast to anyone else in Australia, probably even across the globe. We have now generated a positive operating cash flow quarter for the very first time. And we think that is a major achievement for the company. And given the circumstances that we're in, obviously, COVID, obviously, the fact that there are uncertain economic times, we believe that this is a major achievement and more pronounced because of the circumstances.And the commentary we made in our shareholder letter a few weeks back was that it has been the toughest quarter of my life, personally. It's been very difficult business conditions, particularly in the business-to-business sales area, where you can't physically get people together, which typically we do. It's been difficult where normally we have 4 to 10 decision-makers at any one time to have a decision made. And a lot of our business is in Europe and the U.S., particularly in the U.S. in the last quarter, it's been very difficult to get physically people together, notwithstanding that our technology has been helpful in that. It's actually our technology, we think has never been more relevant than ever. We provide -- and we are the world leaders in intranet, employee communication and collaboration technology. And we believe the tailwinds of COVID and the tailwinds of the work-from-home phenomenon, which is being put on all of us, particularly, those who are in Melbourne right now are feeling this, will continue to allow us to drive our business and be very successful for the future.One of the other key points that was very exciting is that we did grow our cash in hand. We continued to put annualized recurring revenue growth, we've grown that to $58.2 million on a constant currency basis, 45% up from last year. But more importantly, particularly if you look over the last 2 years, 288% in just 2 years. So again, looking at the growth of our business, we've been growing extremely fast. And Rowan will talk in particular about our ability to radically reduce our cash burn pretty much overnight and not within a handful of days. And to us, we think that is a really important point to secure where the company is going.We have also put out, just for those that have not seen this on the ASX, a PowerPoint presentation. And that PowerPoint presentation does highlight a number of key things and achievements for the quarter and, importantly, just talks to some key points. For those that have not seen it, I'll just give you maybe a quick second to see if you can find it on the site and open that up. So I will talk about this now at a very high level.We're very lucky to have 1,092 recurring revenue customers across every major industry. And obviously, in the case of COVID or a recession, one of the great things about our business, like other enterprise software-as-a-service companies, is that we have very steady and stable revenue streams. Our customers continue to pay us. And most importantly, we actually increased our customer base despite it being possibly the hardest software sales conditions ever, and probably for the last 60 years since the software industry started, you'd argue that the last quarter is probably the most difficult.And again, simply because if you're trying to get decisions made, particularly for large contract values, it's very difficult to do that. Importantly, we did continue to grow our sales pipeline. And to me, that is a key element. We also have managed to -- even last week, we had Microsoft write a report on one of our customers Deakin University, which was published about how we're really helping them with COVID. We've had a number of key customers where we've actually been supporting them and being instrumental to how they use products like Microsoft Teams, which has been incredibly high used. And so despite the fact we've had difficulty getting decisions made, we believe our pipeline, what we do with the business is going to be more relevant than ever before.We also announced in the quarter that we have 4 new key product portfolios versus the 12 to 15 products that we have, which we think made it slightly confusing for some of our customers, internal employees, and then probably investors as well. So we've now simplified our product suite into 4 very key -- simple key areas. The first one is LiveTiles Intranet, which is where we are the world's leading intranet provider. We launched a new product that we've been working on out of Switzerland for many years called LiveTiles Reach, which is about front line employee communications. And we've seen a number of key customers sign up.We had, for example, on the intranet and employee communication side of our business, one of the largest sporting franchises in the world based in the U.S. And despite the fact that, that team, I won't give you the name, but you will know it, that team is obviously struggling and they're not playing in the COVID times, they still had a very key requirement to communicate with their employees, in this instance, their football players. For those that have seen our shareholder letter, we also talked about the Geelong Cats, which happens to be my team, but the Geelong Cats last year purchased our software. But it's been very instrumental in communicating with their football players, despite the fact earlier this year, they weren't playing at all.So what we're seeing from a bunch of customers is that employee communication and collaboration is more important than ever. How do I share documents, how do I share information when all my employees who maybe normally went to the office can't physically go to the office. And that's one of the great things we've been able to address with our software.You'll see 2 other products there in our product portfolio. One is called LiveTiles Everywhere. That is a brand-new product. We've been working with the Microsoft Teams team. Some of you might be using Zoom or Cisco, Webex this is a way that you can do video conferencing and calling. We've been able to integrate all of our products into Teams, and we already have a large number of customers that are already using it or in our pipeline to become customers. And to us, we see that as a huge growth area for us over the next 2 to 3 years as people really transition the way they've traditionally worked.We also have LiveTiles Quantum, which is our data and AI stack. So that includes our intelligent directory. It includes the way that we capture information and user behavior information about internal employees and how they work. And again, we think that data and the power of AI, we have one of the world's largest media organizations using our box product to manage help desk, IT help desk, reports and that IT help desk, chatbot, is available 24/7. So it doesn't matter if it's a Saturday night or Monday morning, that's there, and people can get their IT support done in that way. So again, we think that product, from what we're seeing, will be extremely relevant.We have on Page 6 of the PowerPoint presentation what I think is one of the greatest achievements of LiveTiles in our very short history. And for those that don't know, we've really only been around for about 4 years since we've earned our first revenue piece, sort of first $1 million of revenue. We've grown extremely fast since that time. But the Forrester research, and those that don't know Forrester, they are one of the world's leading technology research agencies. It's a bit like Moody's or Standard & Poor's or something to that effect. If you think about it in this finance world, they have a very important name and a very important role, particularly for customers and large enterprise customers. And the great thing is that LiveTiles was positioned as a strong performer, having a very strong product offering, having a very strong strategy, and one of only 12 companies to be selected on this Forrester report. The other 2 companies, the names you may have heard of, Microsoft, obviously, and the other one is Atlassian.Now we obviously work extremely closely with Microsoft. That relationship is getting closer, particularly around what we're doing with Microsoft Teams. But it's also good to see our name associated with Atlassian, who's got to be one of the -- obviously, one of the best not technology companies, I'd say companies [ will stop ] coming out of Australia. So the fact that we've mentioned the same breath by one of the top research agencies sounds incredible.On Page 7, we talked about the operating environment and really, what's changed, what's harder. There is no doubt what we've done as a business, which, as I said, was probably the hardest personal decision that I had to make in my lifetime is around reducing the cost of the business. Now we've done several acquisitions over many years. We've also been involved with many different products. And essentially, where we've got to is that we aggregated those teams, we've consolidated those teams in Europe and Australia and the U.S. and whilst that was extremely hard to see amazing people in our business leave, the great news for the business is that we are now stronger than ever. And when it comes to cash flow, to be able to report the fact that not only we were positively cash flow operating for the quarter, in the actual month of June, where a lot of our changes actually took effect, we actually printed $2 million of positive cash, which is, again, pretty incredible for the quick turnaround that we've done in those changes.Now we have to take some hits there or some hits to everyone's pay. There's obviously been some challenges with that. However, the great news is we are very, very strong, and we are very, very optimistic. There is certainly no change in our long-term strategy. As we said, we think COVID and work from home will be a continuing trend. All of our products focus on what we call the digital workplace and how do we make it easier for people to access their technology and tools wherever they are. And it doesn't necessarily have to be at home.We think there is likely to be a trend over the next 2 or 3 years, where people are reluctant to come to the office every single day, particularly if you're in a high-density pop area like New York or Sydney or Melbourne, and you will choose to work a day or 2 from home. Now the great news for LiveTiles is that the intranet is at the hub of every single company. It's where documents go, it's where policies and procedures go. Last but not least, it's where key corporate communications for all the employees go. So despite the fact that it's more challenging, no doubt, for businesses to sort of make this change and certainly, from our perspective, to get signed up on large projects, we've seen that because the people been scrambling in the last 90 days to change their business practices. I would say that there is a huge upside for us and really, I believe it brings our North Star with the 2030 vision of our company. It really does bring that a lot closer. So we think that the great news is that will continue to go. And as we said, our pipeline has been building very strongly throughout the last quarter, despite the fact, we would expect more sales than where we would. However, it's not unexpected given that, as we said, particularly in the U.S. where everyone was forced to work from home and then physically getting sign-offs were very difficult in that quarter.So we do have a customer highlight. As noted, we've got a number of key wins that we had in the June quarter. Some large health care providers, big state government agencies here in Australia, a bunch of health care-related industries were keep the last quarter, probably for some obvious reasons. We actually had a number of very specific COVID solutions that went out to market. We had a COVID bot out for a company in New Jersey. We got overwhelmed with the request, and we were able to give them about 3 hours, then one of our [ places for ] bot use technology where you get asked a question about COVID and gave the answer back. We had some very specific requests out of a large agency here in Australia to be able to communicate, and we were able to very quickly get a project signed up there. So that normally would have taken longer.The ARR highlights, as I mentioned, we've seen growth, which is great. In this market, we've seen $58.2 million of recurring -- annualized recurring revenue. We've seen a growth in our customer numbers. 24 new customers in the month of -- in that quarter, which again, for a quarter where I think a lot of businesses may have struggled to do anything or maybe even struggle to be in business, we were able to very strongly keep going, which I think is a key thing. And then our ARR per customer of $53,000. One of the great things that we've been able to do is continually keep our ARR per customer increasing and again, strong annualized recurring revenue growth. And my firm opinion on this is that there is no better business to be in, in a pandemic than an annualized recurring revenue business, where the revenues keep flowing in from customers and the [indiscernible] we had a record cash received, cash revenue number as well.The last slide, before I hand it over to Rowan, is really talking about these building long-term recurring revenue cash flow. So a key thing that we have, and we're very lucky to have, we have a very, I suppose, attractive valuation metrics if you compare it to our current share price versus our current ARR book that we have. We're very lucky that we have customers like the likes of Pepsi, Nike, U.S. Defense Department. We have defense departments in major regions of western regions across the world. But those sort of companies are very long term. When they put our software in there, which is about an intranet without being able to share policies and procedures, expense forms. It connects into other systems like Workday or SAP, those sort of systems that brings it together. What we're seeing is that we have very sticky and very loyal customers. And whilst we -- I think we've put a lifetime value of 6 years or so into this, I think the reality is a lot of our customers will be with us, stay with us for a very, very long time.And now the great news is with our growing product portfolio, what we're seeing is that customers are wanting more. Our LiveTiles Everywhere and our Teams product, having people be able to get -- be within Teams, have their video conferencing, but be able to get all their key documents and they'll be able to get to, say, for example, their expense forms or their information without having to leave Teams. We think it's a revolutionary way of being able to communicate inside your workplace. And so we definitely lead -- world leaders already in the intranet space. We're challenging ourselves to some degree by giving us access to things like systems, including intranet wherever you are, and that's why the LiveTiles Everywhere product, we think, has huge potential. And ultimately, we're very excited about where our growth opportunities lie.As we said, despite the fact there has been a lot of uncertainty in the market and there's been much disruption in the market. And I think we're one of the few lucky companies that has had record cash receipts, been able to grow our revenue ARR base, we've been able to add actually cash of $4 million for the quarter and our underlying -- the underlying cash flow positive for the quarter, when we've been growing so fast over the many years.So having said all that, I'm going to throw it over to Rowan for a real financial summary. We'll take some questions in the end. So over to you, Rowan.
Thanks, Karl, and welcome, everybody. As Karl noted, this fourth quarter was a very challenging quarter, in which some really difficult decisions were made with over 50 roles removed from our global operations. And that was in order to preserve valuable capital and cash runway. And we moved as quickly as possible in April and May to realign those business settings and structures for the new environment in which we found ourselves and that included just accelerating our acquisition integration.I'll be talking to Pages 13 and 14 of our presentation, and I'll talk more about our cost control shortly. But firstly, to cover off on our cash inflows, Q4 customer cash receipts rose to $11.2 million, up from $10.9 million in the previous quarter, and that was another record result. That's our third consecutive quarter of record cash receipts. We did see some challenging cash collection conditions to achieve this result. And we continue to see somewhat challenging conditions in the near term, obviously, given the pandemic. Total FY '20 cash receipts rose 114% on the prior corresponding period to $41 million for the full year.And thirdly, in addition to record customer cash receipts in the quarter, we received $7.5 million in government funding, and that included $5.6 million in R&D funding from the Australian Federal Government, and that relates to historical R&D expenditure.On the cash cost side, and we spoke in our previous results about this, and Karl and Peter outlined a little bit of what went on behind the scenes in terms of our restructure and taking some costs out during the quarter, our OpEx declined in Q4 by 38% from $19.8 million in Q3 to $12.3 million in Q4. That included nonrecurring costs of $41,000 for legal fees and $2.3 million relating to the previously mentioned restructure. Combined, those impacts left us with the following operating cash flow outcomes. Firstly, a positive $6.4 million net operating cash flow on a reported basis, and that includes government grant income and those nonrecurring expenses. Cash burn of $1.1 million, excluding government grant income, and that's an improvement of 88% on the prior quarter operating cash burn. And positive cash flow of $1.2 million, excluding government grant income and excluding nonrecurring expenses as shown on the face of the 4C.In light of those impacts of our growth in cash receipts, securing government grant income and tight cost control, our cash reserves rose by $4 million or 12% from the 31st of March to $37.8 million.I'll just make some brief comments that we put in our release in terms of the near-term financial outlook. I'd like to highlight that we returned all employees to 100% pay at the end of June in the interest of staff retention and engagement. The full benefit of cost reduction initiatives, we see will continue to be realized during the first quarter of FY '21, and that's given cost reductions when achieved at the start of Q4. However, we are pointing out that LiveTiles does not expect to be operating cash flow neutral in Q1 FY '21, in light of current operating conditions.We've said that the Board has reconfirmed its objective to achieve operating cash flow breakeven point during calendar 2020, subject to market conditions, and we're continuing to review options to improve that cash flow, and that includes short-term cost initiatives.With that, I'm going to hand back to Karl to open for Q&A. Thank you.
Great. So Maureen, I might let you ask to take the Q&A or the second part of the call, please.
[Operator Instructions] Your first question comes from Glen Wellham from MST Financial.
Yes. First of all, great results, guys. I suppose my question is around the cost initiatives and how that may impact future growth. So in terms of the reduction in headcount, how much has that been maybe what you'd call efficiency from previous acquisitions or non, sort of, sales roles and how much has been potentially affecting future sales in the business?
Right. Well, I might hand over to Rowan to talk about some specific numbers around this. But at a very high level, we've obviously acquired 3 businesses in about 18 months. So a very short period of time. We'd always planned over -- we thought about this period in many years to do a consolidation of things like the product teams, some of the marketing functions, also some of the back-office functions that we thought we could get some direct synergies from. However, given the COVID situation, we made a pretty, let's say, important call, we think, for all the shareholders and for the employees themselves to be able to consolidate those costs instead of taking 2 years in about 2 weeks.So it was a very, very stressful period. I would say, late March, early April, where we had to do the assessments around where could we drive the best synergies in the business, where could we be conservative in various expenditure levels. And most importantly, what do we focus on in relation to the product. So what you've seen in our product, for example, is we've now gone from probably 12 to 13 various product SKUs and names into 4, which is quite a big consolidation of our products.Now what does that mean? We think it's great for our customers, firstly, we think it's going to make it so much easier for them to understand all of our product offerings and their tailwinds. And then we also think it's going to be great for our employees. And also, to some effect, our investments to understand the test that we bring to market, which we think is cutting edge. Now we're also very lucky in that our technology is so far upfront of any competitor that we have in the space that we don't need to spend tens of millions and millions of dollars more into the R&D. We actually have a very, very good R&D base. We have a very major jump on the competition. And so in particular, we're able to use those essential investments that we've made over the last few years and take advantage of it in this period, which we don't think any of our competitors will be able to do it right now. But Rowan, I might hand to you just to talk about some specific numbers.
No. I think you've covered that off. We're not able to plan, unfortunately, to split our cost reduction into any further detail, but I'd just echo what Karl said. The savings were driven by the consolidation -- in some part, the consolidation of regional to global teams, in some cases, including acquisition integration, product road map realignment. And we've also made the point in the release that we're selectively adding back to headcount in terms of priority talent areas, and that includes the front end of the business. So we've been very mindful in terms of how we've gone about it to really have a step change in our cash burn and our OpEx base, but do that in a way that aligns the business to the opportunities in front of us.
Okay. Excellent. Just one other quick question. I note that over the period, despite COVID, you did add 24 clients in the quarter, which is -- seems to be quite a good result given it's pretty hard, I would assume, to get new clients in this environment. Is that kind of organic growth, people coming in to your business? Or have you been able to do marketing and give us a flavor of if we weren't in COVID times, what further -- or if there's an easing of the lockdowns over the next couple of quarters, what those kind of numbers may naturally be?
Yes. Look, we certainly won't provide any outlook, and I think it would be remiss of us to provide guidance given the uncertain nature of the economy right now. But what I would say is that we're in a very lucky position of the business. Firstly, as we said, our core thing is digital workplaces intranets, which we think are more important than ever. However, for some of our larger deals that are still there in the pipeline, we still expect to close, they are definitely harder to sign up when you've had people, especially we have things like security reviews, we'll do that for procurement. It's quite a process. I think it's the point of the customer signing. There's no doubt that, that's been harder to do and may continue to be harder over the next few months. However, we're seeing already, depending on where you live. And it's funny, we talked to our guys in New York who are now out on the streets. And as I'm in Melbourne now in lockdown, unfortunately, with 4 kids in a house, it makes it very difficult to do any business, certainly face-to-face. But I think it is a changing thing that's moving -- that is changing, and it's changing rapidly. And so therefore, we don't really want to be providing any sort of forecast or outlook. I think we've taken a very good conservative view which we've done with our cost reductions, which I think is the prudent thing to do in this situation.So in essence, we certainly think that as conditions -- as people are able to sort of get together more and make key decisions about particularly technology spend and where there are larger budgets that are needed, we think we're in a perfect position. And the last one I'll say on that, intranet will go from being this thing that are in companies to communicate to what we think will be must have. So it'll be part of every business continuity plan, we think, over the next 3 to 5 years, where companies say we need to be able to share documents information. If the pandemic is longer than people expect, if there's another one, I think it's going to change the way people think about their digital workplace. And to us, that's an amazing opportunity for us to take advantage of. Sorry, that's all, Glen, but thanks.
Your next question comes from Siraj Ahmed from Citi.
Just have a few questions. Just firstly, it looks like the ARR definition has been changed. If you could just give us some additional color on why add more services revenue right now in the ARR?
Yes. So just in short, we've obviously evolved our business model over the last 4 years, and we've done through acquisition. We've also done it through our product aggregations. So we've made, we think, very clear now what ARR is, and we've defined that now in the 4C. We've obviously got new forms of revenues that are now part of our business that are recurring, things like multiyear contracts, et cetera, things, for example, services that we expect to get every year that are related to either our intellectual property or products generally. And the way we do this. So we've just made that very clear to define that to the market. So that hopefully gives everyone a very clear picture about our ARR definition.
Sure. And would it be fair to assume that in the June quarter, most of it -- most of the growth came -- the underlying growth came from services? Or because -- I think you had previously said you would help organizations during the pandemic. Just keen to understand whether it is mainly services revenue...
Yes. Look, we certainly don't disclose the mix of our product and services. What I would say, though, is that with our new product offerings, we definitely have a mix of product and services together. We're certainly there to help customers. And so from our perspective, what we've done over the last quarter, particularly what we're seeing over the next few quarters is that we're looking at innovative ways to make sure that we're trying to mind with customers. Some of those services we're actually doing for free, we're actually not charging anything full, where we're helping out, for example, a bunch of health departments, et cetera. But yes, certainly, we're there to be able to make sure that we provide the best products and services that we can do as a business.
Got it. Just a couple more. So with the -- I think I understand -- I mean I understand that companies wouldn't be doing intranet transformations or digital transformations in the last quarter. So which product buckets where have you seen the best traction? Is it really the Condense and Everywhere and the Power Panel/ the Teams product? Or just keen to understand action where you see the [ attraction ]? How do you think about the next 6 months?
Yes. Yes. What we saw as probably the greatest uptick was our Reach product, which is employee communication collaboration so we're working [ internally ] and I think a bunch of industries that have even had to stand down workers, but they need a way to be able to communicate to these workers, a lot of these workers don't even have a company e-mail address. So we've been working with a bunch of businesses all across the world, including, as I mentioned, sporting teams where they've got stood down players essentially, where we're helping them communicate and collaborate.And so whilst we're not seeing large sign off of budgets for the project IT security [indiscernible] review. We're seeing that our Reach product, which is a great sort of very quick, easy-to-stand-up SaaS product, we're seeing some great traction there. So the Everywhere product is still -- it's new -- essentially, it just come out in January of this year, and that's really focused on bringing intranets and bringing our applications in Teams, into Microsoft Teams. And so on that basis, we think we're well set to really take advantage of this -- the work-from-home trends and the change in workplace behavior.
Great. One more, just on the stronger pipeline, I know that you've built the pipeline. As you said, and things are opening up, do you reckon it's still too early for the pipeline to convert in the next 3 to 6 months? Or how should we think about that just in sort of the pipeline conversion? And just September -- my understanding is September is typically a softer quarter. It's more December weighted. Do you think it changes now because of how things opening up and stuff?
Yes. What I would say, and the great news for LiveTiles is that our pipeline is continuing to build. We've not lost deals out of our pipeline, as people say, we don't need this tech. What has been harder to do is actually get sign off on the projects because it takes so many people to get sign off. So certainly for the larger customers, and we're talking about the likes of big government departments and things like that. So having said all that, we are optimistic -- very optimistic in relation to how our pipeline will convert over time. We do not want to provide any guidance on that. And obviously, in normal times, we're Australia's fastest growing technology company. It's been very hard to predict revenue growth because of that, and it does vary. However, in a pandemic, and when we actually physically -- don't quite know how the next month or 2 is going to play out. It certainly would be very remiss of us to give that sort of guidance. And really, as we said, the 2 things that we're focused on in the last 90 days or 120 days since the sort of outline up into our -- how do we reduce our cash burn, as we said, of June -- month of June, we printed $2 million in cash just for that month, but that was an amazing result.But from our perspective, as long as we're prudent with our -- as long as we continue to bring great products and if we continue to build pipeline, it will convert. It's really just a matter of timing. And so -- and certainly, we're not in the cash burn situation. It does make that ability to wait for that period. Now it's possible, it's this quarter, but I honestly don't know. And as I said, I'd be very remiss to tell you if I did think the whole pipeline is going to sign off in the next 3 to 6 months, it's very difficult for us to establish that right now.
Your next question comes from [ Peter Seward ], who is a private investor.
Congratulations on the results. A couple of quick questions. One on the sales team. Last year, the direct sales team, I think, was around about 25, I suppose, with an acquisition. After the restructure and the CYCL acquisition, how big is the global direct sales team?
Yes. Look, probably a couple of things that I'll say about that. What we've done over the last 12 months, and I don't think we've highlighted it well in this call so, is that we've built a very deep partner network. So we have over 200 transaction partners. Everyone from Deloitte and PwC to the small sort of in-person just integrated businesses, and they're already selling our software. And again, we're very lucky, I think, to have built that channel because we are very much aligned. There's roughly 25 people. I don't know what period we're talking about, but let's assume this -- we've got around about 30 people today. So it still is a good team, but they're not just focused -- I think the key message that I'd like to put into this call, it's not just focused around direct sales. In fact, about 50% plus of our revenues, historically, more of that going forward will be from working with our key partners who actually go out there and sell our products. And what we've seen certainly over the last 6 to 12 months is that we have partners now building entire businesses off what we do. And to us, that's one of the most promising signs, I think, as the CEO to know you get to the true scale. And certainly for a much more efficient way of selling a product is through a partner because you don't have to pay a salesperson, despite the fact you have to usually pay commissions to those partners, it certainly is a great way of going to the next level. So those salespeople, a little bit more, but they're doing both the mix of direct and partner management that makes any sense.
Okay. Who is the Head of -- Global Head of Sales? Where are they located?
Yes. So we have our President, Dan Diefendorf, based in New York, who's the Global Head. However, we also have 2 other Heads of East region, one of those is Owen Brandt, based in Sydney. And the other is Elaine Murphy, who's based in Ireland. So we have sort of, I suppose, 3 key regions of the business that are covered from a sales perspective. And certainly, they are extremely well-qualified people and have been able to, as I said, grow our business over the last few years in a very powerful way with those 3 individuals.
Great. And then just on the U.S., I noticed there was a hiccup in the last half yearly report that the historical proportion of U.S. new incremental ARR was falling away a bit even after taking into account the CYCL and Wizdom's acquisitions. But in this last 4C, there's a big jump back of the U.S. customers. So can you maybe just give a bit of color about the U.S. market and entry and the pipeline and how the teams got back on focus?
Yes. Look, I think just my general opinion about the U.S. in the last quarter, it was certainly the most challenging area on the basis that they've been very greatly impacted. And then everyone just needs to look at the COVID numbers and the number of deaths, et cetera. You'll see there's great impact in that region. So that's the -- sort of the first thing I would say. However, there's no doubt that the U.S. is -- well, will be our biggest market over the coming years. We do think that it is certainly ripe and ready for our intranet platforms to play around data and our AI stack. And there is no doubt there is very, very large opportunities. And the reality is with our product and actually the entire market in our space, we're only really scratching the surface of that market so far. Very, very small penetration. So interestingly enough, the European markets have been much more mature in our space, and there's a lot more competition in Europe. Much less competition in the U.S., but a much more mature market. So I think what hopefully we'll see over time is that market develop and us to be able to ratchet up our software across customers in that region.
Okay. Last question just on ARR. It was mentioned before, the definition has changed and you've added services and the like. But taking the number of new clients and your published average deal size, it looks like net retention is a major contributor to ARR, at least it has been for the last couple of quarters. So can -- it looks to be positive. So can you talk about the upsell capability of the business and how that's going? I mean, I know a few years ago, it was around about 110% but I guess, it's come down a bit, but it still looks to be sort of 3% or 4%. Is that the case?
Yes. Look, we don't publish that number. What I would say is that we're in the lucky position that we have over 1,000 enterprise software-as-a-service customers. And these are names in every category that you will know the household names, and there's huge companies. Now the great thing for us is that we're only very -- even in those customer bases, those 1,000 customer bases, we are very small -- we have a very small penetration across all those customers. And in fact, one of the things that we've instructed our sales team over the next 12 months is to essentially do what we call farming those accounts, which, to be honest with you, we've not done a very good job of because we've been so focused on getting new logos and just chasing new customers as fast as we can. So what we've done internally with all of our teams is analyze our top customers, analyze where we can actually expand. That's essentially a land and expand sort of [ playbook ]. And the great news for LiveTiles, and as I said, even in a recession, and let's assume there's a recession over the next year or 2, we're able to go back into those current customers.So whilst there's no doubt creating new customer relationships is really challenging, particularly in technology where you've got to go through security tech reviews, procurement reviews, all those sort of things, if we just look at our current customer base and we do what's called farming or account management of those customers, we think there's very, very large upside. I'm reluctant to give you a number, but it's large, and it is a huge opportunity for us. So from our perspective, that is one of the things that we'll be doing over the next 12 months, particularly if lockdown continues to happen. And depending on the situation, is that how do we make sure that we're offering our customers one of our whole suite of products and then making sure we're fully expanded in those departments or in those companies areas.
Okay. Can I have one minor question? A sharp observer noticed that LiveTiles advertised at a Geelong [indiscernible] game on TV a while back. Was that a quid pro quo given the AFL clubs are tight to money?
Look, it's interesting. That was a deal done last year. I'm not sure I can disclose the amount, maybe Rowan can whatever I can't do this. But look, we have definitely give them a discount on our rates. They're paying us money, which is great. And we're -- actually interesting, we've had quite a bit of feedback even from some current customers here in Australia that also happen to be Geelong [indiscernible] fans like myself, but we're -- one of the great things that we've been able to do as part of the Geelong Football club is they're providing references to us. We've been speaking at our teams and speaking to customers. And so they're actually turned out baseline [indiscernible] customer. And we do have a bunch of other sporting teams on our average varied from [indiscernible]. But, Rowan, I don't know if you've got any other comments there on that point.
No, I -- no, you've covered it.
Yes.
Your next question comes from [ Richard Cho ] from [ Storch Party Limited ].
My question is just kind of in relation to fast growing company, lots of acquisitions, concerning the culture and especially with the layoff, just reading some Glassdoor reviews. How are you kind of keeping around the existing staff? And do you read the Glassdoor reviews and some of the comments? Obviously, there are disgruntled employees, but I'm concerned that, about the nature of some of those reviews and do you want to just quickly comment on that?
Yes. Look, essentially, from our perspective, there's no doubt that it has been the hardest quarter ever when you've got to essentially make many staff redundant, and that's essentially what we've had to do. And even more compounding -- the difficulty of this been compounding on the basis that you actually can't get people together. Normally in a situation, if you're making a bunch of staff cuts, you have people in the same room, you'd be talking to them they'd have a face-to-face contact. We haven't had that luxury. In fact, it's been extremely tedious to say the least. And so we understand there's a portion of staff that have been made redundant that are very unhappy. And unfortunately, there is nothing we can do other than try to support them. But then there are a set of people that have been made redundant, they are very essential but why we did it, and we were very open and transparent with everyone. I think we did it in line with our company values and cultures, which are [indiscernible] on myself, the Co-Founder, who we hold dearly, and we've built an amazing company culture today, and that's still there, which is great.And really, there's 2 sides for them. There's obviously people who are directly affected, but no doubt going into an environment where there's a lot of stress. There may not be the jobs that were there a year ago because of the market being in a different situation. However, we also look at the team that we have here now that we're currently working with on a day-to-day basis. I have no doubt. And certainly, although what we've seen in the last 3 months is that most of them have stood up even when we said to them, you have got to take a 20% pay cut across the board, Board members, management there on. We actually saw a lot of people do a hell a lot more than the 100%, which obviously, we don't want to encourage [indiscernible] be able to have a nice balance in what we do in life. However, we did see a number of people really stand up. And that makes me proud to be the CEO of LiveTiles. And certainly, we have got an amazing culture of the business, and we're going to retain that. And the great thing is that through our customers, through our partners, we're getting that feedback that the future is extremely bright for us, and that's the key thing from my perspective.
Okay. And in terms of the 4C, the nonrecurring staff cost of debt, the $2.3 million, was that the redundancies? And then going forward, can you kind of guide on that -- what that figure might be in the future?
I might handle that part, Richard, it's Rowan here. Yes, it's nonrecurring staff costs relating to staff that exited the business in the quarter, including the redundancy costs. Now, the 4C template actually changed a couple of quarters ago in terms of not providing guidance any further. So that's been a change made by the ASX. And notwithstanding that, during a pandemic, I doubt that we would provide firm financial guidance. What we can say is 3 things, we're committed to a significantly lower cash burn on a recurring basis. As markets open up around the world, there will be more costs come on board just through natural activity, travel, business activity, that we potentially haven't seen in the fourth quarter, and that's part of our reasoning behind a very conservative position in guiding the market to cash burn in the first quarter of FY '21. But certainly, we're very, very committed to maintaining the step changes that we've made in terms of our spend rate.
Okay. My final question, just on the government grants and tax, the $7.5 million. Was that -- how much of that was kind of job keeper? And how much of that can you kind of expect going forward?
There's no job keeper in it. So of the $7.5 million, $5.6 million is R&D. We've now hit the $20 million threshold in terms of revenue. And so any future R&D tax concessions will come through if and when we've become a taxpaying entity in Australia. And so there won't be further one-off cash payments expected in that regard. The other item for government funding, which is also in the back end of the 4C was the U.S. Paycheck Protection Program, we were a participant in that, and we received USD 1.3 million from that. Some of that may not be forgivable. That will be tested during the first quarter of FY '21, but the Paycheck Protection Program was to go towards, obviously, payroll in our U.S. entity, rent and utilities.
Your next question comes from Wayne Sanderson from Phillip Capital.
Karl, thanks for a good result. Just interested in the sales cycle for your major products, what was the normal time period between convert -- taking a lead and closing it out to an actual installation? And how much has that has blown out to post-COVID, just roughly?
Yes. Look, there's no doubt in enterprise that certainly in our space, the earliest still, the quickest you'll ever do a deal is 3 months. And then the average might be 6 to 9 months. So it's quite a significant lead time. And our pipeline, therefore, is reflective of that. We have quite significant dollar amount in our pipeline. However, obviously, COVID makes that more challenging. And that's why we are reluctant to sort of provide any guidance here because it usually requires 3 or 4 different departments to make various sign-offs to be able to get deals across the line to actually get them to sort of production. So from that perspective, that 6-month time may be longer now in the face of COVID. However, as we said, things are changing pretty rapidly, almost daily and certainly weekly at the moment.
Our next question is a follow-up question from Siraj Ahmed.
Karl, I actually forgot to ask that change in definition, what was the impact of adding services to the ARR? If you could just help us with that.
Yes. So we've obviously always had, and we've disclosed them several time, services. We don't disclose the number, but it's in the order of a few million dollars. Obviously, what we've done, and we've made this [indiscernible] we've evolved our product offering, and we've evolved that we can get aggregates essentially 12 different products down to 4. And most importantly, we've now set up what I think is a much more simple sales approach for both our customers and our sales teams. And certainly, aggregating those products together makes it a lot smarter and a lot -- as I said, a lot more efficient.Now one of the things I would say is that we're recognized by the Australian Financial Review about a month ago or 6 weeks ago as the Australia's fastest-growing technology company based on revenues, and we're very proud of that fact. I think, unfortunately, it was probably washed away in the news of COVID, it was of the end of March, start of April when that was announced so probably not many people were aware that we were the fastest-growing technology company that is in Australia. And again, if we look at our benchmarks of our ARR, we're very lucky again to one, have that these customer base that we do, but probably more importantly, we're benchmarking ourselves against the best SaaS companies in the world, we're doing extremely well. So we're very happy with the growth and obviously very -- it's a very important thing of what we go to the future. As far as future growth, we've sort of made it clear as well that we're not providing any guidance or prediction on that just based on the market where it stands today.
Sure. And just on the salaries, the fact that you brought it back to 100% at the end of June, is that essentially, should we take that as a sign that things are looking better, you're more comfortable? Or how should we read that -- read into that, sorry?
So I suppose what we -- the general question around us taking our people from 80% back to 100% of their wages, obviously, we had a very large number of redundancies across the group in Europe, in the U.S., all across the globe for our business. And so one of the things, and as I mentioned to you, we had people stand up, I believe, doing more than 100% of their work day in very fine conditions [indiscernible] in homeschool kids go up for the stock, but yet giving 100-plus percent of their time, yet getting paid 80%. And the question before around culture and values, we believe that we need to be fair to our employees. We believe we need the best out of them with business there, and we didn't think it was fair to continually hold their payback at 80%.We did have a cash flow positive in June of $2 million of positive operating cash, which is an incredible result, again, in such a short amount of time. And rather than essentially LiveTiles hold on to those gains, we feel it's really important to give those back to the employees that are actually being asked to do a lot more. Now there were those redundancies in the consolidation of the teams on what they were doing before. So from our perspective, this is why despite the fact it's an incredible achievement for LiveTiles today, generating a positive cash flow quarter, operating cash flow quarter is amazing.However, we're also just being realistic that we need to be conservative about what will happen over the next 3 to 6 months. We need to, obviously, pay our staff correctly, which is an important thing for everybody in our team, to keep morale and to keep them motivated and keep the growth going as we have been. And therefore, as I said, we've set our business up to be a very, very strong business now because of all of those reasons.
Got it. And just last one, just on the channel partners, which is a key channel to market for you. Given the product refresh, is there a need to reeducate the channel? Or how are you thinking about that? I mean should we think there'll be a lag in conversion from the channel, from the partner channel?
Yes. So certainly, we've had a massive reeducation program, including our own staff. And it's something that we'd love to do with this investor call in the next month or so. However, jump on a call to look at what we internally called LiveTiles 1. And the reason why we call it LiveTiles 1 is we just had so many different brands and so many product streams. It got unwieldy for a salesperson or a partner to be able to position those to a customer. So we have definitely spent a lot of time with customers in the last 3 months, probably more so than ever. And the great news, again, that we have set up very well is that those customers can go and sell our products, make great margins from our -- the commissions that we give them. And as we've seen for the very first time, businesses create a whole -- whole strategies. And literally, build their whole business on LiveTiles products. And we started that reeducation process back in November, where we actually started what we call certification of our partners. And we give them essentially some very in-depth training, every region is a 2- or 3-day training. Each of those regions, we had about 60 or 70 people attend. And these are people that are normally charging that about $2,000 a day. And they're taking 2 to 3 days off their time, sometimes longer, taking their own travel costs to get trained up in the LiveTiles products. So what we do know is we've built a great army of people out there now that has the capability. And you're right, so right, we do need to continually train those people on these offerings, and we expect to do that over the next few months as well.
Our next question comes from [ Dianna Mitchell ] from [ Osis ].
Just got two questions. Just with regards to the ARR and the inclusion of services, can you just confirm whether the prior comparables actually do include services as well? Or is it only been changed this quarter?And the second question is just on churn. So in the most recent quarter, there has been kind of increase in churn and then an improvement. And I didn't see any comments on churn in this period, and you haven't changed the assumptions on churn in lifetime value. So should we take that to assume that there is stability in the churn rate for the fourth quarter?
Yes. So just a quick one on the first one. We have told the market that, I think, end of last year that we have related services in our ARR count. So that's -- there's nothing changed there. We do have some new services [ prints ], which is why we've defined ARR to make it very clear to everyone. So hopefully, that answers your first question.In relation to churn, for those that don't know what churn is, that's customers that don't pay you anymore. So what we look at is we -- firstly, we haven't reported that number. Rowan might want to make some general comments around this just after me. However, what I would say is that we're extremely happy with adding 24 new customers on, again, in the period, which is -- there's a lot of uncertainty. We're probably one of the few industries that have been able to continue to add and grow, not only keep our base but grow that base, which to my opinion, is extremely exciting in this period and great opportunities. But Rowan, you just might want to just any other comments on the debt.
I think there's -- Dianna, I think there's -- the other side of the coin in terms of churn is, as you might expect, I'll be looking to take a conservative position on providing for debt in our full year results. During the quarter, our debt aging actually came down in terms of days sales outstanding. And debt collection progressed well during the quarter, but it's something we're keeping a very close eye on, and that's something that hopefully comes through in terms of our conservative outlook comments around Q1 cash flow is just keeping an eye on the evolving situation.
[Operator Instructions] Your next question comes from Ricky Jin from Northbridge Capital.
I'm trying to get a better understanding of your product portfolio. Great rebranding, by the way, I really like the look at it. It's very clear the way you've categorized the 4. Now I'm still trying to get a better understanding of not just the appearance of things, but your strategy? One of the comments -- reviews I've received from one of your customers regarding your LiveTiles Intranet product was that it's perhaps becoming less relevant and valuable as opposed to where it might have been a few years ago. Are you able to provide some comments on that? And that's perhaps just related to the increasing usability of SharePoint itself and where LiveTiles Intranet comes in, in terms of the added value proposition. So I'd like to hear your thoughts on that comment.And just the second question is with regards to your growth drivers. So now that you've got the 4 categories, if you can speak with them in context, where do you expect your growth to come from what your future drivers could be? I'd love to hear your thoughts.
Great. So obviously, one of the great things that we've been able to do with our product suite was simplified it into a data and AI stack, an employee communication stack and intranet stack and then also we've got LiveTiles Everywhere, which is basically our Teams slack Google Chrome integrations. And that means you can use the product everywhere you need it. A couple of things, I'll say, our relationship with Microsoft and our positioning with Microsoft is stronger than ever. We've been essentially led in by Microsoft into one of the largest school districts in the world, because they wanted to integrate our products into Office 365. They're actually moving from Zoom to Teams, and they approached us to do that, and we're in the process of doing that project. And that's in the last 3 months.We have no doubt that the overall offering that we have, and you can speak to anyone at Microsoft that knows us, an extremely differentiated product. Any of our competitors in the market, which is important, particularly when it comes to our data and AI stack, which is called LiveTiles Quantum. And that's all about understanding new behavior, understanding the people and the information that exists in companies. And then really our key value proposition is that we allow employees to communicate, collaborate and get to the applications extremely easily. And I look at companies that we work with like Pepsi and Nike that we've been working with for many years now. And for example, we just extended quite significant with one of those companies for another 3 years in the last quarter, despite COVID to make sure that they're locked in for a much longer period.One of the things we've been able to do is innovate really quickly and actually innovate with the customers. So certainly, across our customer base, we're more relevant than ever. We're seeing the differentiation of our products, we've been able to integrate things like Salesforce and SAP, WorkDay, those sort of products into a single pane of glass. And again, if you look at the essence and DNA of what LiveTiles is trying to do here, we're just trying to make employees' lives easier. We're trying to make it so when they come to work or if you're home, one of these, which would be your work now, they can get access to information and the systems without having to navigate what typically is, in most large organizations, a crazy, very complex world. So we're very, very happy with the progress. We're super connected with, obviously, the Microsoft development teams in Seattle and Redmond. And you'll see even in the stuff that Microsoft -- on Microsoft that put out about us that we're more integrated than ever.So certainly lots of upside. Hopefully, that explains the value proposition. But on this topic, we would love to spend some more time with everyone to have our Chief Product Officer, Simon Tyrrell, up with the 4 solutions. And Maureen, I'm hoping you'll be able to arrange over the next month or so for anyone who wants to join a technical deep dive of the products, and we'll also have Microsoft. We'll have one our customers and one of our partners talk about how they use it and partners, in particular, how they go about distributing this tool and why it's so important to the partner network. Hopefully, that gives you an overview.
Yes. That's helpful. And are you able to speak to where you expect the growth to come from, where you're able to categorize it across the floor as it is very well connected such that it will be hard to distinguish between each of the components.
Yes. Look, we've integrated the suite very carefully, and that's a big part of what we do with our product team. So it's a seamless experience. Part of LiveTiles 1 was making consistent brand, consistent messaging and really making it easier for customers to take all the products on overnight really seamlessly. And we think we've done an amazing job. And now that's only rolled out as of the 1st of July. That was the release date, be a key that we did that, so yes.Look, I'm mindful of the time and it's 12:00, I think. So I appreciate everyone joining the call, much [indiscernible] on the call as we've gone over time. But as I said, we'd love to get the actually the background but we'd love to get an overview of the technology they run. So you can see it, as we say, the momentum for LiveTiles where we can say now, we've gone from the growth of business being able to declare a cash positive generation quarter, which is amazing. And as I said, our outlook is very promising in the way to work from home in COVID. We think we're on the right path.So thank you, everyone. Thanks, Maureen, and thanks, Rowan. Thanks for all the questions that you asked, and we'll no doubt speak over the coming weeks and months. Thanks, everyone. Goodbye. See you.