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Both for questions and to talk about what the situation is in the sales and marketing. I'm going to hand over first for Craig to talk a little bit about our 4C highlights. Go, Craig.
Thanks, Teri. Okay. Let's review the 4C cash metrics posted up on the ASX earlier this morning. We're very happy to say that during Q1, we had our strongest quarter ever for cap receipts from customers with receipts of almost $8.7 million. That's up about 35% compared to last year or 26% in constant currency and almost all of those cash receipts coming from subscription sales. It's great to see our cash receipts increasing quarter-on-quarter on a consistent basis. During the quarter, we had net operating and investing cash outflows of $3.6 million and that's a decline of 12% from the same quarter last year. This was as expected, however, as Q1 contains a large number of our operational subscription renewals and also our performance-related pay. Cash on hand, excluding the revolving credit facility of $10 million that we have in place at the end of Q1 was a little over $15 million. And Teri is going to touch a little bit more on the -- about this in the summary of our strategic review, but later on. If we look at the SaaS highlights, all the recurring revenue metrics, during Q1, we had a record USD 1.5 million of net new contracted annual recurring revenue. This included our largest contract to date and our first of over USD 1 million per annum. It also included a number of other significant new contracts with some respected institutions like Sharp HealthCare in California. CARR is now running at USD 23.7 million. You'll notice in the announcement that we put up earlier today that we're now starting to report CARR and ARR separately. CARR represents all of the contracted annual recurring revenue, whether installed or not, whereas ARR reflects the trailing 12 months of accounting revenue. Importantly, cash inflows sit somewhere in between the 2 of those. ARR at the end of Q1 was USD 18.5 million, and that's up from USD 17.3 million at the end of the previous quarter or an increase of 7% quarter-on-quarter from Q4 FY '22 to Q1 FY '23. For us, the difference in CARR and ARR in and of itself represents significant upside to our revenue potential for FY '23 and beyond. You will see in the presentation that, that gap had been closing consistently until this quarter where the large deals pushed that up slightly. Our job is to get those customers live as quickly and successfully as possible. The average revenue per account has increased from USD 28,900 to USD 31,400 over the quarter as we continue to drive sales in the direction of larger organizations. Midterm of our SaaS CARR remains low and that's 3% or less. Lastly, with our strategic review largely completed, we're now pleased to present our revenue guidance for FY '23 of $31.5 million to $33 million. That's up from $ 26 million last year and represents an increase in revenue of between 20% and 25%. That's an overview of the numbers from the 4C and our guidance for FY '23. And then I'll hand back to Teri.
Next slide, please. All right. So strategic review. So after taking the home of Volpara a couple of months ago, I worked really closely with our senior executive team and with a number of people in our company to really take stock. We looked at the industry, we looked at our company's strengths and weaknesses, and we worked quite collaboratively on a plan to take Volpara into a new era of profitable growth. The objective of our review is to assess opportunities to accelerate our growth and to improve the financial health of Volpara in order to increase shareholder value. After a thorough review of our operations, partnerships, customers, sales, marketing and products, we recommended some actions which the Board had accepted. To put simply, we look carefully at how do we bring in more money, how do we spend less money and how do we grow our secret sauce. We found we've got some work to do, most of which has already begun. I mentioned in last quarter, the concept of elephants and Craig just mentioned about focusing on larger accounts. So we do continue a heavy focus on sales growth, emphasizing those elephants or large commercial opportunities. I like that better than saying whales by the way, regardless, we're focusing on the bigger opportunities primarily in the United States as well as in Australia. Our recent contract signed with RadNet, the largest provider of outpatient imaging services in the U.S. was a great start, a great elephant to join our family. However, our pipeline does have other large opportunities that are progressing in our direction. We're also investing our product development on driving some cross-selling and upselling opportunities among those most profitable products to be able to support those elephant-sized organizations. The integration work, which is already underway is expected to unlock growth within our current customer base, which we're fortunate does include lots of elephant-sized organizations. Also, we expect this will drive more multi-purchase -- I'm sorry, multiproduct purchases from new customers. To remind everyone, our most profitable products, which are getting the most emphasis as part of our strategy, our Risk Pathways, which is a program for identifying and managing high-risk cancer patients, which we acquired from CRA back in 2021. The next one is Patient Hub, our mammography reporting and patient communication system, which we acquired from MRS in 2019. A key part of our development right now is providing the risk functionality acquired from CRA as part of our Risk Pathways and embedding that in our Patient Hub work flows. Analytics provides mammography quality reporting and Analytics is interesting in that we are exploring potential synergies between what our Volpara Analytics Platform product does and our Volpara Data Platform, which houses all of the data that we've been talking about over the last couple of years. We're looking at some interesting potential product growth, leveraging the wealth of that data and expect alignment or combination of Analytics and the VDAP products to provide infrastructure to open some new commercial opportunities such as providing business insights to our customers. I also just mentioned our investment in integration supporting multiproduct sales and upselling. We've also now gone live and have new revenue flowing from the automation of test request ordering and supplying evidence for eligibility via direct links to genetic testing laboratories, which reduces the time and work required for insurance approval as well. So in terms of less money out, older legacy products and products that are less profitable will get less focus from us over the course of the next 18 months and we have a goal of migrating customers to the newest versions of our software and reducing reliance on older technology. This also feeds into a careful look at our markets. Some parts of the world aren't ready for modern cloud-based architecture and some markets simply won't pay for it. Not enough to make it profitable at this time. So we're focusing our resources on the high revenue and most profitable markets of the U.S. and Australia and we're pulling back from parts of the world that currently don't make as much money. We're looking at savings in the cost of acquisition or CAC, with less travel and we've ended some distribution agreements in Asia. We're on a go slow approach for Europe in the next year or so primarily supporting our ongoing research efforts there. We're looking closely at internal operations overall and reducing some of our non-sales staff costs. We're cross-training staff. We're looking at improving our operational infrastructure and this should result in some operational cost reductions, saving around $3 million in the second half of this year and another $ 7 million to $8 million in fiscal year 2024. We're also looking carefully at our partnerships and we're nurturing the partnerships that have the best potential to support future expansion. This is part of our secret sauce. For example, a month or 2 ago, we announced to the market a collaboration with Microsoft and this collaboration continues. Starting next week, around half a dozen Microsoft staff will be here in Wellington working closely with our science and our innovation team and building on the foundation of our patent related to breast arterial calcifications. This is at no charge to Volpara, and it's built -- and it's pretty cool. So imagine if your mother goes in for a mammogram to detect potential breast cancer and our software alerts her doctor that she's actually at risk for heart problems. She may be entirely unaware and perhaps this could save her from an unexpected heart attack. This is extra important because women are more likely than men to have a heart attack without chest pain, which we all imagine is the main symptom of a heart attack. So partnerships very important to us, but those that are a very long play or don't have an evident path to profitability or being deemphasized right now. However, explorations of the areas that are most promising for future growth, including how to leverage our data will be continuing. Speaking of focus overall and driving the culture of profitability, it's hard. One step in that direction was the creation of a new set of guiding principles to help staff make decisions in their daily work. Next slide. So this is an example of one of our internal communications about our new principles. We discussed these in a weekly or every other week, final our meeting where we talk about how these principles apply daily to the jobs that our staff are doing at all levels of the organization. The first principle is listed first for a reason because it's important. And for a purpose-driven company, making money is not at odds with our intent to save lives and every member of our staff needs to understand that. We've always kept the patient at the heart of our decision-making and this is not changing. However, creating a culture in which we examine the work that we do, look for ways to streamline or open up ideas for commercialization. These are areas that we can draw on broad global expertise at all levels of our company. When we unite and execute on our in-flight plans for reducing costs and emphasizing our most profitable activities and products, we will achieve net operating cash flow breakeven by the fourth quarter of 2024 and net operating cash flow profitability in fiscal year 2025 using cash we have available on hand and without slowing our revenue growth. However, that is not quite enough. Next slide. This summarizes how the focus in our next 18 months, driving to profitability and leveraging the benefits of the 2 acquisitions to streamline our operations, sets the foundation for our expansion into new commercial models and ultimately, our vision of going beyond breast and even beyond cancer. Even though right now, the focus of our time, you can see 90% in step 1 is really getting those operational improvements and optimizing our sales, we keep our eyes on the future and we intend to grow our pipeline not only of sales, but also commercially viable products. And with that, I'd like to open the floor for questions.
Thank you very much, Teri. We do have a few questions that have come in, and I'll read them out. I think this one might be for Jill actually. It says Volpara has stated that it is now focusing on elephants as its primary sales model. How do you define an elephant? And do you have any of these coming up?
Apologies. Thank you for the first question. So we define elephants as opportunities that are greater than $250,000 in annual revenue, recurring revenue for us as an organization. We certainly cultivate any larger deal over $100,000 in annual revenue with different organizations. But our products are very uniquely aligned with large organizations, improving the quality of mammography, looking at staff over a very large amount of deployments and many sites as well as mammography tracking. So we see that as customers join other organizations as they expand, as staff move around, people come back to us. And so we're lucky and fortunate to have a nice pipeline of those very large opportunities in the next year and we're looking forward to talking about more of those as we go throughout the next 12 months.
We do have some others. So what is the net financial impact of this strategy? So you have cost reduction initiatives and additional investment initiatives. But overall, will your costs go down or up in the next financial year?
Why don't I let you take that one Craig, yes. I know the answer, but you'll give it more specifically.
Yes. So obviously, we're halfway through FY '23 already or almost halfway through FY '23 already. Our costs will be relatively flat on FY '22 -- sorry, just thinking of the fiscal years. But FY '24 onwards, we should see a drop in our net outflows or our overall outflows in FY '24, '25 and '26 compared to FY '23. There are some significant cost reductions that Teri mentioned a little bit earlier that are in the ballpark of about $7 million to $8 million in FY '24 over effectively FY '22 with about half of those savings also being relevant in FY '23 as well but only in the second half of FY '23. So we do expect our cost to decrease and the intention is to manage those carefully going forward.
Will you be doing any more acquisitions?
Not at this time. It's not that we're actively looking at -- or that we're not considering if there's something that's significantly value accretive based on what's going on in the market. So if the right opportunity presented itself, it's not that we wouldn't evaluate it. But in general, with the market dynamics right now and what's been going on with different companies in our space, we've seen a few that we really think would make sense for us right now. And therefore, we're focusing a lot internally, but it's not something that we would rule out in the long term.
Another one. Why don't you hit breakeven? Is the plan to remain above breakeven going forward?
Yes.
I'll just elaborate very slightly on that. We've set a target that Teri mentioned of Q4 FY '24 breakeven. Q1 of FY '25, we will likely dip into a negative cash flow because it is generally our most expensive quarter followed by Q2. But Q2, Q3, Q4 and the whole of FY '25, we will be cash flow positive.
And my yes, was I want our company to have a way of life that we bring in more than we spend.
So we have another one which is, Teri, you've recently joined us as the CEO of Volpara. When will you be buying shares?
Well, given that I'm not a Director, it didn't need to be reported, but must have been 6 weeks ago or so, I bought 6 figures level plus number of shares. So I am a shareholder and I believe in our company and I believe that it's a worthy investment for me personally.
Why is the share price so low?
Been a bit of crazy time. We look at companies that are similar to us and we've been on trend with other organizations. I've been told by folks, it almost doesn't matter what we do, this is just a band of what's happening given the macroeconomic dynamics out there. It's just the market. I do think our share price has been up and down recently. And I expect that we'll weather this storm pretty well and continue in our current upward trajectory. But I guess I'll see if Craig, do you want to add any comments to that. Biggest thing to me is who we're benchmarked against who are really just flat in the middle of the pack.
Yes. I would echo those comments, Teri. When we look at -- I do see there's another question along similar lines that I might just read out there, Hannah, which is even pre-pandemic, the company was trading well below fair value. Any reason why it is unable to achieve its fair value while some competitors are achieving the opposite and trading above their fair values? I'm not sure that's a fair statement to be honest, because there is no competitor in our space that is listed. We are a unique company on the ASX in our specific space. There is no one doing breast specifically or in that vertical. You can look to the U.S. at a competitor like iCAD that does compute-aided detection. That would probably be the closest in terms of a competitor. If you just go look at their share price, they're down 80% to 85% in the last 12 months. So in terms of direct competitors, there are no competitors on the ASX that operate in our space. In the wider health care sector on the ASX, it's fair to say that we're probably trading in the middle of the pack or some way maybe in the bottom quartile. And that's partly some of the reason for the strategic review and part of the reasons that Teri has just spoken about for the last 10 minutes and getting to breakeven. And we think that getting to breakeven and not having to go back to the market and raise capital, which is what we're telling everyone now should provide some stability to shareholders and the belief. And we all -- we want to and we will deliver on the strategy that Teri outlined. And it will take a bit of time, but the markets are very strange at the moment. So the overall health care sector has struggled and we've just been part of that. I don't know if you want to add anything, Teri?
Yes, I think that's good.
So another question for you Craig. Craig, you mentioned that operating costs would decrease in FY '24. Is that relative to FY '23 or absolute?
No, absolute. So at a high level, we're looking at total operating costs in the region of $42 million to $45 million. Currencies are all over the show at the moment. FY '24, we should be below that number at an absolute level.
And then I guess, related here, we've got, it says, does the successful execution of this strategy involve a capital raise or the use of your debt facility?
Yes. Our strategy is designed to not require a capital raise nor to dip into our debt facility.
One on sales, how long does it typically take to win a new elephant client or customer?
I'll give this one to you, Jill.
They typically will take around 12 months. But certainly, we have had some opportunities come in that have turned around in 3 months, and we've had them go as long as 24 months. So I think what we're seeing is a lot of projects are accelerating just due to the rebound of women come back from mammography exams. And so there's a bigger priority to really understand the patient's risk and personalize their care pathway, and that's brought some more deals to the forefront, maybe shortened a couple different sales cycles towards that end.
I'm going to add something on that, that I know I've been asked about a lot before and that is, could you comment about the sales cycle for, say, a capybara? Maybe it's a smaller organization versus a big elephant, do you see substantial differences for the same product mix. Jill?
No.
No. Or I'll comment on it that one of the things that's been surprising for us is that oftentimes a small sale and a large sale don't necessarily take significantly different amount of time to get over the line for the same product mix. So obviously, from one product to another, there's some differences. But with large organizations, oftentimes they have more expertise so they can get through the same kind of security reviews and things a little bit faster than a small sale that's relying on one person to single threaded.
Is there any update on the U.S. federal legislation regarding breast density?
No real new news on that. We are still awaiting. We keep hearing it still in the works and we've reached out to some partners and trying to find ways to be able to also encourage our customers to step up and be helping support lobbyists and others to get that legislation through because it's been pending since 2019. We do think that it will eventually come over the line, but we can't tell exactly when and we think that, that will be good for us. But I can't give you a date or a specific movement except it's still in the works.
And what does your sales pipeline look like at the moment?
All right. Jill, you want to talk about the pipeline?
Sure. The pipeline is really strong. It's certainly stronger than it was when I started about a year ago. And we've seen the greatest volume of increased fee both not in one particular product. I want to call that out. It's been very balanced across all 3 of our products. Our main products, Risk Pathways, Analytics and Patient Hub. But the biggest growth we've seen is those elephants is that the opportunity is greater than $250,000. And that's due to a focus on those as well as just an increase in just the number of IDNs that have pivoted away from the kind of the COVID downturn with that volume coming back in mammography and the reinvestment and the patient private pay surgeries and elective surgeries and things like that rebounding. We're just seeing that these larger hospitals have recovered and they're starting to focus again on how they can personalize patient care.
We do have some questions from the floor. So I'm going to throw over now to Michael Yassa who has a question for us. Michael, please go ahead and ask your question?
He's on mute, Hannah.
Yes. If you're trying to talk Michael, you're on mute.
Yes, looks like he is muted.
Maybe just move on to one of the other questions, Hannah.
So the next question is, are you able to expand a little bit more on the partnership with Microsoft? You said that 6 Microsoft staff are coming at no cost to you and match with Volpara scientists, but what is this project goal and what is the time line for it?
Yes. They are working with us on some of the AI work that we've done, so bringing in some of their experts on breast arterial calcification, identification and quantification. And a part of the scope of that is not just the technical work but also discussions about commercial options and we expect that we will be able to come out after we've done some more of this work with more specifics about time lines and where this might go as a product. So it's got a technical element and a business element, but I can't give you a determination yet because we're all just getting together talking about it.
Another, it's quite a long question. It's says, historically, there was constant talk about company uplift in users following the DENSE study release or the FDA recommendations around breast density. However, this uplift hasn't been as substantial as expected. Therefore, will the breast vertical only ever be able to grow slowly and we should never expect a sudden increase in users? And is that why Volpara is broadening into these non-breast verticals?
That's a good question. I do think it's unrealistic to expect a sudden explosion of use based on the FDA recommendations or the DENSE study that it's something that organizations do still go through a process. They still have to carefully consider security. These -- especially -- well -- in the United States, there is a process of getting consideration from radiology and budgeting and all of that sort of thing. It's usually not at the urgency of, oh my gosh, we have to put something in, we have to do it right now. Depending on what happens with those legislation, usually, there still is a grace period in which people can take their time to be able to put new systems in. So it's not like you're going to be nonconforming if you don't have something turned down next month. So I think it will be good for us, but I don't think that there will be a time where all of a sudden, there will be an explosion of activity. The second part of the question, though, I do think it's good for us as a company to look at expanding our market and leveraging the deep expertise that we have in imaging, the expertise that we have in risk and the fact that with the acquisition of CRA, it actually opens us up to look at other types of cancer beyond breast. And so to me, I like that. We've got a really good, solid, steady revenue stream in breast. But when you expand beyond women to men and women and you expand to other areas, I think we could become a much bigger company in the future, which is why that's part of our strategy.
Will your revenue be impacted by all this cost cutting?
We do not anticipate that our revenue will be impacted by the cost cutting at all. We've protected our resources in sales. We've got a solid marketing plan, even the products that we're focusing on and continuing to support are really the highest revenue products. So no, we don't expect our revenue to go down. We expect that this focus will actually help support our continued growth in revenue.
And then one perhaps for Jill again. Has there been any changes in the requests or priorities of health care providers or potential customers over the last 2 years when actively saying your product. So that may be either COVID or non-COVID related. And what is the sentiment like generally in the U.S.
I think, first of all, in terms of the requests or priorities, the first, I would mention a little bit around what Teri was talking about, and there are not being just some level of activity around breast density legislation. But I will tell you that I see very much a strengthening of not going beyond just breast density to patients understanding their lifetime risk and then patients understanding their genetic risk. A couple months ago, we talked about the upswing and also genetic assessments and patients and providers trying to bring that value. There's 5 states that have mandated reimbursement in those lines. And we're starting to just see that while that's a future state, customers and providers need to make sure they're giving the lifetime risk today. So we're really -- that's a very strong story and people are asking a lot of questions. The other thing we see a lot of uptick on is security. And it's something Volpara is very strong at providing security around PHI and around our data security and customers are really confident in us when they do that analysis and that is something that I think is a very real part of everything we do and everything we do in health care now. So there's a lot of data security questions in rigor and we tend to do very well with that. So I think that's the strength. In terms of the sentiment, I probably am repeating myself, but with the COVID has normalized more, and so patients are going back in and seeking elective care. And so I'd say the sentiment in the United States is we're not as rattled and we're just stronger and we're building up in our interest and pipeline and things along those lines. So the sentiment is really strong. We have a very good team in Volpara. We've added a lot with regards to customer success and working more collaboratively with our customers and our products are really sticky. So I think a lot of very positive things to talk about in the U.S.
Thank you, Jill. We just have a few final ones here. If you do want to ask a question, please do send it through using the Q&A at the bottom of your screen. What are you doing to retain talent?
We got a couple of different things. Fundamentally, a lot of it comes down to attracting and retaining our talent is staying grounded in our purpose and connected with our customers. That's extremely important to us. And in fact, we just had a all-staff meeting that I just about came to tears, where one of our staff was talking about her experience and why she works at Volpara. It's a section we call what we do what we do to ensure that people at all different levels of the company are very engaged and committed to the good work that we do in saving families from cancer. So that's the foundation. But the next level is creating opportunities for our staff to be able to grow within Volpara. So we've got Volpara University to be able to offer education and professional development opportunities, but then also giving people a solid growth path. So it's something that our senior management team, our executive team, talked about last week. Even as some parts of our company have gotten smaller, there are other parts of our company that are growing, like Jill just mentioned, customer success. Even that us working with our customers to make sure that they're not just live, but they're using the software to be all they can be, to do everything that they can do with our software as fully as possible is actually very gratifying for our staff and providing opportunities for our staff to be able to bring forth their good ideas on how to help leverage what we're doing with our customers as well as even driving those principles to the people in accounting, the people in all different parts of our company to be able to be heard and engaged in a process where we do continuously improve the operations that we do. I would say those are the main areas. Couple softer things like we've got a walking challenge coming up where we have the Northern Hemisphere compete with the Southern Hemisphere, focusing on the healthy workforce, making sure that people have the tools that they need to do a good job. Really, we want this to be a place where our staff feel valued and enjoy the time that they have with us, but probably more than anything, feel like what they do with our company matters. And it's something I feel like under Ralph, we did really well and I'm committing to continue.
Thank you very much, Teri. So that's -- that concludes all the questions we have for today. If any of the attendees here with us, do you think of any other questions, the contact details are on the bottom of the ASX announcement. Please feel free to get in touch with me directly or with the company directly. Before we go, Teri, do you have any closing remarks?
I would just say thank you for your time for everyone that tuned in on this. And as you can tell, we've got a really resilient business. We're helping millions of women each year. And we really appreciate those of you that invest in us and support us for supporting our mission of saving families from cancer. And onward we go with trying to do that bigger and better.
Thank you very much, and thank you, everybody, for joining us today. Good bye.