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Edited Transcript of IRI.AX earnings conference call or presentation 21-Aug-19 11:00pm GMT

Full Year 2019 Integrated Research Ltd Earnings Call

NSW Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Integrated Research Ltd earnings conference call or presentation Wednesday, August 21, 2019 at 11:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* John Ruthven

Integrated Research Limited - CEO

* Peter Adams

Integrated Research Limited - CFO

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Conference Call Participants

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* Chris Savage

Bell Potter Securities Limited, Research Division - Senior Industries Analyst

* Mark Bryan

Wilsons Advisory and Stockbroking Limited, Research Division - Head of Research

* Mike Ryan

Select Equities Pty Ltd., Research Division - Senior Institutional Adviser

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the Integrated Research Ltd. Fiscal Year '19 Full Year Results Investor Conference Call. (Operator Instructions) I would now like to hand the conference over to Mr. John Ruthven, CEO; and Peter Adams, CFO. Please go ahead.

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John Ruthven, Integrated Research Limited - CEO [2]

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Good morning, and welcome to the FY '19 results briefing for Integrated Research. My name is John Ruthven, and I am the CEO of IR. With me today is Peter Adams, our Chief Financial Officer and previously acting CEO for the second half of FY '19.

This morning, we posted our results presentation to the ASX website, which I will be talking through during this call. Please take this opportunity to download the presentation if you had not already done so. The agenda for today's call will follow closely the presentation, and I will refer to each slide as we progress.

Firstly, I'll provide a summary overview of results and a brief on my background and observations as the new CEO, and then Peter will take you through the detailed analysis of our financial results for FY '19. We'll close out the session with a look at the key growth factors for FY '20 and finally take some of your questions. We anticipate the call will close at about 9:35 a.m. Sydney time.

Please now move to Slide 2, the key financial metrics. We have delivered strong results in both revenue and net profit after tax. In fact, revenue surpassed $100 million for the first time, coming in at $100.8 million and exceeded $20 million NPAT for the first time, coming in at $21.9 million. Our total revenue was up 11% over the prior year with $91.2 million. This result is underpinned by very strong growth in license sales of $62.8 million, up 19% in the prior year. The quality of these earnings continues to improve, with the recurring portion up 1/3 percentage point in the prior year at 89%. Our profit after tax of $21.9 million represents a 14% increase over the prior year. Peter will talk shortly through the details and mechanics of these results. These strong results have been achieved at a time when we're also making strategic investments to drive long-term sustainable growth.

If you now move to Slide 3, I thought I'd share with you some observations as the new CEO, literally day 34 on the job. These observations will also inform as to my decision to pursue the CEO opportunity at IR.

I come from a strong background with nearly 25 years in enterprise software across both infrastructure and applications. I've held global executive roles with large multinationals including a 4-year posting in New York, a Silicon Valley pre-IPO startup, and most recently with an ASX-listed software company, TechnologyOne. Over this time, I've established an extensive global network of peers and customers, many of whom are IR customers and partners today. My success has been a unique leadership blend of people and technology. My conversations with the Board during the extensive interview process galvanized my view that both my ambition and experience would be rewarded and valued at IR.

Against this backdrop, let me share a few experiences and observation 30 days in. IR is truly a global multinational with an incredible customer base. I was in the U.S. recently for our global kickoff. I extended the trip as is my passion and met with a number of customers, large global brands. It reinforced my view that IR solutions are mission-critical, the products are sticky in software speak and customer relationships are strong. Executive access with customers is also very evident with a clearly understood value proposition that extends to the customer's customer. Let me explain: With a large payment processor, much of the conversation was about how IR provided a differentiated experience for their customers through big companies, some of the largest retailers on the planet. Under the Unified Communications, or UC provider, it was about how IR is critical to the managed service that they provide to a large number of mid-market companies and the experience that their customer's users and customers have on voice calls with call center interactions.

Interestingly, across 3 major product segments, payments, UC and infrastructure, there is a trend of disruption. And what's exciting is that this disruption has the market leading towards IR through our core capabilities with real-time assurance and ultimately, improving the customer's customer experience. The underlying market dynamics of increasing payment transaction volumes and core volumes make IR's value proposition even more compelling, and we're assessing our enviable market position that are clearly understood vectors to growth, whether applying a geographic product or usage filter.

And the last of my observations is that we are investing and well-placed to innovate around our business model. Subscription revenue is a very small part of our mix today. We are developing our NexGen platform, which will be cloud-based, and this provides us with an exciting opportunity to differentiate not only from a technology standpoint but with our business model as well.

If you move to Slide 4, I want to share an anecdote from visiting customers on my recent trip. And if you look at the slide, it's a very impressive grouping of some of the world's best-known brands. In fact, I met with 4 of those customers on this slide.

One customer I met was a very large payment processor, and they process something like 1/3 of all credit card transactions in the U.S., trillions of dollars. And when you go into their operations center and you look up at a massive ceiling-to-floor, 20 meter-wide screen, the whole screen is Prognosis. And in fact, what you're watching live are thousands of credit card transactions a minute being processed by large retailers, all being monitored by our software. They use our software to differentiate their service to their customers, we're changing the experience for our customer's customer.

Let's move over to Slide 5 and talk a little bit about the IR opportunity. This slide is not a 1 year or current year view. Rather, it provides a perspective on the strategic planning horizon that has 2 vectors for assessing growth: market and product. It's based on a well-known Ansoff model. Having achieved our first $100 million in annual revenue, our aspiration is to double that. And to do that, we need to do 3 things and do them really well. We need, of course, to maintain the base. As already described, we have such a large high-quality customer base with a retention rate of greater than 95%. We have a coverage model that is designed to build and sustain high-touch customer relationships and is extended through partnerships to create reach. To supplement the revenue in the base, there is an inherent growth in payment transactions, core volumes and the like that achieve capacity growth. Added to this, we continue to innovate and bring new functionality onto the Prognosis platform.

Second, we need to grow the base, and we have invested in our product management leadership and capabilities significantly to achieve a strategic approach to product life cycle management. Not only does Prognosis remain mission-critical and relevant for existing customers, 26 new logos were added in FY '19. In fact, 28% of license sales came from new business in FY '19. Again, new models like merchant portal and dynamic thresholds allow us to grow our revenue with existing customers. Increasingly, we're executing successfully on cross-sell where customers now have at least 2 of our solution areas across payments, UC and infrastructure.

And last, the next generation platform. Over the last 12 months, we have been developing our next generation platform. It's a modern architecture scalable platform that allows us to extend our capability into new markets as well as offering existing customers a path to cloud. We've developed this leveraging in Agile and Lean methodology and expect to come to market with the first product in FY '20. Importantly, our R&D gross spend as a percent of revenue has remained at 19%. This is during a period that we have been developing the new platform as well as keeping Prognosis current with 11.7 expected in the first half of FY '20 and 11.8 in the second half.

In addition to these 3 things, our coverage model and business model will enable us to grow. Our coverage model, where we continue to innovate -- to the model, to focus on new logo acquisition, increasing our field productivity and to drive growth across all 3 of our regions: APAC, Europe and the U.S.

And lastly, our subscription revenue. Over the strategic planning horizon, we anticipate a shift in what our revenue mix will be, and we think it will move to subscription revenue. It's too early to be precise, but the planning is well underway, which will support innovation with our business model.

And I ask you to move to Slide 6 before I hand over to Peter. As I reflect on FY '19 performance, a few things, mostly highlights. Payments growth in FY '19 was outstanding, 92% up. Even when normalized over the last 7 or so years, it's 25% CAGR. In FY '19, 9 new payments logos were added, including the third and ninth largest banks in the world. In fact, 30% of payment license fees came from new customers.

UC was down 7%. This was disappointing and largely a result of patchy execution. Good news is, it's in our control and we've already started to address it. Our FY '20 pipeline looks strong. And with new leadership in the U.S. and Europe, we expect to be back on the growth path. Europe was up 19% as a result of new leadership, reorganizing our coverage model to be more effective and good execution on large deals. It's worth noting that in FY '20, we've implemented dedicated new logo territories in Europe to really grow that business.

Our customer events are called Summit, a great endorsement of the strength that our customer relationships and the engagement we have. And the validation of this is their attendance at Summit, and last year that was up 36%. This year's events, in the U.S. are in October and in Europe and the U.K. in November.

Leadership talent. This is one of the key things that attracted me to joining IR. The leadership at a senior level is experienced, broadly skilled and very well-balanced.

Please now turn to Slide 7, and I'll hand over to Peter Adams to talk through the detailed financials. Over to you, Peter.

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Peter Adams, Integrated Research Limited - CFO [3]

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Thanks, John. We are on Slide 7, headed Results Summary. It gives me great pleasure to share in the message of achieving $100 million in revenue and $21.9 million in profit. These numbers are more than double what they were 7 years ago and following a significant evolution of the business. The past is illustrative of our capability to move with changing market dynamics and evolve to meet the needs of our customers.

Comparing the current year results to the prior year provides an insight on the consistency in our margin performance. The company achieved a 10% increase in EBITDA to $40.2 million, and with that, retained an EBITDA margin of 40%. The company achieved a 14% increase in bottom line profit to $21.9 million and with that, a profit margin of 22%. This margin consistency incorporates an approach to development spend and a disciplined approach to opening new markets. You can see some of this longer-term consistency in the 10-year analysis that is in the appendix of this presentation.

Cash generation was comparable to the prior year at $21.2 million with significantly less debtor factoring, which I'll talk about later.

The Board declared a fully franked final dividend of $0.375 per share, taking total dividends for the year to $0.0725 compared to $0.065 for the prior year.

Slide 8 provides detail on our key performance metrics. These measures include term recurring revenue, new customers, pipeline renewals and retention rates. Over 89% of our revenue was of a recurring nature. This number excludes onetime through revenue, such as perpetual license sales and professional services.

Term license sales are recognized upfront in the year of sale and have a recurring event at the commencement of each term. This intermittent recurring nature of the revenue creates some short-term cyclicality to the revenue streams, but with a 95% maintenance retention rate provides management with confidence over the cycle. For those that are interested, the appendix at the back of the presentation provides an alternate view of revenue performance showing subscription revenue on a pro forma basis.

As John mentioned earlier, the pipeline to Unified Communication renewals is stronger than the prior year, which provides a growth platform for the revenue stream going into FY '20.

Turning to Slide 9, headed High Quality Revenues. This slide provides further insight into the diversity and commitment of the customer base. As can be seen from the chart on the left-hand side, customers typically sign up for a 3- to 5-year period on a term base license. The top 10 customers for FY '19 represented less than 1/3 of the company's overall revenue, demonstrating that the singular customer dependency is of low risk. Airbus, Visa, Banner Health and Westpac were some of the key deals closed in the second half and demonstrate the diversity of business closed during that period, whether that be classified on industry, geography or the products that were purchased.

Slide 10 provides the revenue contribution by geography. Starting from the left, the Americas remained the highest contributor to our overall revenues. The Americas contribution was comparable to the prior year and the results within the region were broadly mixed. Whilst payments and infrastructure revenues were up from last year, the Unified Communications numbers were disappointing and provide an opportunity for improvement going into FY '20.

We tagline this slide the return of Europe, with the middle chart demonstrating this fact. After a significant contribution in the first half supported by the closure of the Barclaycard payment deal, the region continued its strong performance into the second half to finish up 19% on the prior year. Worthy of call out is the Airbus deal that was a Unified Communications deal closed early in the second half. The European business is now under new leadership, and we believe there is opportunity to grow the business over the coming year to which John has already referenced.

Asia Pacific has achieved consistent growth for several years and FY '19 was no different. Revenue growth for FY '19 was 14% up over the prior year, driven by -- primarily through payments and infrastructure sales. The strong result was achieved from a combination of account management through renewal and capacity selling but more importantly, signing new customers.

Turning to Slide 11. We see the revenue by product portfolio. Revenue from payments grew 92% over the prior year to $16 million. We saw a continuation of growth in the first half into the second with contributions to the product line from every region. The growth rate of 92% easily outstripped the infrastructure growth rate, illustrating the performance was more than a cyclical upswing. Importantly, 9 new customers were added to the fold. New business represents over 30% of overall license numbers to which John has already referenced.

Unified Communications revenues were down 7% to $51 million when compared to the prior year. Similar to the themes communicated at the half year, we saw growth in Cisco being more than offset by declines in Avaya and Microsoft. The overall portfolio is now much more weighted to Cisco than Microsoft and Avaya. This fact, combined with a stronger renewals pipeline, bodes well for the coming year to which we are anticipating a stronger performance.

Revenue from infrastructure grew 28% over the prior year to $26.3 million and predominantly represents renewal and capacity sales. The product line continues to be a strong source of cash flow with strong margins.

The company's balance sheet presented on Slide 12 shows cash at bank of $9.3 million with no debt. The accounts receivable balance of $72.8 million provides a rich source of future cash flow, bearing in mind the high-quality customer base and the relatively low experience of historical doubtful debt write-offs.

Turning to the cash flow on Slide 13. Cash flow from operating activities of $21.2 million was comparable to the prior year but with much less debtor factoring. The top line of the cash flow shows cash receipts from customers excluding debtor factoring are 22% to $84.4 million. Debtor factoring is used by the company to manage credit risk and improve working capital. Cash flows from operating activities continues to fund the investment into development as well as provide a regular dividend to shareholders.

I would be happy to take questions on the numbers towards the end of the call. But for now, I will pass back to John to talk about the FY '20 growth drivers and to close out the formal part of the presentation.

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John Ruthven, Integrated Research Limited - CEO [4]

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Thank you, Peter. Let's move to Slide 14, titled 2020 Key Drivers. You'll notice a commonality with Slide 5 where we use the same model to describe our growth vectors or how we think about growth. Included in our growth in FY '20 will be maintaining our base with high confidence that our retention rates will remain greater than 95%. In FY '20, the renewals component of our pipeline is up on last year, and our underlying market growth and payment transaction volumes of 14% and end nodes of 3% provides further confidence that renewals can be supplemented with capacity and additional modules and will be a strong foundation for growth in FY '20. New models like merchant portal and dynamic thresholds currently have low customer penetration and offer good upside.

We'll also expect a turnaround in UC in FY '20 with a refocused field execution. As Peter has already mentioned, the renewals pipeline is stronger than last year. And in both Europe and the U.S., new leaderships in place, their coverage model has been enhanced to improve our deal qualification and closure. Over a large percentage of our UC is in fact conducted through and with large service providers and partners. This is a broad category of companies including names like Cisco, Avaya, BT, Dimension Data and many others.

We conduct business in 2 principal ways through these channels: Firstly, managed services; and second, resale. And depending on the service provider or partner, we have pilot programs for their go-to-market model where IR solutions are included in the managed service offering that they provide directly to their customers. And in resale, IR products were included in the partners' price book and sold in conjunction with a broader sale that they conclude with their customer. The pipeline and outlook for both managed services and resale is up on prior years, including the renewal and extension of some larger contracts or agreements that fall due in FY '20. Whilst we acknowledge a competitive environment, our new logo prospects are good in FY '20. Coming into the year, over 30% of pipeline relates to new customer opportunities.

Increasing complexity in customer environments in both payments and UC amplifies the value proposition for Prognosis. And to capitalize on this, enhancements to our coverage model in both Europe and the U.S. have been implemented, along with new leadership in place to drive focus. And in Europe, as I said earlier, we've actually put in place dedicated new business territories and teams.

In summary, our UC and payments networks across the globe are becoming more pervasive, more mission-critical and complex. And as such, they require effective performance and user experience management. This generates demand for solutions such as Prognosis, and we expect to benefit from this in terms of future growth. IR plays a critical role in creating clarity and insight in a world of connected devices.

This concludes the formal part of today's presentation. And we'll now turn it over to the moderator to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Mark Bryan of Wilsons.

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Mark Bryan, Wilsons Advisory and Stockbroking Limited, Research Division - Head of Research [2]

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A question for each of you, if I may. John, firstly, as you've alluded, you've been on a global roadshow around the business, understanding the business inside out. Many CEOs, when they first join a software business, look quite hard at the level of R&D that's being invested in the business and draw a view as to whether they're comfortable that, that's at a sustainable level. Given your initial insights into the business, how are you feeling about the level of R&D that IRI is investing?

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John Ruthven, Integrated Research Limited - CEO [3]

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So you're right. I did it myself in the first 30 days getting across -- in fact, I think I've met most of our team and certainly spent some time with customers. At the 19% of revenue, which is consistent year-over-year, I am pretty comfortable. I'm pretty comfortable having gotten a little bit under the hood, if you like, looking at how that is being spent and I think what one of my comments that I make is that we'll have this interesting juncture where we're continuing to invest in Prognosis, which is our core platform and has been, for the life of the company, the rigor with which we make our 2 drops a year, so 11.7 and 11.8, we dropped this year. But at the same time, we're investing in the new platform with the next generation of our technology, which would give our customers a path to cloud. One large sign, I think, that the investment feels about right at the minute, first to do both those things, maintain our core product and invest in the new platform.

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Mark Bryan, Wilsons Advisory and Stockbroking Limited, Research Division - Head of Research [4]

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Okay. That's good to hear. And Peter, actually I might add 2 questions, if I may. With regards to the cash flow from operations, as you know, the cash-in looks pretty attractive. Just with regard to debtor factoring, I appreciate it has dropped quite materially year-on-year. 2020 might just be the year that cash turned off with regards to debtor factoring. That's the first question, Peter. And then secondly, you helped us by giving us a slide for some of the providers in 2020. I'm just wondering, in 2019, the group delivered just over 10% EBITDA growth. Given those drivers in 2020, could you at least match that sort of growth rate into 2020?

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Peter Adams, Integrated Research Limited - CFO [5]

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Right. So let's handle the first question on cash flow. So you might recall that the business model several years ago was much heavier in upfront perpetual sales. And over the last few years, we have been converting that business to more term base recurring and with that, we introduced the debtor factoring program. With regards to the outlook for FY '20, we still have a program for debtor factoring. And I can't categorically say that we won't do any, but obviously, we'll be looking to minimize that and continue to taper accordingly.

Your second question was with regard to the drivers for 2020. As you know, the company doesn't provide formal guidance on profit. Having said that, John and I are feeling quite confident about what the future holds for us. And obviously, through the presentation, we provided you with some color on what some of the drivers are. So for example, Unified Communications' renewals pipeline is in good shape, and so we intend to use that as a platform for growth. Payments is obviously strong in FY '19. So I don't know that we can achieve the same level of growth going into FY '20, but we will ambitiously attempt to see growth in that line.

The other point I wanted to make, if I can Mark, is just with regard to the currency exchange gain that we had in the financial year. In the first half, we've had quite a large exchange going because of the exchange rates moving down with regards to the U.S. dollar. And then in the second half, that movement was not as sharp and so as a result, the currency gain in the second half is not as large. I think that needs to be borne in mind when you're analyzing the results between halves.

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Operator [6]

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Your next question comes from Chris Savage of Bell Potter.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [7]

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John and Peter, you called out the fiscal growth within the UC division. Is that at all driven by the addition to the global price list or is it more just driven by key renewals?

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Peter Adams, Integrated Research Limited - CFO [8]

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So we did actually have some gain through the Cisco SolutionsPlus program as I called out in one of the slides there. Banner Health was one of those examples. But to be honest, I think we -- there's probably more execution that management needs to improve on with that program. And so hopefully, we can get more runs on the Board in the 2020 financial year. So otherwise, most of the gains in Cisco was direct.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [9]

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And the renewals you had flagged in UC for FY '20, is there a continuous hope there that Avaya will rebound or they'll let -- releasing that turnaround now?

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Peter Adams, Integrated Research Limited - CFO [10]

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So we -- there are renewals across each of the Cisco and Microsoft and Avaya around numbers. But in terms of the waiting, look, we -- a lot of it is not Avaya or Microsoft. A lot of it is predominantly coming through Cisco, and so that's what gives us the confidence. Obviously, in fact I might let John answer the question on his outlook with Avaya, given some of the circumstances that are happening there with regards to their ownership and the like. But yes, we're confident with the outlook.

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John Ruthven, Integrated Research Limited - CEO [11]

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Yes, so with -- in fact, Avaya was one of the companies I met with while I was on this -- my world tour. Obviously, it'd be speculative for us to have a point of view. It's pretty -- the press is pretty active now in terms of the options that they are pursuing. But I can say that the meeting that I had with them in New York, in fact, very positive engagement, was certainly strong. Putting everything else aside was very strongly intended for us to continue and to grow the partnership, both in the managed services line and the resell. Obviously, a lot of the players like Avaya are looking for higher-margin opportunities and we're integral to that in terms of the managed service part.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [12]

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Okay. Second question. Q4 for me is -- has been slightly negative, was a bit disappointing. Was there any slippage in key renewals that are now front and center for FY '20? Or did Q4 play out as you thought it would?

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John Ruthven, Integrated Research Limited - CEO [13]

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So I mean I'll maybe take that on the phone and Peter can add to it. Certainly, they are they've deferred it with some overhang, which obviously where the business is, renewals. It's our job to go and pick that up now, but there's probably some execution issues. But the good part about that is, as far as I'm concerned, in coming is has a -- problems that you can resolve yourself and work through. Peter, I don't know if you want to add to that?

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Peter Adams, Integrated Research Limited - CFO [14]

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Yes. No, I think that's right. I think now that we have a new American leader, we can improve on our execution for FY '20. Overall, we're very happy with the numbers. But yes, sure, they could have been a little bit higher if we had some of those deals come through towards the end of the year, the financial year.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [15]

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They're deals that haven't gone away, they just didn't get executed or slipped in Q4?

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Peter Adams, Integrated Research Limited - CFO [16]

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That's right.

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John Ruthven, Integrated Research Limited - CEO [17]

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That's correct. They're slips. They're not close lost.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [18]

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Sure. And last question...

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John Ruthven, Integrated Research Limited - CEO [19]

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I've got a list of those written down in my notebook.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [20]

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Last question. I think I asked if you had any result, any update on FedRAMP?

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Peter Adams, Integrated Research Limited - CFO [21]

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So the short answer is that there's no change, Chris. And that you'll see in the back of the deck that we continue with the slide that was presented at the half year. So we'll continue to monitor the situation and as soon as there's any material change, then we'll let the market know.

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Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [22]

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Are you anticipating any revenue from it in FY '20?

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Peter Adams, Integrated Research Limited - CFO [23]

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We are not banking on it, but we even hope.

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Operator [24]

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(Operator Instructions) Our next question comes from Michael Ryan of Select Equities.

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Mike Ryan, Select Equities Pty Ltd., Research Division - Senior Institutional Adviser [25]

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Good results, guys. Just on the FedRAMP question. Does that mean the whole FedRAMP has basically sort of slowed down and not much has happened? Can you give us some color on how it's going, apart from your side? Is it going at all?

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Peter Adams, Integrated Research Limited - CFO [26]

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Well, we're hooked to the trailer with, at Cisco, so to speak, which is layman's talk. And so my understanding is that the take-up at Cisco is not that great, and so the consequence is the flow-on effect for ourselves. I don't really have a lot more to add, Mike. Clearly, it's been disappointing for us. And as soon as something changes, we'll let you know.

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Mike Ryan, Select Equities Pty Ltd., Research Division - Senior Institutional Adviser [27]

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For the other 2 companies that are like Cisco, is it the same for them, too? Have you got any color on them?

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Peter Adams, Integrated Research Limited - CFO [28]

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When you say the other 2 companies, are you talking about Avaya or -- what do you mean?

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Mike Ryan, Select Equities Pty Ltd., Research Division - Senior Institutional Adviser [29]

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Well, providing services similar to you guys. Or similar to Cisco.

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Peter Adams, Integrated Research Limited - CFO [30]

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Yes. No, I don't have any additional insight on that.

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Operator [31]

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Your next question comes from Mark Bryan of Wilsons.

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Mark Bryan, Wilsons Advisory and Stockbroking Limited, Research Division - Head of Research [32]

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Just a quick follow-up. Just with regards to the shift in the model that you've obviously talked to a number of times as in moving away from upfront to more term-based licenses. You're starting to get to a period where some of those initial contracts are hedging renewal. Can you just talk about some of the conversations you're having with clients and whether or not, when they're coming for renewal, clients are comfortable to be renewing at the same duration of contracts and at the same values?

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John Ruthven, Integrated Research Limited - CEO [33]

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Mark, I might just make an opening comment and then Peter can add to it. Certainly, the customer conversations I've had did reinforce a view that our solutions and products are mission-critical though, and they're highly pervasive within our customer environments. And as such, on a renewal basis, where we have a high level of -- I would think you might have seen in the deck where we talk about something like 89% of our revenue being recurring, which speaks to the point you raised that we've migrated the portfolio largely away from upfront. I would have a good level of confidence that subject to normal commercial negotiation, et cetera, that our renewal of existing agreements will remain strong. Peter?

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Peter Adams, Integrated Research Limited - CFO [34]

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Yes, I'll add to that. So Mark, on Slide 9, we show license fees by contract length, which is illustrative of customers willing to sign up for a 3- to 5-year period. If we look beneath the covers and just provide you a little bit more insight, I think that with regards to Microsoft and the uncertainty attained with customers, are probably more willing to sign up for 1 new deal at a time rather than 3 to 5. But in terms of our overall portfolio, that's a relatively small percentage. And so with Cisco and Avaya, we'll be seeing no major change in terms of deal length.

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Operator [35]

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(Operator Instructions) There are no further questions at this time. I'll now hand it back over to Mr. Ruthven for closing remarks.

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John Ruthven, Integrated Research Limited - CEO [36]

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Thank you. So if we just close it out there. Certainly, thank you for attending today's call, for your ongoing support and interest in IR. I certainly look forward to meeting with a number of you on the roadshow that takes place over the next couple of days, accompanied with Peter.

I guess for me, new CEO coming in, there's 3 key things that are very strong in my mind, and that is that we're announcing and coming off the back of very strong results in both revenue and profit in FY '19. In a short space of time, I've got a high level of confidence based on meeting with and speaking with customers around the strength of our value proposition in the market. It's incumbent, it's pervasive. And the new logos, some of them very significant, that we picked up in FY '19, that certainly speak to the relevance of our products and solutions. And last and probably to some extent, very importantly, our strategy is on track, and it would validate that there's a significant growth opportunity for us as a company. When we think about some of the contributing factors to that, our next-generation platform is well progressed and that takes IR to the cloud. The strength of our existing platform in Prognosis is a good cadence in terms of our release drops each year. And I think it's a very exciting opportunity for the company around the opportunity to change our revenue mix or brand to subscription either way, strategic planning horizon. So I think those things would give us a high level of confidence in the future. Simple message from me would be, our priorities are very clear and we know what we need to do. So from an execution standpoint, with a very high level of confidence, we can deliver.

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Operator [37]

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That does conclude our conference for today. Thank you for participating. You may now disconnect.