Dye & Durham Q4 2023 Earnings Call Transcript

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September 13, 2023

There are 10 speakers on the call.

Operator

Good afternoon. My name is Jenny, and I will be your conference operator today. At this time, I would

Speaker 1

like to welcome everyone to the Dioderum 4th Quarter and Fiscal Year 2023 Earnings Call. I would now like to turn the call over to Ross Marshall, Investor Relations on behalf of Dione Durham. Mr. Marshall, you may begin your conference.

Speaker 2

Thank you, Jenny, and good afternoon. Welcome to the Dine Durn conference call. Before we start, we'd like to remind you that all amounts discussed on this call and future oriented financial information regarding Dione Durham and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicates management's expectation of future growth, results of operations, business performance and business prospects and opportunities. Such statements are made as of this date hereof and Dine Durham assumes no obligation to update or revise them to reflect events disclosures or circumstances except as required by applicable securities laws, such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks or uncertainties could cause results to differ materially from the results discussed today.

Speaker 2

Given these risks and uncertainties, one should not place undue reliance on these please refer to the forward looking statements and information in Futurant's Financial Information section of our public filings. Without limitation, our MD and A our earnings press release issued today for additional information. Joining us on the call today are Matt Proud, Dione Durham, Chief Executive Officer and Frank DeLizzo, Dione Durham, Chief Financial Officer. A question and answer session will follow for formal remarks for research analysts. I now turn the call over to Matt for opening remarks.

Speaker 3

Thanks, Ross, and good afternoon, everyone. The business performed well in the quarter and we either delivered or exceeded what we said we would deliver. Our performance once again demonstrates the strength and resilience of our business as well as the significant efforts we have made to diversify our revenue base And grow our contracted revenue. As many of you know, we sell software to low up law firms globally. We remain focused on expanding our wallet share across this large and growing market.

Speaker 3

In fiscal 2023, we made significant product investments, Which have accelerated our go to market strategy, in turn rapidly accelerating the amount of ARR in our business. As a result, we've grown our ARR from basically nothing 18 months ago to over $100,000,000 today and growing. In the Q4, we surpassed our revenue guidance coming in above the top end of the range with more than $120,000,000 in revenue. We achieved our guidance on adjusted EBITDA with nearly $66,000,000 in the 4th quarter, up almost $10,000,000 compared to the Q3 of fiscal 2023. It goes without saying that year over year comparisons with respect to revenue and adjusted EBITDA are less favorable, reflecting lower transaction volumes Driven by challenging macroeconomic conditions and uncertainty regarding inflation and rising interest rates.

Speaker 3

Frank will give you some more details on that in a moment. Our stated goal as a company is to lead the global legal software industry. This week, we marked a major milestone in this journey when we announced the upcoming launch of our global Unity platform. This one stop shop will bring together all our full product suite in a single destination with one sign on and one bill for our over 60,000 customers around the world. Huawei's always operated a well oiled backend platform into which we integrate the businesses we acquire, our new global Unity platform is a result of a dedicated effort to integrate all of our customer facing applications on the front end, enabling our customers to access all of our capabilities from one's frictionless destination.

Speaker 3

This is a first of its kind and truly disruptive offering for the legal professions and is unmatched by any other provider in the market today. We're launching the Global Yealy platform in the UK in the coming few weeks, Canada later this year and Australia, Ireland in calendar 2024. Our global Unity platform project is part of a larger product development strategy at Dine Durham that supports our goals. In the past, we've received questions from the investment community regarding our total product investment. During fiscal 2024, we intend to invest more than $60,000,000 in product innovation and R and D to further enhance our industry leading practice management capabilities across the markets we operate.

Speaker 3

In addition to the global Unity platform project and enhancing our practice management capabilities, the team is actively working on AI applications for our practice management software, specifically in the form of document generation for law firms. This fall, our first generative AI enabled capabilities will significantly streamline and improve how law firms can create an initial draft of a will. When opening will matters in our practice management software, users will seamlessly interact with a generative AI enabled capability That through a multi turn or chat or conversational experience will in seconds generate an initial draft of a well. Through generative AI, Dynderm will have reduced to seconds, a task that used to take hours of manual work Or 30 minutes or so even using our traditional questionnaire style workflows. Our strategy to diversify our revenue streams across a larger total share of wallet that legal market spends can be seen in our results.

Speaker 3

As of June 30, 58% of revenue in the quarter was related to law firms conducting matters on behalf of their clients using software, Which is a significant decrease from the 68% in the same period in the prior year and that's our software. More importantly, as I previously mentioned, ARR has grown growth has increased by 117% since the start of last fiscal year. We also materially strengthened the company's executive leadership team this quarter with the additions of David Nash as Chief Product Officer and Aaron Eichenlaub as Chief Revenue Officer. Both David and Aaron have deep software experience with growing and Innovating companies that deliver enhanced value to their B2B customers. With respect to our capital allocation priorities, we intend to drive our total leverage ratio, including the convertible debenture below 4 times adjusted EBITDA.

Speaker 3

However, we believe we can walk and chew gum at the same time and we must balance deleveraging with our stated growth objectives. Therefore, we'll also continue to be disciplined and prudent in our As many of you know, we have a strong track record of acquiring assets and rapidly and de levering revenue And deleveraging while we drive revenue and cost synergies to get to a post synergy goal. We've established clear goals for the business. We have a set target of annually delivering 20% to 25% adjusted EBITDA growth consisting of approximately 50% organic, meaning economic growth, wallet share growth And pricing power and 50% from M and A. An important aspect of achieving this goal is building more predictable recurring revenue streams And we're diversifying our revenue mix across our customer base.

Speaker 3

We have a set goal of 50% recurring revenue within 3 years. We also have a goal of diversifying our exposure to real estate transactions to less than 33%. We've built a world class software business of scale. It's a business that can generate strong top line growth with stable cash flows and very healthy margins. We look forward to updating you on our progress as we continue to grow, optimize and diversify our global business.

Speaker 3

I'll now turn it over to Frank to review the financials. Frank?

Speaker 4

Thank you, Matt, and good afternoon, everyone. This afternoon, we reported our 4th quarter and full year 2023 results. I am pleased to report that we achieved the guidance we provided to you in May. Our results continue to demonstrate the resiliency and consistency of the business despite the challenging market conditions and significantly lower real estate transactions we've had to navigate during the past 12 months. This consistency demonstrates how we're able to manage through market cycles, while still delivering shareholder value.

Speaker 4

Our diversification strategy and build out of our Pacasmus solutions are working as we continue to increase our annual recurring revenue contracted And reduce our exposure to real estate transactions. Annual recurring revenue contracted was 19% as of June 30, 2023, compared to just 10% in the same period last year and revenue exposed to real estate transactions, volumes globally in Q4 was 58% compared to 68% in the same period of fiscal 2022, while revenue exposed to real estate transactions in Canada was 33% compared to 45% in the same period of last year. We reported revenue of $120,200,000 during the 4th quarter, an increase of $16,100,000 or more than 15% compared to the Q3 of fiscal 2023. On a sequential basis, you can see the market has improved from the lows we saw in the second and third quarter periods of fiscal 2023. Now keep in mind, our fiscal Q4 period is typically a stronger seasonal period for us.

Speaker 4

However, we are not back to normalized levels at this stage. 4th quarter revenue decreased by $9,500,000 or 7% in the same period last year. The change is primarily related to market conditions leading to lower real estate transactions versus the prior year. Fiscal year 2023 revenue was $451,000,000 a decrease of $23,700,000 or 5 percent from fiscal 2022. The change is primarily a result of our conditions I referenced earlier.

Speaker 4

We generated adjusted EBITDA of $65,700,000 in the Q4 of fiscal 2023, an increase of nearly $10,000,000 or 17% compared to the Q3 of fiscal 2023. Adjusted EBITDA decreased by $9,500,000 or 13% compared to the same period last year. Continue to maintain our strong EBITDA margins coming at 55% this quarter, which is in line with our target range of 50% to 60%. Adjusted EBITDA for fiscal 2023 was $243,800,000 a decrease of $23,000,000 or 9% compared to fiscal 2022. The change is primarily a result of lower revenues, partially offset by lower operating costs, net of acquisition impacts.

Speaker 4

Adjusted EBITDA margin was 54% for the entire fiscal 2023. Total operating costs, which includes direct costs, technology operations costs, G and A and sales and marketing expenses were $54,500,000 for the quarter or 45 percent of revenues, which is in line with the prior year period. Net of the impact of expenses from fiscal 2023 acquisitions, our operating costs for the quarter were $49,700,000 demonstrates improvements from our cost reduction initiatives implemented earlier in the fiscal year. As we require assets, we continuously look for ways to drive cost synergies eliminate redundancies. We expect our ongoing operating costs to be within the 40% to 50% range of revenues.

Speaker 4

Net finance costs for the quarter were $37,000,000 compared to $14,400,000 in the same period of last year. The increase is due to an increase in interest rates and lower favorable non cash impacts from the change in fair value of our convertible debentures and contingent considerations and loss on the settlement of loans as compared to the prior period. As a reminder, IFRS accounting requires us to mark to market on or value of these instruments each quarter, so we do expect this variability in our finance costs to continue. Acquisition, and other costs for the quarter were $9,200,000 or $8,000,000 excluding non cash items. This was a decrease from $16,400,000 in the Q4 of fiscal 2022, primarily related to the TM Group and Link transactions being behind us And we anticipate this downward trend to continue.

Speaker 4

We announced the sale of TM Group subsequent to the end of fiscal 2023. As part of the transaction, the company received CAD 75,600,000 in cash at closing on August 3, net of transaction costs incurred With up to CAD70.9 million in potential additional earn out payments between 2023 2026. During the Q4, we recorded a non cash impairment charge on

Speaker 2

the sale of $66,700,000

Speaker 4

which impacted net income for the period. Now turning to our balance sheet. As of June 30, 2023, we had approximately $132,000,000 of liquidity. This liquidity consists of cash, the revolving credit facility and a delayed draw term loan. Our leverage ratio based on fiscal 2024 consensus and excluding the impact of the convertible debenture is currently 3.7 times as of June 30.

Speaker 4

Subsequent to the end of the period, we use the upfront net proceeds from the divestiture of the TM Group and cash from operations to pay down $84,000,000 in debt. During the same period, we also drew $43,500,000 from the delayed draw term loan to fund acquisitions. The net result of this is that we have reduced our debt by approximately $41,000,000 This afternoon, we announced the normal course issuer bid as the existing program terminates on September 29, 2023, the NCIB will allow us to acquire up to 2,750,000 outstanding common shares Approximately 5% of the total 55,000,000 issued outstanding shares as of September 13, 2023. We view our shares as a great opportunity in the market available to us. We'll continue to be disciplined in our approach to capital allocation as we grow the business.

Speaker 4

With that, I'll turn it back to the operator for Q and A. Jenny?

Speaker 1

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Will hear a 3 tone prompt acknowledging your request. Questions will be taken in the order received. Your first question is from Thanos Moskopoulos from BMO Capital.

Speaker 1

Please ask your question.

Speaker 5

Hi, good afternoon. With respect to M and A, it seems like you completed $42,000,000 of M and A this quarter, dollars 55,000,000 post quarter end. Any color that you can provide in terms of the nature of the assets or geographies that required?

Speaker 3

Yes. The acquisitions this quarter were in the United Kingdom and it was It's in relation to practice management software for law firms.

Speaker 5

Okay. And what about the $55,000,000 post quarter end? Any comment on

Speaker 4

Yes. So I think when Matt said this quarter, he meant this current quarter Q1 panels. In Q4, we have done the post practice acquisition that was announced. That was mainly in the geography of South Africa that we were able to complete in, I believe, May of 2023.

Speaker 2

Okay.

Speaker 5

And With respect to the new launch of Unity, just given that you're leveraging some common R and D Across the geographies, as that platform fully rolls out, might there be some incremental cost synergies from an OpEx perspective or

Speaker 3

Look, long term, we always look for margin improvement and efficiencies of scale. We will get that. We do have duplicate cost bases in a lot of places, but it does take time to realize that. So Yes is the answer, but that will take time.

Speaker 5

More broadly on synergies, I mean, you Or might there be some incremental benefit in that regard that will flow through into Q1?

Speaker 3

Look, as we buy businesses and continue to do that, we continue to take costs out. We're always looking for that downward trajectory. Do we have any kind of large programs to take costs out right now? No. We're always looking to be efficient with our cost structure.

Speaker 5

Maybe last question for me. Obviously, last quarter you've given us Some quarterly guidance. As we think about September quarter, obviously, some thin parts, no one has a crystal ball, but And any broad parameters we can think of in terms of as you look at the volume of business that you're doing currently? Directionally, would you expect you're talking similar, up or down? Any color you can provide in that regard?

Speaker 3

Well, look, I mean, Given we sell software to law firms and given very common matter type they open is real estate Commencing transactions, Q4 is generally our strongest quarter. But I mean, We're seeing generally in line with what that we expected. You'll see a bit of softening in Q1 because that's just cyclical, but should be generally in line where we are now. Generally. All right.

Speaker 6

I'll pass the line. Thanks.

Speaker 1

Thank you. Your next question is from Robert Young from Canaccord Genuity. Please ask your question.

Speaker 7

Hi, good evening. Maybe I'll start off with a couple of clarifications from the prepared comments. I think you said That you intend to drive total leverage including the convert below 4 times and then later in the call you'd said that the leverage Is 3.7 times. I assume that's without the converter. It's a different frame.

Speaker 7

Just clear that discrepancy for me.

Speaker 3

Yes, Rob. When I mentioned below 4 times that was included in the convert. And when Frank We talked about senior leverage that was without the convert.

Speaker 7

Okay. And maybe if you could just elaborate on what the What levers you have to drive leverage below 4 times? I assume growth in EBITDA is 1, but are there any other Plans to reduce debt or through free cash that you're generating or through maybe some divestiture, if you just maybe walk the different levers you have there.

Speaker 3

Look, the primary focus is growing the business. And as we do that, As we grow our earnings, we will naturally delever the business. And so that remains our focus. Being prudent with our capital also helps. The business does generate a lot of cash.

Speaker 3

And yes, of course, if we wanted to Make any rapid decrease in that we could always look at getting rid of non core we're non strategic assets, but our primary focus is growing the business.

Speaker 7

Okay. The second thing I want to Clarify and make sure that I heard it correctly. I think you'd said that the ongoing operating cost was 40% to 50%? Or were you saying that the ongoing operating margin was to be 40% to 50%. I just want to make sure I'm clear on that.

Speaker 4

Yes, no, it's the operating cost as a percentage of revenue 40% to 50% or perversely the margin would be 50% to 60%.

Speaker 7

Okay. And when I map that to EBITDA, is that sort of consistent with the previous Guidance you've given in the past?

Speaker 4

Yes. There's been no change to that, Rob.

Speaker 7

Okay, great. And Maybe next question. I think it's suggested that special charges might be lower in the coming period just because You're moving to appear with less activity with TM Group and Link in the past. I think you said that $8,000,000 of excluding non cash, maybe like if you could give us just a sense of what that quarterly special charge How should we think about that decline? What would a normal run rate be for Dendron?

Speaker 4

Yes. So I mean, you would have seen the large reduction we had in Q4. We had in Q4. As I mentioned, the report it was $9,200,000 but excluding Non cash items, it was $8,000,000 for the quarter and that compares to $16,400,000 just a year ago. So those two transactions are behind us.

Speaker 4

Going forward, we do expect like obviously with those 2 transactions behind us, We don't expect the same levels of spend that we've done in the last 12 months, and we'll continue to drive that number down.

Speaker 7

Okay. And then last question for me would just be around the new sales strategy. You talked about the new hires, product management and sales. I We talked about expansion of Unity into the U. K.

Speaker 7

But I think last quarter you were talking about moving into the U. K. With the current Sales Effort Bundling Practice Management. So maybe you would just give maybe a quick summary of How that practice management bundling strategy is moving forward, maybe the timeline if it's tied to Unity? And then I'll pass the line.

Speaker 3

Yes. So 2 different concepts here, Rob. We talked about our Uniti Global Platform that is single landing page, single place To access all our applications, regardless what geography you're in, one bill, one view for the customer. As it relates to our practice management system, which for clarity was traditionally called Unity, but Unity practice management, we have been in Canada bundling that with Accounting module and other capabilities we have, which has significantly helped us in our take up in ARR As we sell that via a contractual offering. We're in the process Scaling up our team in the U.

Speaker 3

K. To roll that out, that actually we haven't started rolling that out yet in that market, but that's something we're in the process of doing. And likewise, we've just started in Australia to sell a subscription offering that is very similar to what I just talked about. So again, very early days, We have started in Australia and UK will be next.

Speaker 7

Okay. And then the natural follow on to that is how are Customers reacting to that new offering in the UK and Australia. Then I'll pass

Speaker 8

the line.

Speaker 3

Well, let's say, we've not launched yet in the UK. It's pending. We're going to roll that out shortly. And it's really, I mean, there's already been take up and it's just launched in the last kind of month or so. So we're already seeing takeers.

Speaker 3

So look, the value prop, as we talked about previously, It is real and it's demonstratable and tremendous for the customer. And as we saw in Canada, we were able to drive significant uptake from customers We're willing to contract with us, given the value proposition of Green to the Table.

Speaker 7

Thanks a lot. Thanks for taking the questions.

Speaker 1

Thank you. Your next question is from Kavan Krishnaravna from Scotiabank. Please ask your question.

Speaker 9

Hey, there. Good evening. And just a clarification, you mentioned I think you mentioned $60,000,000 in R and D Expenses, did I hear that right? Can you just clarify, is that a repurposing? Is that geared towards AI?

Speaker 9

I can't recall what you said the $60,000,000 was related to?

Speaker 3

Yes. So we get a lot of questions. What's your total spend on R and D and software development? And so over the next This fiscal year, we plan to spend approximately $60,000,000 on that or just over $60,000,000 on that. And so AI is one thing it's related to.

Speaker 3

It's also related to enhancements in our practice management software as we retool and platform it for new markets and consolidate applications. And as we finish the build out for the Uniti Global Platform for Canada and Australia. Those are the

Speaker 8

kind of

Speaker 3

primary uses of those funds.

Speaker 9

How does that number compare to what you did in R and D last year?

Speaker 3

It would be up.

Speaker 9

It's what's up. And so like again, I know you kept the guidance for your target range of 50% to 60% on margins. But given maybe some is there any sort of cadence to that? Is it kind of like upfront spending, Your quarter is Q1, Q2 and then an uplift through Q3, Q4. How do we think about the investment cycle?

Speaker 3

I already understand the question. You want to repeat that again? I'm sorry.

Speaker 9

Yes. So are you going to be investing upfront Q1 and Q2 sort of go see margins maybe towards the lower end of that.

Speaker 8

Yes. So I mean, as we've said,

Speaker 3

the Unity Global Platform, a lot of that has already been built. There is a heavy lift as it relates to taking the practice management application Globally, so that's the number we anticipate over the next year. It's not very cyclical. I would anticipate being flat across the year As we're kind of spending at that rate today. Kevin, you

Speaker 4

would have noticed in Q4, the capital The CapEx spend ticked up a bit. I think it was roughly $9,000,000 amount in Q4. So that's reflective of what Matt was talking about in terms of getting the single sign on and the global Unity platform up and running. So we do expect that to be the current trend, but in over time getting back to more normalized levels that we saw in the past.

Speaker 9

Okay, got it. Okay, I understand. Thank you. Just the last one for me, if you can help us out. I know you did Ghost Practice, you did few other acquisitions last year and then you've done the ones that you just talked about subsequent to quarter end.

Speaker 9

Is there a way you can give us Sort of what the total revenue number for all those acquisitions in totality could be just to help us modeling going forward?

Speaker 3

Sorry, Kevin. We don't disclose that.

Speaker 9

All right. No worries. I'll pass the line. Thank you.

Speaker 1

Thank you. Your next question is from Gavin Fairweather from Cormark. Please ask your question.

Speaker 6

Hey, good afternoon. I thought I'd start out on the Unity Global Platform. I guess to what extent do you expect us to be revenue accretive as Your clients can access kind of more of your products from within a kind of single sign on environment.

Speaker 3

Yes. No, we do anticipate this to be revenue accretive. It makes the cross sell easier. The way you can go to market, interact with your customers easier. Having, I would example, 5 or 6 different places you go to to access your applications in one market, it's all available in one place.

Speaker 3

And a lot of the use cases, you look at Small and medium law markets that we serve, they need the same products, the same demands as they take on work for their clients And we provide those products too. So having it all in one place, we think Napster needs to cross sell. It also makes it easy to get them under contract As you have it all available by one place, by one invoice, etcetera.

Speaker 6

That's helpful. And is this a pretty seamless kind of migration? Is that kind of switching Over the UI for the most part or is there a decent amount of kind of hand holding you need to do as you roll this out?

Speaker 3

No, it's seamless. It's very seamless.

Speaker 6

Okay, great. And then just, as we think about transactions kind of bottom bouncing to potentially starting to rebound, Are you seeing any kind of areas in the business where you need to kind of add some costs to support higher volume or any other kind of investment priorities you'd call out? Just trying to think about

Speaker 3

Yes. No, the great thing about our business is it's a fairly fixed cost base. We sell software to law firms, so there's no people involved in processing transactions. It's just whatever type of work the clients are doing on the software, the computer does it. So you don't need to add bodies as there's more transactions going through your through any kind of software application.

Speaker 3

So that's one of the the operating leverage in our business is good from that perspective. The answer is no, no bodies need to be added.

Speaker 6

Okay. That's it for me. Thanks so much.

Speaker 1

Thank you. Your next question is from Scott Klutcher from CIBC. Please ask your question.

Speaker 3

Hi, there. I wanted to ask

Speaker 8

a question on the revenue in the quarter relative to the guidance you provided in Q3. You sort of broke out the build into a few categories. Is there a specific category that helped you get to the top end of that guide relative to what you laid out in the Q3 presentation?

Speaker 2

Yes. Thanks, Scott, for

Speaker 4

the question. Generally in line, Scott, with the extent of the revenue guidance that we provided, we provided a range of $115,000,000 to $120,000,000 We did see strength in the IRR as we alluded to previously. Given the seasonal high period time, we were able to close a lot of contracts in the May June timeframe. And also some of the revenue contribution from TM was a little higher than expected as well.

Speaker 8

Okay, thanks. And as a follow-up, is there anything you can give us in terms of numbers of TM in the quarter just so we can look at modeling going forward?

Speaker 4

Yes, sorry, we don't disclose those numbers, Scott. But you can look back to previous disclosures around percentage of revenue that we previously disclosed about a year and a half ago. It will be generally that line.

Speaker 8

Okay. Understood. And sorry, one thing, just a clarification again from the remarks. Can you just Walk us through how much you paid down on the term debt, is that subsequent to the quarter?

Speaker 4

Yes, for sure. So, on the term debt, we paid down roughly $59,000,000 that was developed from the proceeds direct proceeds from the sale of PM. And then also

Speaker 2

So it's

Speaker 4

been to year end, we paid down an additional $25,000,000 in the revolver, largely from both the TM proceeds either reimbursements of past costs As well as cash flow from operations.

Speaker 8

Okay, great. I'll pass the line. Thank you.

Speaker 1

Thank you. Your next question is from Steven Bullen from Raymond James. Please ask your question.

Speaker 8

Thanks guys. Not to beat this to death, but the Unity rollout, I just wondered when you move it over to UK, Australia, like all you're doing is Basically combining the legacy products that you have with the Unity rollout. So it like you said, it's just going to 1, you're not Actually getting rid of the legacy products that are in those other jurisdictions. Is that the right way to think about it?

Speaker 3

Yes. All of our products for the most part are cloud based. So you're going to 1 DYNDERM website to log in, 1 DYNDERM account, 1 DYNDERM landing page And being able to access all the applications that you're used to using and more on place.

Speaker 8

Okay. And this new the acquisitions that you did subsequent or in this quarter Q1, you did say it was U. K. Practice Management Software. Those will all be Integrated into Uniti as well.

Speaker 8

Is that correct?

Speaker 3

Correct, yes.

Speaker 8

Okay. And then I guess my last question, when you mentioned that your goal is that the 25% 20% to 25% EBITDA growth, 50% organic, 50% M and A, the $55,000,000 that you've spent, if I use multiples that you may have paid in terms of Whether it's 10 to 15 times, I'm not sure what the multiples are right now in the market. Matt, maybe you could explain that. But Basically, the thought is that to get to 12.5 percent of M and A, you're probably going to have to do more M and A. Is that a fair assessment as well?

Speaker 3

To get to yes, Chris. To get to the 20% you have as you have in the M and A, that's correct. Yes.

Speaker 8

Okay. And what kind of multiples are you seeing in the market right now, Matt?

Speaker 3

Look, it's still expensive to being careful. We're being very selective. The reality is our market we serve is fast growing, has a lot of favorable characteristics to it. And we are focusing more on businesses that have steady ARR basis. So look multiples are in there.

Speaker 3

They're still in the mid to high teens Sometimes you can find better deals and we look to be as prudent as we can. So you got to be very selective, try to use structure where possible to share risk with sellers, but they're still high.

Speaker 8

Okay. That's all I have. Thanks guys.

Speaker 1

Thank you. There are no further questions at this time. I will now turn the call back over to Ross Marshall for the closing remarks.

Speaker 3

Thanks everyone for joining this afternoon.

Speaker 2

We look forward to speaking with you in the coming weeks and on our next call in November.

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Key Takeaways

  • The company beat Q4 guidance with $120.2 million in revenue (above the top end of its $115–120 million range) and delivered nearly $65.7 million in adjusted EBITDA, despite year-over-year revenue and EBITDA declines from lower transaction volumes.
  • Annual recurring revenue (ARR) has soared from virtually zero 18 months ago to over $100 million today, representing a 117% increase since the start of fiscal 2023 and now comprising 19% of total revenue.
  • In the coming months the company will roll out its Global Unity platform—a single-sign-on, single-bill portal uniting all customer-facing applications—with launches in the UK, Canada, Australia and Ireland, backed by over $60 million in fiscal 2024 R&D spend and new generative AI document-generation features.
  • Management is diversifying its revenue mix by reducing exposure to real estate–related transactions (down to 58% of Q4 revenue from 68% last year) and targeting 50% recurring revenue and less than 33% real-estate exposure within three years.
  • The balance sheet remains a priority, with net leverage at 3.7× (senior debt/EBITDA), $132 million in liquidity, $84 million of post-quarter debt paydown, and a new NCIB to buy back up to 5% of shares, all aimed at driving total leverage below 4×.
A.I. generated. May contain errors.
Earnings Conference Call
Dye & Durham Q4 2023
00:00 / 00:00