accesso Technology Group plc (ACSO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Hello, and welcome to the accesso Half Year Results 2024. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Steve Brown, CEO. Please go ahead.

Hello, everyone, and thank you for joining us. I appreciate you taking the time to be here for our call as we walk through our interim results. And today, I think we made a trading update just a few weeks ago, so we're going to keep the detail a little high level and make sure we have plenty of time for questions as well because I think you have the general headline from the results statement this morning as well as the trading update we made. So I want to make sure we have plenty of time for a conversation. I want to start off by saying that I'm here this morning, and I'm joined by Matt Boyle, who today has been appointed as our new Chief Financial Officer. So I want to welcome Matt into his role and Matt has been with us for 5 years. He was Fern's right hand, just as Fern was my right hand. So Matt and I are used to working in locksteps and I'm very pleased to have him in this role. Today, as usual, we're going to walk through just a quick overview of our business. I'll hit some highlights on the operational performance. Matt will take us through the financials, and then we'll wrap up at the end with outlook and then, of course, time for questions. I just want to start off on Page 4 with a headline of the numbers, just to orient us all before we go into some of the details. So we finished the half year with just over $69 million in revenue, which was an increase of 5% on 2023. But if you take out the adjustment for the seasonal labor that we no longer handle for our big customer, we're actually up almost 10% in revenue because that is an adjustment to our comparables. We had $6.5 million of cash EBITDA, which is exactly in line with prior year. It certainly lower than our expectations, but that's primarily due to the time line shift for a key installation project we're working on in the Middle East, which we'll talk more about in a moment. Our gross margin was just over 76%, a nice improvement over prior year. We were at 73.5%. Of course, removing that, essentially no margin pass-through labor in our numbers is very helpful. And that is a part of our focus on revenue efficiency, making sure that the revenue we're looking at the top is flowing through to the bottom and continuing to look through our business where we have opportunities, sometimes some acquisitions you can have things in there that are not optimized from a margin perspective. So we just continue to work on tightening those things up to improve our margin. Our Ticketing and Distribution revenue was up 18% that was partially from our core ticketing, but also fairly significant growth in our Ingresso business, which we've been working hard on kind of making some strategic repositioning work there since the fall of last year, and we're starting to see that come into play with some results. 85% repeatable revenue, again, underpinning our business. We have a very strong base of repeatable revenue and that's remained constant even with the acquisitions mixed into our numbers. Importantly, I want to share that if you take out the acquisition impact because, of course, we have more overheads coming in, our underlying overheads were up 4.3%. So just pointing out that our focus on cost management is -- continues to be a priority for us in regards to staffing as well as all of the costs. We won 21 new venues in the half year, slightly ahead of prior year, which was 16. We implemented 16 different venues across the period. And importantly, we had 8 wins for our new accesso Freedom platform. So that's just it in a nutshell. That's what we're going to talk about more as we go forward. So flipping out just past Page 6 really for the sake of time. Just to remind everyone on Page 7, and I won't go this page in detail, but I just want to remind everyone that we really are focusing on our business in 3 main groups: ticketing, queuing and restaurant and retail. So we're not really breaking down each one of the products in this overview. As you can imagine, with all the acquisitions and products we have now, it should be a little complicated, but when you boil it down, it's really about ticketing, queuing and restaurant and retail. Our geographical footprint is very broad, both our products and our customer base are very distributed. Matt will share with us some impacts that our recent acquisitions have had on our mix of revenue as we continue to diversify around the globe. So let's spend some time talking on Page 10 about some industry trends because as you think about our numbers and our trading update, there might have been some concern or questions around what's going on in the world. And I wanted to unpack that a bit for you here today to just give you our view on the underlying thoughts on the transactional demand in our business. So if you talk about theme parks and attractions first, you will see that the destination leisure sector was reporting and has been reporting a notable moderation of demand as they might call it. And most of these locations, if you think about both the big theme parks in Orlando, as an example of the ones that have been reporting, they've basically been broadly even with prior year. Some a little down, some a little up, but more or less even in the prior year. And of course, they would never expect their year-on-year to be flat. So for them, this is less than expected and it makes our comparable to last year a little more challenging as costs have increased, but their demand has not gone along with that. So what we see in the regional attractions is there actually is typically a substitution effect when the economy or those kinds of things kick into play where consumers may shift their behaviors. And if you're not traveling as far away, taking big vacations, you tend to stay closer to home. And whether it's the economy or whatever may be happening that makes people stay closer to home, the regional attractions tend to benefit from that. As customers trade off their visit to the larger destinations for a visit to, I don't know, the neighborhood, Six Flags or the neighborhood Legoland as an example. And so if you look at what's happening across our portfolio and I'm sharing publicly reported information, which is just to give us some insight. As you know, Cedar Fair and Six Flags emerged at the beginning of July, just as our period was ending, but when the legacy Cedar Fair side of the business reported their attendance at the half year, that was up 16% to prior year. And when the legacy Six Flags side of the business reported, they were roughly flat. They had some pretty significant weather impacts in the spring, and they also had cut some operating days as well as they have the wraparound effect of a continued change to their membership program, which provided a significant amount of attendance. So there's kind of a dichotomy here of what's happening between -- what's happening between these 2 operations. But I think it shows you that Cedar Fair, which did not have those same level of impacts and perhaps even had some different strategies around the go-to-market. Actually, it was up 16%. So it's not all doom and gloom. They actually were doing quite well. And I think as Six Flags begins to see -- but now combined Six Flags begin to see the benefit of their go-to-market strategies and the synergies from that begin to emerge, I think we'll see more consistency between what was 2 parts of the business. Of course, weather is always a factor, but also the operating calendar can be a factor, how you handle, the pass programs can be a factor. So a lot of things working in there, but I think it's important to point out that there's not -- the underlying trend, if you look at Cedar Fair was actually up quite strong, which really is a validation of the substitution effect theory that you may hear we talk about often. The international venues. So it's not just the U.S. that we've been watching, the international venues have been very mixed. And it seems to vary by the venue types and also geographies. Some of the venues that we -- where we service the ticketing systems are destinations. So we have a big venue in Hawaii, for example. We have a notable roller coaster in Las Vegas. We're seeing some softness in those areas where those are more destinations that involves travel. And so we see sort of inconsistency when you look on our report at the plus and minuses. But overall, I would say it's mixed with some positives and some minuses. But that brings them the value of our diversification across geography and across customer types. So what we expect will happen in those destination resorts, destination venues, they'll adjust their pricing, of course, they'll adjust their marketing to make sure they're keeping pace with what the consumers are expecting and what the consumers are willing to pay in those markets. We think about North American Ski, which if you look at ski across our business, it's a bit less than 20% of our overall revenue. So it's an important part of our business. What happened at the end of '23 going into '24 was the snow conditions over the holiday period were very, very poor. And that's super important time period for ski operators, the Christmas season in particular, New Year's, that whole period in the U.S. is quite important in terms of revenue. It's tourists, it's higher pricing. So they had this incredible softness at the very beginning of the season. And then what happened was near the end of the season, they got late season snow, so overall, they had a lot of pass holders coming in at that end, that last push, but they lost a lot of their valuable tourist visits, which were higher margin. And so for them in the U.S. even though attendance was up by 6% as reported by the association, their revenue was impacted because of this holiday period being a bit rough. Canada saw the same thing. Canada, Western Canada was down about 15% of attendance and the Quebec area on the East side was down about 10%. Again, same factor, of course, snow conditions. And so I think that is a factor of just we're in the ski business, this will come and go, 1 year will be boom, 1 year may be a little soft. But the attendance actually held up. It was a matter of when the attendance came in and how that affected their profitability based upon what customers pay during different time periods. So for us, what that means is if the revenue was slightly impacted, it can make them a little bit slower in making decisions about a new system. They just want to kind of wait and see a little bit. So that kind of plays into some of our go-to-market thinking as well. Accesso Paradox, which is our acquisition from last year, we've finished that just, I guess, about June -- May, June of last year. And we quickly jumped in and updated their e-commerce products because it was just not at the level that we would expect and we weren't able to rewrite it and in a whole new platform yet, but we did a significant cleanup of their offering and included -- we've added accesso pay, a whole range of updates, which have been very well received. And we saw the e-commerce volume in their business jumped by 14%. So overall, I think we're very well positioned in the sector. We might need a little weather cooperation in this particular area, but I feel very comfortable around where we are sitting in the ski market. Live Entertainment was actually down a bit for accesso ShoWare with the tourist venues that were more notably impacted. Again, as I was saying earlier, ShoWare served some of those venues in Hawaii or Las Vegas. So that area could have some impact driven by those larger destination venues. Across the rest of it, again, it's kind of a mixed bag. We see a lot of demand for live entertainment, concerts, feeder shows. All those are in a strong position. But we do have a mix of business within ShoWare, it does include some sort of tourist type venues. Our ticket volume for Ingresso was actually up 25%. We added a new high-volume distributor and we've also been working to fine-tune some of our pricing, some of our commercial arrangements as well as just refining how we operate the business. For example, we exited our consumer direct side of that business. So overall, live entertainment from our view is actually, from an investor perspective is actually very healthy. And I think ShoWare is going to have a little bit of impact from these tourist destinations, but broadly speaking, on live entertainment, things look pretty good. So moving on to Page 11. How does that turn into what we do. I covered a little bit as a way just to kind of make sure things were tied together. But here on Page 11, I want to walk through some more of the specifics. So starting first with ticketing. The revenue from our core transactional products was actually ahead of prior year, Passport, accesso Passport was up more than 5%, and ShoWare's revenue was up more than 4%, even though the unit volume was down. We benefit from mix. We benefit from pricing. We benefit from new commercial arrangements. So overall, on the ticketing side, our transactional revenue was actually ahead of prior year. So you might have expected from a trading statement, we might say it was behind. We saw softness that didn't get us to where we wanted to be. But as a comparison to prior year, we actually were tracking ahead. We've also rolled out a new update across the estate for Passport for their e-commerce platform. It's a new UI/UX where we really went through and just did a major overhaul of the aesthetics, but also the user flow. And as we rolled that out to our various customers, we've done AB testing to confirm each 1 of those rollouts. And we're seeing a revenue increase for the clients of around 4%. Of course, that can flow into us as well where we gain a percentage of the revenue from the transaction. We rolled out a new version of the point of sale for Passport which was partially to update the technology because these platforms do age, but also to provide a better user experience, and that has been very well received. When we talk about R&D, right, sometimes it's a lot of these kind of elements that really help us maintain the freshness and relevancy of our products, things like updated the UI/UX, which took nearly 2 years of effort. Rewriting the point of sale, which was a year of effort and fairly extensive development work on that. These are things that are underpinning our R&D is keeping that product fresh and keeping our big customers, in particular as well as the entire portfolio, very pleased with our offering. We also brought accesso ShoWare to the U.K. market. We've just now started sort of selling and marketing that into the customer base there, which we think is a great opportunity as we establish the awareness and get a chance to be in front of customers and explain the product in more detail. I mentioned before, we've been making a range of strategic and operational changes in terms of Ingresso. We adjusted the leadership there. We've made some changes in terms of how we operate, what we operate, for example, exiting the consumer side of that business, which was essentially no margin or minus in some years. So we exited that. We actually transitioned that to one of our partners that was very eager to have that from the box office business. And so we protected profit, right? But we moved the top line revenue out to a customer that actually does that for a living from a consumer perspective. I think when we wrap up the year here, we're going to see the Ingresso bottom line profitability to be slightly better than probably it's been in years, I would expect if things continue on the track we're expecting. We did have a shift in the time line for a key excessive Horizon project. We mentioned that over and over again. You all may be getting tired of hearing that. But we have a large new customer in Saudi Arabia. And as projects do, their time line for the build-out, the construction, whatever you may say, or just the decision process around when they want to open has shifted. And so that means that if their build-out time line has moved, the implementation or the need for a system is also going to move with that. The contract is still there. The deal is intact, but the timing of when that rolls in has shifted, and it was a significant expectation for us, both in the first half of the year as well as the second half of the year. Talking about Queuing. Our transactional revenue for LoQueue was definitely impacted. Really, there were 2 things that were coming into play there. That are less about the attendance volume at current customers like the big ones that we serve. But we actually had a customer in one of our locations that was offering virtual queuing to all of their guests sort of post pandemic and they ran it for a couple of years that way, decide to continue with it only as a premium service. And so we were getting paid for every visitor going in the venue, now we're getting paid on the premium side. So there was a shift in how they chose to operate the system. Again, it was a bit of a, I guess, you could say, a hangover from the pandemic decision, and they wanted to ease out of that. We also had a water park customer that shifts away from our product. The water parks are good for us. Water parks are not our best queuing business, but we did have a revenue impact on those 2 pieces. When you look at the lower attendance, we actually are seeing the revenue relatively holding up where attendance is down. The higher-end customers seem to still be spending. It's the middle customer where there's probably some weakness, but we're seeing strength on the queuing side. It's just been offset at some degree by these customers that changed or left the service. We launched a pilot of 2 venues in the U.S. That's our queue management system, which is cameras and AI and machine learning to predict the wait time. So we have a customer testing that through their theme parks. And we also implemented LoQueue within the Philadelphia museum of Art and within a museum, sometimes you have exhibits whatever it may be, that are high profile and very appealing, and they had a challenge with the queue for that particular experience within the museum. And so they asked us to help them solve that with the implementation of LoQueue. I think it's just an example that there are opportunities for LoQueue outside of the theme park. They're -- I would say, maybe they're few and far between. But this is an example within the industry on the cultural side, where we can show we can add value there just as much as we can with roller coasters. Shifting to restaurant and retail, the third part of our business, which we've just launched accesso Freedom. I continue to hear our customer feedback be very, very positive. We signed 8 customers for the new venue and we installed 5 of those that are now live at the period end. I think a couple more since the period ended has gone live. The customers that are seeing the demos are positive, and the customers that have been installed and running are very positive, and they're very highly referenceable, which has been an important priority for us. We're still working on some pieces. So for example, we made the connection to accesso Siriusware so the guests with seated passes or stored value cards that are within Siriusware. Those can be validated on the Freedom side of someone's buying a hot chocolate at ski resort or a hamburger at a water park and they're using Siriusware, they can validate that entitlement of that pass discount or use their gift cards in accesso Freedom to redeem that. We're also seeing a range of prospects in Canada, specifically in Quebec. But Quebec has a unique requirement there that you have to have government certification for a system to operate there sort of tax related and that application is then we're just waiting for that to be approved. We've done the work required. We've submitted that, and we're just now waiting for the check mark on that. And we believe we have a range of customers in that region that we'll be ready to sign up once we have that certification. So whenever I look at the half year it sort of obviously frustrating to me to not have been giving an upside update a few weeks ago. But when I look at the overall business and step back and think, let's just stay focused on what we're doing. Our operational success is absolutely spot on. Our product road map and our product innovation is, in my view, absolutely spot on. Our acquisitions are playing out as we expected. And we've just hit a bit of a road bump here with this timing on this implementation that at the end of the day, maybe we should have planned a bit differently for and hedged in our expectations. But we live and learn and everything seems to be moving along as expected until we got into the sort of summer -- mid-summer period and realize that we probably needed to move that out. So fundamentally, across these product sectors, I don't see anything that is of concern. I see shift in trends. I see consumers may be moving their behavior around. But if you really peel it back and look at our individual products and how we're doing, it is not reflective or indicative of the update we gave because that really was strongly about the shift in this project. And if you look at our product, our transactional revenue, I think it's actually holding up quite well. We would like a bit more, of course, and to be beating expectations. But it certainly isn't going backwards, if that makes sense. The last thing I want to hit, obviously, is our people. I was just at one of our user conferences last week that we held in Arizona for a Siriusware and Paradox customer base. And as I saw the 125 or so venues that were represented there, I heard over and over again, what a great team we have and how we just stand out heads above our competitors. They work with competitors. They consider competitors, and they come back to us and just highlight what a difference it is working with us. And that plays into a lot of the things we highlight here on the right, which is just continuing to provide the resources where we need them, continuing to help our employees work as efficiently as possible, helping them with development programs like emerging leaders and women in leadership. And our survey results for 2024 came in near the end of the period. Again, 95% participation, slightly ahead of last year. And we're once again in the 75th percentile of the [indiscernible] companies. Our stores were essentially the same as last year, which were at an all-time high. So we're very pleased with what our employees view. Of course, in the details, there are a few things they don't like that we have to go work on. But broadly speaking, our employees are very, very pleased, and that the cascades into what our customers think. Our turnover at the half year is at 4%. So again, we're managing -- keeping very low turnover. I think the job market has cooled a bit in terms of people being recruited away from us. But also, I think as we've settled in with the acquisitions and the things we continue doing, our employees remain sort of convinced of our longer-term success and the opportunities that lay ahead for them -- lie ahead for them. So I think people are sticking around with us. And I think we're going to continue to make them such an important part of our success because they're really behind everything we do. And I just can't say that enough. And it's just surging probably for some of them to see an update that says we have a trading update that's a little softer than we expected. But at the end of the day, everybody knows they're doing great work. And the things they're working on are actually going quite well. So I'm just very pleased with our overall team and where we stand on that. So now I'm going to -- I should have given my page numbers, I'm so sorry for that. I was on Page 12. I know some of you are following along on your own. So I do apologize if the screen isn't tracking with me. I'm now going to turn it over to our newly appointed CFO, Matt Boyle, who's going to hit the highlights on the financial results, and then I'll wrap up and we can take some time for questions.

Thank you, Steve. So starting on Page 14, we've got our key financial highlights, which is putting out the pieces in our update this morning. So revenue was $69.2 million, which is 5.2% ahead of the prior year. Excluding that impact of the seasonal staffing that Steve mentioned, it's 9.9% ahead. That is we recharge cost that was on our books directly to a major customer for supporting the operation. So if you switch your attention to the right-hand side, you should see the revenue split on the screen and you can see, as with the prior period transactional revenue makes up the bulk of our mix, 76% last year, 74% this year. So that slight dilution is where we've acquired particularly accesso Horizon, which is a repeatable revenue to the blue bar, which is license and support model and maintenance rather than the transactional piece for the time being. Again, so gross margin improved to 76.2% from 73.5% in the prior period. That is, again, directly related to that seasonal staffing impact. We no longer have that staff cost on our books nor the revenue. So we are trending to a higher gross margin, which is more reflective of the business that we're actually doing providing software. Again, cash EBITDA of $6.5 million is behind our expectations, and that's largely because of the accesso Horizon implementation in the Middle East, as Steve mentioned, it was -- the project plan was H1 2024 for a large chunk of that revenue at very high margins, which dropped straight through to cash EBITDA, which we're missing? But pleasingly, our balance sheet is still and as it was at the end of last year, and that's been for a number of months and years now. It's still strong. We ended the period on $18.3 million of net cash, which will go into the cash statement shortly. So switching to Page 15. There's a bit more of a breakdown of our revenue by type here, which follows on from the previous diagrams. So looking at this, you can see our transactional revenue on its own was 2.3% ahead of last year. In there, you've got 2 offsetting things. One is the impacts of ticketing and e-commerce being up 12.7%, which is largely the impact of Ingresso having a really strong H1 2024, which Steve mentioned was the result of work done at the end of 2023, so signing a particularly large new distributor as well as changes in existing contracts that really allowed the business to kick on for the first half of this year. And then offsetting that, we've got virtual carrying revenue, which is down 7.2%, which is through customers changing their service levels whilst the volume still is there, it's just a slight change in service levels required? And then moving on to repeatable revenue. That's up by 5.5%. Repeatable revenue includes maintenance and support platform fees and licenses. The bulk of it being maintenance and support. And again, accesso Horizon the business that we purchased is a license and support business. And so those revenues went in H1 2023, whereas we've got the full period of some in H1 2024, which is making up that increase there. The nonrepeatable revenues dropped to 13.1% to our professional services business fluctuates year-on-year, period-on-period. It's largely driven by customer demand, which is cyclical and the particular projects that they have in play at any one point in time. So it's down 15.1% for the period-on-period comparison. Next slide. So Page 16, we've got the income statement there. So we talked about the gross margin being up 6.2%, again impacted the virtual queuing on there. The key thing to point out here, I think, is mitigation we've done on our cost base. So underlying cost base comparing without the acquisitions and just underlying cost mix proportion. So salaries, software, server costs, things like that, they're up 4.3%. And we have managed that throughout this year just to make sure that, that is in lockstep with our revenue movements that we have with maintaining margin. You can see the head count piece there is the key component of it. So that was 692 at the end of December '23, and we're at 680 at the end of June '24. The other piece on there is the finance expense. So it's slightly up on the prior year. Again, that's the impact of the acquisitions. So we drew down $35 million to fund those acquisitions in June -- end of May, June 2023. We've got a full period of interest cost on that whilst we have repaid it significantly. So we're down at $19.75 million drawn at the moment, which you'll see on the cash flow statement. On the next slide, Page 17. Again this is a reconciliation of cash EBITDA just to show you how we get there. So we're at 6.482 versus 6.481 so very close in the prior period. That's driven largely by an increase in operating costs this year, offset by increases elsewhere. So we had -- in the prior period, we had $2.5 million of exceptional costs related to those acquisitions that we don't have in the current period. So you can see that movement in operating profit there and also in the acquisition-related expenses, at least offsetting each other. The acquisition-related intangibles increased significantly to $1.9 million, but that is the intellectual property and customer relationships that we acquired slightly being amortized through the P&L in the current period. There's a bit of an increase to $2.2 million in the share payments, which is reflective of new awards that we made acquisitions to support retention. And then you've got a decrease -- a fairly substantial decrease there in the 49% in amortization and depreciation, and that is largely the capitalization of R&D spend overview that have been following us since 2019, 2020, you know there was quite a drop-off in capitalization, which was more reflective of an appropriate R&D policy that was being pursued at that time and the runoff of that. And then the next slide, Page 18, please, is our cash flow statement. So you can see the increase in cash flow generated from operations before working capital, $7.7 million this year. We've got movements in working capital of $14 million outflow. Again, that's largely seasonal. We generate most of our cash in H2, July, August, September, October, as we collect the cash from those key peak seasonal months on the transactional volume. And following the cash flow statement down, we've got a repurchase of shares. So we started a repurchase of shares at the back end of 2023 and finish that in late February 2024, which resulted in a $2.8 million spend in this period. We have since restarted that program, so there's a GBP 4 million commitment, roughly $5 million that we spent hopefully over the rest of the course of this year so you'll see that in H2 2024. We ended the period on $37.2 million cash. And as I mentioned earlier, the borrowing is at $19.75 million. So we continue to maintain a strong balance sheet. and that is -- it's on the key financial pieces, I pass back to Steve for the outlook.

And Matt, I was very glad you found the extra $1 on cash EBITDA. From 6. 481 to 6. 482. Thank you.

Every dollar counts.

Yes, every dollar count, exactly. Well, just shifting to wrapping up on the outlook on Page 20. On the right, you'll see Stephanie, who is one of our sales engineers looking very optimistically into the future. She was a recent event we had. So we took the opportunity to grab the picture. But our outlook for the year, as we stated at the trading update is $150 million to $153 million of revenue. That is largely impacted by the time line shift or that the projects that we have mentioned over and over again as well as we did see softness in the trading volume versus our expectations starting to emerge at the sort of very, very end of the period, but then when we saw July -- and going into August, we were just a little softer than we expected relative to our original budget expectations. So that led us to a trading update when you combine that with the impact of the key projects. And by losing that high-margin revenue, which essentially goes right to the bottom line with our cash EBITDA margin in the 13% to 14% range. So we've -- I think you all knew that already. I'm kind of stating the obvious here. But overall, this is kind of where we are. And again, I'm as optimistic as ever. I know some will say I'm too optimistic. But at the end of the day, when you really look at -- through our detailed statement in our numbers, I think you'll see the foundation here is in very good shape, and our product portfolio is probably in some of the best shape it's ever been in. So with that, I will wrap up and we can spend the next 20 minutes or so on questions, assuming you all have plenty for us.

[Operator Instructions] We'll take our first question from the webcast. It is from [ Tintin ] at Deutsche Numis. One, in terms of the acquisitions, have there been any further learnings in terms of go to market, their products, what needs more focus/refinements, et cetera; two, with Horizon, what can you do to derisk some of the milestone-based revenues it generates? Three, if there's time show where opportunities in the U.K., what has triggered the opportunity?

Okay, certainly. So first of all, on the acquisitions, anytime you acquire something, you looked up the hood and you really get to know the product. I wouldn't say you're finding problems, but you get to know the product intimately in terms of how it's set up, how it's operating maybe get to go a level of detail beyond what you do before the acquisition. I think overall, we're very pleased. In Paradox, I think what we see is what we knew we were getting. We are probably more pleased with the reception from the market because our accesso Siriusware product, which is an on-prem installation, it's been around for 25, 30 years. It's an on-prem, it's not SaaS. And so customers are really looking to say, what are you going to do here? We're looking for a SaaS product on our next round and what do you have for us? And having acquired Paradox and showing them that we, as accesso, who they really like working with have a plan for them, and I shared that with them at the conference last week in more detail, and they're just very, very positive about what we're doing at Paradox and the plans we have for bringing that to the market as a SaaS solution. We have some work to do for the U.S. because this was a Canadian-based application. So there's some things like U.S. taxes can be a little different. The payments are different. So there's a range of requirements we're working through to make it what we would call U.S. ready. And there are also some features that were in Siriusware that were not yet in Paradox and the customers probably do them as essential. If you're going to move from Siriusware to Paradox, they want to have those features. So just some adjustments to how they handle ski rentals, how they handle lessons, and things like that, which we're working through, and we roll them out in every release. And overall, I think on that side, we're in great shape. I think Horizon, what we realized is the demand is as robust as it seems. It's about prioritizing the work we take in there. That team is small, and we're working on scaling it as quickly as we can. But taking a company with 36 or so employees, you can't just drop 20 more on top of them, if you have to let them absorb and train those people. So we're slowly adding staff where we can, and we're also beginning to leverage accesso resources to help them much more broadly on a range of projects. So that I think is going to help them move along a bit faster than they would have on their own. And we've just gone another phase of the implementation in Osaka. We've just gone live with the large projects in Singapore. We've been awarded a venue here in the U.S. as part of the larger customers regional expansion plans. So there's a lot of things happening in the Horizon that I think are very, very positive. We've taken some time to assess the tech, and we're working on building out the road map for what do you add when, what do you re-factor when and what does that look like over time. For me, Horizon was always a mid- to long-term acquisition. It was strategically very valuable for us from a competitive perspective to bring that into the accesso portfolio. It's a successful business. It operates with a nice level of profitability, and we'll continue to grow that across the enterprise customers as the opportunities arise and they're plenty of them. So that's really the Horizon by definition is going to be a milestone-based product until we start refactoring some of those components. Partially because the pipeline already has customers signed that are signed on a milestone basis. And so we can't just change the rules on those customers, like the ones in Saudi, we have to kind of live our way through that. As we go forward, I will be looking at breaking those milestones into smaller pieces. Sub deliverables within the milestone. So it's maybe not quite such a large amount at one time. If you have 100 things to do and that's your milestone, you've got to complete all 100. I would rather see us do 33, 33, 33 and get paid as we go. So we'll look at how we can adjust some of those commercial terms as we move forward. And we'll continue to look at opportunities to bring in more transactional-type revenue into that product as we can. So that is definitely something we're working our way through. It's a very big and complex solution. And so you've got to move through with that at that level of speed respecting the complexity of the product. And for ShoWare in the U.K., I think there are sort of 2 buckets of opportunity. The first one that I think is the most apparent is there are a lot of, I guess, you would say, smaller football clubs -- small to medium football clubs that use different solutions. And I think the view of those customers would be there's an opportunity for something better. And so that's an area that we're really focusing on in terms of bringing the awareness out. We're going to their trade shows, their events, showing them the products, letting them become aware of the solution as they go into their renewal cycles and their tech road map that we're here and were available as an option. And then also, there's a range of other sort of festivals and other type events. There are surprisingly a lot of them in the U.K. as we dug into it. And so we're looking at those kinds of opportunities where we can get a foothold in the market. It's all English. We had to do a couple of things to make it U.K. ready like make sure we can handle VAT appropriately, a little bit of British English compatibility, if you will. So some relatively small adjustments to bring it to the U.K. And so it gives us a new market for our sales team, and I think it's going to take a bit of time to build, but having a product that we could sell there and not selling it was a missed opportunity. So taking that wall down and allowing that to be available in the region, I think, is a really important step for us.

Our next text question is from Katie Cousins with Shore Capital. One, could you give some further color about some of the expected volume drivers you expect from your clients during H2 and next year? Two, could you provide an indication of how the CapEx spend in dividends between your main product lines and how you see this developing. For example, does the e-commerce development in Passport indicate a step-up?

Okay. Yes, a good question. So the volume drivers, I think you see on the regional attractions is -- which is where the majority of our transactional revenue obviously comes from a largely across Passport and to some degree within ShoWare and LoQueue as well. The regional attractions have a lot of -- when they change something, they can affect the market very quickly. So if they do a promotion, if they offer season passes earlier than last year, they expand the benefits, you almost get a snap response because those people are within a stone's throw of the venues. When a destination attraction does that, it could take them several months for that consumer marketing to have effect and even a year before those customers show up, depending upon the planning cycle. So where our regional players will be looking is -- looking at their daily ticket pricing they're not wanting to go backwards, but how can you be creative with what you offer in terms of bundling and packaging of the daily tickets? How can you think about your season pass program. How much marketing spend you put behind it relative to years where maybe it sold itself more. So they'll be looking at those different factors and building their own sort of formula for how they operate in a substitute effect economy versus one that's a bit different. And so I think when you look at the combined fixed identity, I think they're very astute at doing this. And just like we saw on the Cedar Fair side of the business, they were tracking quite well in their business. And I think we'll see that kind of begin to roll across the entire -- the new Six Flag's portfolio. I think you'll see the other operators doing the exact same thing. The destination locations have a bit harder time. So what they'll do is they'll try to pull local then more. They'll play that card. So if you're in Orlando at the theme park, they'll try to get for the residents to come visit more often. They're much easier to get the take rate from them. So they all have playbooks for this. They've been to this rodeo before, as we would say. And so they will definitely be working their way through those. And we're already starting to see those come into play. I can't share more about H2, but I'm starting to see the customers really thinking a lot about where they are and how they adjust those parameters in their marketing and in their product offering. And also, I think I'll add this. I think one of the factors you might be seeing in Orlando, too is maybe not to be mistaken by being all consumer economically driven. I feel if I can use that phrase. There's a range of new capital coming in the Orlando market. Disney has a range of new products. Universal has a new theme park opening. I think SeaWorld has significant new offering coming. So consumers can sometimes look and say, "Oh, wait, this year is kind of a normal year, but next year, they have all this new stuff coming." Maybe we should wait and go to Orlando or wherever it is, the following year to get the most for our money. So you can start to see a little deferral when there's a lot of new and exciting things, whether it's a big anniversary at Disney, where they're celebrating with all kinds of new entertainment. Whether it's a new park coming or a big new ride coming, people will shift their behavior a bit. And I'm not convinced that all of the Orlando results that are being reported by all 3 companies are related specifically to the economy, there may be a factor coming in around the planning cycle and how customers are responding. So I think we'll see each one of these companies do their own thing that's relative to their market. And to me, I think we'll see much more balanced results as we go into 2024 as a result of that. In terms of CapEx, things like the e-commerce product. Yes, obviously, it's important to bring in new customers and to show them that, but it's also really important that our customers are happy with the product they're getting and they continue to renew, whether they're an enterprise customer or otherwise, Passport is essentially 1/3 of our revenue. And so making sure we're maintaining our foothold there is really important to us. And so keeping our product set fresh there from a capital investment it is probably our largest from a total revenue, our largest growth opportunity, at least in the near term. And so being in the market and showing the demos of that product, meeting with their customers and having that product be just 5 stars across each module is really, I think, an important factor of our retention strategy, and it's an important factor in our go-to-market strategy. So we see some of those play out in the short term. We also see some of them -- when you look at our net revenue retention, which Matt can probably throw that number in here, look at our net revenue retention, this is part of how we maintain our business as much as we do grow it. I think it plays on both sides of the fence. Matt, we're just taking a look at our revenue retention. Can you give a highlight of what that number looks like right now from a full year basis for '23.

Not right now, but I can follow on from Katie's question, which was the CapEx piece, which I think she was talking about how much actual cost will be capitalized to the balance sheet in future periods as a result of these new initiatives, the important context there I think to give is the accesso Freedom has occupied a lot of that cost for the last 18 months, 24 months really and is starting to tail off in terms of how much we're capitalizing because the product has been since launched. That number is now being replaced by these enhancements that we're talking about on Paradox and on Passport for enhancing their e-commerce solutions. So whilst the spend is -- it will probably stay slightly at the same sort of level as it is now proportionally. It's just got different components to it. It will increase as we get through the rest of this year and into next year, particularly as we develop these enhanced e-commerce functionalities that we're mentioning.

And because the enhancements we're making are also going into live customers in many cases, right, that affects our capitalization because they're not always a new product that is being launched like accesso Freedom. So there's always a balance there, and thanks, Matt, for clarifying that. I guess from my view, we're working on cash EBITDA. So how we move that between the 2 is a bit of an accounting treatment. At the end of the day, it's still expense for us, but I totally understand your question.

Our next question comes from Richard Jeans with Hardman. How are you expecting Ingresso revenues to develop? When are you expecting to reach 80% gross margins.

We -- I would say that's probably a little more detail on an individual sector than we typically disclose. I can tell you from a business plan perspective, we have a very clear priority because that product line, that solution is a drag on our margin, to be frank. And so we have made -- or making a very pointed effort to reduce the drag if that makes sense. And so things like revisiting commercials on customers, I think that product has more value than perhaps was inherent in some of the pricing models. And so we are literally going through there. And if the customer isn't willing to compensate us for the value provided, we're actually letting them walk because there's no reason to have the revenue if it doesn't have the appropriate profit. A lot of these are very, very small clients that are in that mix. There's hundreds of customers. And so the larger customers, I think, actually, we've had a chance to re-factor some of the commercials. We have new items coming in that are at a much better sort of, I guess, business model like the work we're doing with Major League Baseball. You have venues in there like [ OWA ], I mean it's very high volumes on products like that. And so it's really just about fine-tuning our approach, and I will say we -- things were shut down in 2020, 2021 was pretty quiet. We've now gotten the feedback under the life back under that business, it's really time to fine-tune what's coming in, things like moving from the box office away. So now what we're doing is going through each one of those individual revenue items and looking at the margin and deciding what to do with it. Because at the end of the day, I would rather have less revenue with a respectable margin, they have a bunch of revenue coming through that isn't highly productive. So we want to meet the customers' needs, but we also don't want to be diluting our overall profitability by, I'd say donating our services where applicable. So overall, I think that would be -- it's going to take a couple of years to get there. But when we get to the end of the year we have a lot of revenue comes at the end of the year in that business, we'll be able to provide more of a perspective on -- and maybe I think where the gross margin ended up and kind of what we're thinking about it going forward. But in the past, I would say this has been kind of operating at normal year-on-year. And the last quarter last year, we really shook things up and except for a new senior leader in charge, they've had a chance to refactor a lot of the operational processes, the commercials. I think we're going to see that continue to step up as we go through these earnings cycles.

[Operator Instructions]

Maybe, we've time for one more question. If anybody has a -- another one for us.

We have no further questions. I'll hand back to you, Steve, for any final remarks.

Certainly. Well, thank you very much, and thank you all for taking the time again. And hopefully, going through this and reading the full statement provides a bit more context around the individual layers of our business. It is a bit complicated with all the different products and all the different variables that you have to consider. But my takeaway from this is, I'm hoping you'll walk away feeling a bit more confident in terms of what our underlying numbers really look like and the dynamics around this project moving around that has affected us this year, which is certainly on a reflection, I don't believe of our underlying business model or the continued value proposition that we bring to the market. So with that, I would say thank you all very much. Again, welcoming Matt to our role as CFO. And I look forward to speaking to many of you individually in the coming days. And of course, if you have any questions, feel free to reach out to us, and we'll be happy to help you out. Thank you all very much.

Thank you.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.