Beonic Limited (BEO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Andrew Johnson. I'm Chairman of Skyfii Limited. On behalf of the Board of Directors, I'm pleased to welcome you to the 2022 Annual General Meeting, the 8th AGM for Skyfii as a listed company. I'm advised by the Company Secretary that this meeting has been validly convened and that we have a quorum of shareholders present. It is just after 11:00 a.m., so I declare this 2022 Annual General Meeting of Skyfii Limited open. I would like to start by acknowledging my fellow directors who are joining the meeting today. With us are our CEO and Managing Director, Wayne Arthur; Executive Director and COO, John Rankin; and Non-Executive, Kirsty Rankin, Mark Devadason, Bob Alexander and Sue O'Malley. We have a talented and experienced Board that brings a very broad range of complementary skills and governance capability to the company. I propose to give a brief address on what we, as an organization, have achieved during an extremely challenging year and identify what the Board regards as the critical, current and future challenges we must focus on. After that, I'll ask Wayne and John to give you some more insights into our business, financial performance in FY '22 and the outlook for FY '23 and beyond. Year-end review. FY '22 was a year in which the company successfully executed the strategies that we, as a Board and executive team, set out to achieve and communicated to the market at our 2021 AGM. One of the key decisions was to invest for future growth, primarily by expanded sales, service delivery and additional project management capacity in order to capitalize on the global market opportunity and with a view to driving our revenue in FY '22 to set the business up to deliver future operating leverage. This decision was made based on the company's strong balance sheet following the capital raise in April of 2021 and was consistent with the stated use of funds outlined as part of that capital raise process. Our expectations were the investment would assist in delivering significant revenue growth in FY '22 and provide a stronger global foundation for continued scalable growth. I am pleased to report the company has delivered a 49% revenue growth result year-on-year. Consequently, as was indicated in our market statements and in my AGM address in November 2021, that investment carried a capital cost which negatively impacted our cash flow and ultimately, our cash position through the year. Despite that investment, we're able to maintain a very prudent cash position throughout the year. We're clear in our belief that the investment was justified and would be well spent in improving both ongoing performance, reducing ongoing operating cost and resolving so well-recognized risk that we had not previously been in a position to address as thoroughly as we believe necessary despite the short-term impact on our capital position. I am pleased to report that these investments are clearly producing the planned results and entered FY '23 with strong momentum in booked revenues and pipeline development. The investments have strengthened our company and positions Skyfii as a business capable of performing at a significantly improved level of operational efficiency, and we are confident in reiterating our expectations of delivering sustainable positive cash flow in the second half FY '23. So FY '22 investing for growth. Skyfii has grown significantly over the past 2 years via our deliberate and status strategy of investment in sales resource, technology development, complementary and accretive acquisitions to drive long-term sustainable growth. In FY '21, the company expanded its scale and breadth by the strategic acquisition of CrowdVision, a leading crowd analytics software company providing passenger flow, queue monitoring and management solutions to the global airport sector. The acquisition diversified our product offering, added new technology into our portfolio and increased our global presence. The acquisition of CrowdVision, which is focused primarily on the airport sector, consolidated our position as the leading provider of venue analytics in the global transportation vertical. The strategic decision is to acquire the business at the idea of international travel was deliberate and is generating strong revenue momentum as global travel returns to pre-COVID passenger numbers. The acquisition provided a platform for Skyfii to expand its customer base globally, particularly in the lucrative airport vertical in the USA and EMEA. Following the acquisition and the subsequent capital raise, the Board and management team made a deliberate decision to invest into our operating model in 2022. These investment decisions were made to provide scale both in terms of people and product in order to capture the growth we see in the global venue analytics space. To deliver against our growth aspirations, we needed to invest in a more headcount, particularly in our sales and delivery teams globally. Moving forward, we expect OpEx growth investment to be lower and our hiring will be focused on specific skill sets. We made the strategic decision to implement an outsourcing and offshoring program to provide more cost-effective options, aid retention, address salary inflation and address gaps in talent acquisition. This program is underway and already delivering both cost efficiency and attracting some industry-leading talent to our organization. The combination of these strategic initiatives with the supportive tailwinds of an increasing global focus on crowd analytics and then occupancy management positions the company to deliver continued revenue growth and a sustainable cash flow breakeven position during the current financial year. Data security. Recent events highlight the importance of data security. Skyfii processes over 11 billion data points every day from 90,000 devices across 13,000 venues globally. Data security and privacy is at the core of our business and continues to be our top priority. Our ability to safeguard the data we capture and analyze for our venues is at the heart of what we do and is critical to maintaining the long-standing confidence of our customers. Security is one of the core pillars of Skyfii's vision. Skyfii has taken the necessary steps to ensure that security is embedded in our operations and technology. Our systems are designed to enable customers to protect their data and support compliance with privacy legislations, such as the general data protection regulation, GDPR within the EU or the California Consumer Privacy Act, CCPA, within the USA. Skyfii encrypts data at rest and in transit for all of our customers and our platform is built on secure and highly resilient infrastructure and in line with industry-best practices. In conjunction with our Tier 1 global partners, we can protect assets with standard recover from sophisticated attacks. Furthermore, with the growing emergency of cyber criminals across the globe and the ever-evolving threat landscape, we continue to invest, adapt and advance our protections against the most sophisticated forms of cyber threat. During FY '22 year, we made a significant and proactive investment into our security practice. Part of this investment included the appointment of a head of cybersecurity function, the company places great importance on information in cybersecurity to predict against threats, taking a proactive and continuous approach to security. Our security strategy prioritized detection and response to known or unexpected cyber threats and manage cyber risks efficiently. It's also important and pleasing to note that were recently underwent an external security assessment, including a penetration test that was conducted by an independent and well-qualified cybersecurity firm to identify the exposed attack surface of Skyfii's web applications and provide a view of the internal and external security posture. It was noted that our security posture is considered strong and effective to protect against the current and emerging threats every business is exposed to. We will, of course, continue to assess our sub security posture to enhance and evolve the overall security program and identify new and emerging risks and our technical capabilities and practices are continuously improved to match the new advancements of modern threats as they emerge. Our people. Our company offers more than just a data platform. Our people and technology ensure that our solutions are customized to allow physical venues to optimize the experience of the venue for their customers. Through our investment in growth and acquisitions, our staff quota has grown to over 100 people located across Australia, North America and the EMEA regions. Our team skills span the fields of IT, AI technology, data security, marketing, commercial, data science and technical service delivery. As a business, we must ensure that we attract and retain key talent in a highly competitive global landscape. And as an organization, we have built an ambitious progressive and agile culture. We continue to ensure that our incentive structure is aligned with global best practice. The Board has reviewed the employee share plan and executive option plan against our global technology peers. As a result of the review, we restructured our incentive program to minimize the dilution of share capital, yet provide adequate incentives for our staff. The combination of our culture, our off-shoring initiatives and our remuneration structure give the Board confidence that we'll be able to continue to attract the leading exponents in the fields in which we operate. This year has seen Skyfii place particular focus on building the foundation for growth through its people function with the introduction of a head of people and culture function, the delivery of a new performance management process strongly linked to remuneration that is appropriate, the implementation of new systems, policies and processes that enable us to consistently improve our compliance and analytics to an international standard and the launch of a company Intranet to improve global communication and accessibility. Finally, one of our most significant people-related milestones has been the successful implementation of our support office in the Philippines to improve efficiency as well as establish our footing in Portugal to expand our world-class technology capabilities beyond Australia and the United States. The leadership team together with the Board, will continue to focus on building a culture that is ambitious, collaborative and respectful. Board renewal. As we continue to grow, the ongoing strengthening of the company's Board ensures we have the right skill set, diversity of experience and corporate governance capability to execute successfully on this ongoing program of growth. Following the end of the financial year, we announced the appointments of Mr. Mark Devadason and Mr. Bob Alexander as Non-Executive Directors. Bob's previous non-executive director roles and experience as a global CFO in technology solutions and digital media, brings a highly complementary skill set to the Board. And Mark's proven leadership and geographically diverse background in banking, finance and sustainability further diversifies the skill set and background of the Skyfii Board. Kirsty, Bob and Mark, along with our senior management team lead by Wayne and Bob and John provide a deep and extensive background to guide the company on its next phase of growth. I would like to take this opportunity to thank Sue O'Malley for her contribution to Skyfii. Sue is stepping down as a Non-Executive Director after joining the Board in September 2018. Sue's insights and experience in the listed property sector, coupled with her general senior management experience, has proved exceptionally valuable for the Board, and I wish her well in her future endeavors. I particularly would like to complement her on the excellent job she has done as Chairman of the Remuneration and Nomination subcommittee of the Board, where she led the search and recruitment activity resulted in 3 excellent new directors joining the Board. And her work with our new Head of People and Culture, where their combined efforts have dramatically improved the professionalism of how Skyfii undertakes the multiple aspects of the critical role of managing and rewarding our people at a time when the acquisition and retention of quality people is a demanding task for any company, but particularly one that needs to maintain technical leadership in a complex field with operations spread across the globe. So finally, outlook. Our pipeline of venues includes airports, commercial properties, quick service retail, QSR chains, municipalities and stadiums remain strong and well advanced and in conjunction with our cost efficiency initiatives, will ensure long-term sustainable and profitable growth to Skyfii. Specific areas of focus for the Skyfii team in FY '23 will include: a renewed focus on our 3 core verticals of retail, transportation and quick service retail; resolution of internal delivery bottlenecks and supply chain issues that impacted second half of FY '22 project closures; a focus on collections and closing of projects to recognize outstanding revenues; cost rationalization and efficiency initiatives, including offshoring talent to deliver material cost savings and maintain margins; and finally, deliver ARR growth greater than $20 million in FY '23 and deliver sustainable positive cash flows in the second half FY '23. I would like to thank our Board of Directors and the entire Skyfii team for their hard work and resilience during FY '22. I'd also like to thank our new and existing shareholders for their continued support. I'll now hand you over to Wayne and John to take you through the FY '22 financial year and the operational outlook for the coming period. Thank you.

Thank you, Andrew. Good morning, and welcome to the Skyfii FY '22 AGM presentation. My name is Wayne Arthur, CEO; and presenting alongside of me today is John Rankin, Chief Operating Officer. And we're excited to take you through a summary of the full year financial and operating highlights, and I'll also provide, as Andrew noted, an outlook, including financial guidance for the remainder of the year ahead. As you can appreciate, we set some clear objectives at the beginning of FY '22 as we enter the year having just concluded the CrowdVision acquisition and a successful placement in April of last year, which was 100% oversubscribed. Our key objectives included making resourcing investments, as Andrew has noted, in the form of international sales people and expanded marketing investment, particularly event-based marketing, further building out our security practice, which has included investment in ISO 27001 compliance, which is near in completion. And importantly, investing in our people and culture through the appointment of a Head of People and Culture role. In addition, having recently inherited a very strong pipeline of airport projects through the CrowdVision acquisition, we're particularly focused on establishing ourselves as a global market leader in the very lucrative airport vertical. And finally, we set some goals around our products, which included integration of the CrowdVision platform,and the launch of a LiDAR-based solution through our own IO platform. At the conclusion of FY '22, I'm pleased to say that we've successfully executed on all of these objectives. We have some legacy product retirements still to complete during the current financial year, and I'll explain a bit more detail about this later in the presentation. However, we made the necessary investments into the operating model, which has resulted, as Andrew has pointed out, in us delivering 49% top line revenue growth, 30% recurring revenue growth year-on-year, successfully onboarding the CrowdVision team and converting on the airport pipeline, which obviously remains in flight. Based on our current win-loss ratio, we've also firmly established ourselves as a global market leader in Q management in the airport vertical with an extremely full and buoyant pipeline of new projects currently in flight. Whilst our investments in FY '22 did result in a negative EBITDA, that was part of a deliberate and stated strategy and a result that was firmly in line with our business case. FY '22 was specifically a year of investment, which has set the company up extremely well to begin to deliver operating leverage as we exit FY '23 and into FY '24 and beyond. So a little bit more about the product itself. We've developed a data intelligence platform for physical spaces. We collect and analyze multiple data sets and we visualize insights that helped drive improved operational performance, leading to cost and revenue efficiencies for the operators and to improvements in the experience for the customers. Today, we work with over 200 different data sources and our platform processes over 11 billion data points every day. The kinds of data sets that we work with currently include data gathered from cameras, people counters, LiDAR sensors, WiFi networks, CRM platforms, mobile data and device applications, social media platforms, IoT sensors and point-of-sale systems, to name a few. What we do is we stitch all of these information points together to form actionable insights on customer experience and behavior. In today's world, as venues have shifted their focus to facilitate structural and operational changes as well as customer experience management, a great deal of our services are being used to help venues manage occupancy levels, monitor crowd density, optimize staffing levels and improve customer safety and security. So here, we've highlighted some key use cases across 5 of the key industry verticals. Andrew mentioned the 3 core and we have a couple of emerging verticals as well. These are the use cases that predicate Skyfii becoming a critical component of the technology and data strategy for these types of customers. In the commercial property industry, venue operators use us to understand and manage occupancy levels across floors, buildings and tenancies. They use the insights that our platform provides to understand space utilization and optimize the layout, design and often the tenancy mix within these venues. Retail properties use Skyfii to understand their audience by age, gender, behavior, trade area and use these insights to better engage with and service customers both in and out of their venues. Transport hubs use us for cure management and occupancy monitoring and to optimize passenger throughput from curb to gate to drive more traffic and revenue within the restaurants and retail tenancies in these spaces. And today, we have contracts in place with 15 out of the top 30 U.S. airports based on passenger volume, and we are present in excess of 60 airports globally. For stadiums and event centers, the use cases center around fan engagement, event attribution, sponsorship and advertising monetization and to drive more ROI through the concessions. And finally, more recently, we have unlocked value in the QSR space through delivery of store operations analytics solution focused on monitoring food preparation and to ensure maximum freshness. So I'll move to Slide #6, and I'll hand over to John to present some of the key financial and operating highlights delivered during the financial year.

Thanks, Wayne. Moving to Slide 6. So the FY '22 financial and operating performance. If we focus our attention to the FY '22 financial results, the company delivered another exceptional year of performance. Total operating revenues of $23.6 million resulted in a 49% uplift in revenues year-on-year. As Wayne mentioned earlier, our recurring revenues or annuity revenues delivered strong year-on-year growth of 30%. Recurring revenue accounted for 62% of total revenue. This was a little bit lower than when compared to FY '21, which was a result of 71% and can be attributed to a greater proportion of projects and implementation works completed across our growing airport retail and retail property customer base. In FY '22, revenue from international markets accounted for 47% of total revenue, an improvement on FY '21 where it represented 39%. The trend towards increasing revenues from our international operations is consistent with our stated strategy and our investment rationale. Our pro forma annualized recurring revenue exited FY '22 at $16 million. And finally, we finished the year with a strong balance sheet with a total available cash funds of $5.1 million. If we turn our attention to the key operating highlights, across the 4 quarters, our investment in sales and marketing helped the company secure contracts with a total contract value $15.8 million, with our international operations accounting for over 58% of all contracts signed during the year. We expanded our presence in the rebounding global airport vertical via deals with 3 of the top 10 U.S. airports by passenger volume. And we advanced our LiDAR technology offering, delivering new avenues of revenue growth and establishing Skyfii as a technology leader in the airport, retail and retail property sectors. And finally, our investment for growth strategy undertaken in FY '22 has increased the company's sales and distribution capabilities, accelerating growth opportunities and providing momentum into FY '23. Slide 7, the key performing metrics -- performance metrics. We've already touched on our total revenue and recurring revenue results. So let's go through the balance of the key financial metrics. We exited Q4 with $16 million in annual recurring revenue, representing a 14% increase when compared to FY '21. Operating EBITDA performance was down at negative $1.8 million. This was, as stated earlier, a deliberate strategy and clearly stated at the commencement of FY '22 as the company increased its investment in sales, marketing, engineering, coupled with the investment to integrate the CrowdVision business following the acquisition in April 2021. In FY '22, the company commenced reporting our true gross margin, and this is not a reference to product gross margin, which averages out for the company at about 75% and can be as high as 90% for subscription-based revenues. True gross margin presented today is inclusive of cost of sale, sales, account management, project and service delivery costs. True gross margin did trend down in FY '22, averaging out at 58% across the year, which is lower than our historical range of 64% to 66%. The impact through gross margin across the year can be attributed to 3 main factors: Number one, FY '22 was a year the company invested for growth with a particular focus on headcount in North America and EMEA; number two, our revenue mix generated in FY '22 was more weighted towards capital works projects revenues, where historically, gross margins have set around 50% to 60%. The increase in capital works projects in FY '22 included the grandfathering of sales pipeline from the CrowdVision acquisition, and the retirement of the Blix and Beonic people counting technology platforms, 2 acquisitions that were made in 2019. The final point. Number three, we did experience the impact of inflation, both in people, hardware and implementation costs to deliver our services. The company did not remain static in addressing these challenges. Our pricing models have been adjusted to track with the inflation and the company is executing on a strategy to establishing resourcing hubs within countries that represent better economies of scale for our people resourcing. And the final metric and to finish, the company held a churn rate of 4% which was consistent with the prior year. If we look at Slide 8, some more in-depth analysis of our net cash flow from operating activities. And as stated in previous slides, our investment for growth strategy in FY '22 coupled with the completion of the CrowdVision acquisition, led to a reduction in cash in FY '22. We have provided today a breakout of payments made for the acquisition of CrowdVision. Highlighted in orange are the payments made for the period for Q4 FY '21 through to Q4 FY '22 that formed a part of the completion of the CrowdVision acquisition. A total of $3.1 million in nonrecurring payments were required to settle the CrowdVision legacy net debts, including aged payables. The $3.1 million cost was offset against the total purchase price paid to the vendors of CrowdVision. However, under the accounting standards, these payments were required to be classified as cash outflows from operating activities. The outflows of $3.1 million were settled and paid as followed: $1.3 million in Q4 FY '21, $1.3 million in Q1 FY '22, $220,000 in Q2, and $210,000 in Q3 and the final and balance payment of $70,000 was completed in Q4 FY '22. Despite the cash burn experienced in FY '22, the company has a strong growth pipeline, growing ARR base, cost-saving initiatives underway. And with the recent contract wins, these ensure that Skyfii remains confident of achieving sustainable positive cash flow generation in the second half of FY '23. Moving to Slide 9. New contract wins and our investment for growth has considerably increased the scale and breadth of our operations, particularly in our international markets. As we stated earlier, we've generated over $15.8 million in total contract values -- total contracts across the course of FY '22. Much of this revenue will positively impact our FY '23 revenue performance and beyond. Consistent with our stated strategy to expand our international operations, we are pleased that of the $15.8 million in contracts secured, 54% of revenue was secured from our international markets. And most pleasingly, 38% of those deals closed during FY '22 were CrowdVision-related products. Key contract wins and renewals. Whilst this slide is not an exhaustive representation of all contract wins and renewals secured during the year, it does demonstrate the quality of the blue-chip brands that Skyfii is proud to service. The brands represented today demonstrate our focus and expertise in our core verticals of retail, retail property and transit. Our relevance and expertise is not limited just to our core verticals. Skyfii has and is successfully penetrating new and emerging verticals such as the QSR vertical where we have successfully extended our existing relationship with McDonald's by securing a major contract win with McDonald's in North America. This was announced last week, and Wayne will discuss in more detail in the coming slide. So before I hand you back to today, I want to thank all our shareholders for attending today and supporting us, our customers and most importantly, the Skyfii team for their support in FY '22. We look forward to delivering another great result in FY '23. Thank you.

Thanks, John. I'd now like to draw everyone's attention to our data security and privacy posture just to touch a bit more on what Andrew spoke about in his address. So our ability to safeguard the data we capture and analyze for our venues is at the heart of what we do and is critical to the longstanding trust -- to maintaining the longstanding trust of our customers. As mentioned in Andrew's opening address, the company has placed security as its top priority. Having taken the necessary steps to ensure that security is embedded in our operations, in our technology and importantly, in our people culture. Our systems are designed to enable customers to protect their data and support compliance with privacy legislations such as the GDPR regulation in the EU and the CCPA regulation in the U.S., both of which we are compliant with. Further to this, our platform encrypts data at rest and in transit for all of our customers and is built on secure and highly resilient infrastructure and in line with industry best practices. In conjunction with our Tier 1 global partners, we have full control of our endpoints, which enables us to adequately protect our assets and withstand and recover from any potentially sophisticated cyber attacks. In the month of September, as Andrew noted, the company engaged a third-party cybersecurity firm to undertake a comprehensive penetration test in the live environment, which we are pleased to confirm was successful with the key result being that we have been classified as having a strong and high security posture, which validates the investments we've made to date in both our security compliance and processes, but also investments made to embed security awareness as part of the culture of the organization. So with the growing emergence of cybersecurity criminals across the globe in the ever-evolving threat landscape, we continue to take an agile and proactive view to security and invest, adapt and advance our protections against the most sophisticated forms of cyber threats. So I wanted to just shift the conversation a little bit now to provide some context around the work that our product team -- product engineering team is and has been doing in terms of platform consolidation, in addition to the fortnightly release schedules of new and exciting features. It was a key part of our objectives for FY '22 and also a key part of our objectives now for FY '23. As shareholders might be aware or should be aware, we've been supporting a number of legacy platforms over the past 3 years through our acquisitions of Blix, Beonic and CrowdVision. I'm pleased to announce that we are nearly through and nearly willing to retire all 3 of these platforms, which is a goal that we have set for the end of this current financial year. As it stands today, we have successfully built future parity with the Blix solution and almost completed feature parity on both CrowdVision and Beonic with only a small number of features outstanding currently. Equally, migration of the legacy customers for Blix is complete. We're 90% of the way complete with Beonic, but with the vast majority of the team's focus now on successfully migrating customers across from CrowdVision to IO. I want to state clearly, however, that all new customers are immediately onboarded to the IO platform. We're not actively selling the legacy solutions, but we are required to continue to support them for certain customers who are yet to migrate as we have been bringing the various solutions to future parity. This will be an exciting milestone for the company as the rationalization to a single platform does create significant cost and resourcing efficiencies, which to date have not yet been realized. So a major component of the strategic value in the CrowdVision acquisition is the relatively recent emergence of LiDAR as a highly accurate and more privacy compliant technology alternative to traditional stereoscopic cameras, used for monitoring, tracking and the delivery of analytics. This was a technology which prior to the CrowdVision acquisition, Skyfii did not have the technical capability or product capability to support, and it's one which has provided us a market-leading opportunity, particularly within the airport vertical. Some of the key attributes of LiDAR include its exceptional accuracy, its ability to canvas a larger field of view than a traditional camera and its versatility in terms of deployment. We have to date successfully built partnerships with all of the leading enterprise LiDAR vendors in the market, which has added another technology source to our platform and one which is helping us to build a significant leadership position in the airport vertical, now the QSR vertical, and I know it's our recent McDonald's announcement, which I'll talk about in more detail. And finally, also in the stadium vertical, where we are currently partnering with Verizon in the North American market as part of their 5G initiatives. So on the next slide, I'll just animate these. At the end of the day, we are an agnostic data platform. So in addition to our rich LiDAR-based feature set, we do also support a computer vision camera-based solution. This is a solution which has its own unique benefits for use in certain cases where LiDAR and other technologies are just not suitable, in particular, in relation to object detection and classification use cases. To give everyone a flavor of -- a small flavor of some of our recent product development in the airport space, our computer vision team have been working with camera imagery to detect people and objects. On the right-hand side, we have built an algorithm that can detect unattended baggage and trigger an alert from the platform to security teams on the ground to go out and investigate. And on the left-hand side, we are detecting passengers queuing at a taxi rank and identifying whether there are enough taxis to service them or not. I would encourage anyone who has the desire to learn more about the products and our product road map to attend or listen to the product -- demo day, which we are hosting virtually tomorrow in Sydney. A copy of the demonstration will also be posted to the ASX. So with that, I'm going to move through to the outlook. First of all, we're extremely pleased to have announced a new initial 3-year contract with McDonald's in the U.S. worth $2 million. This agreement will see Skyfii provide McDonald's with an industry-first real-time whole of venue monitoring and analysis solution, focused on improving store operations, service efficiency, food freshness and customer satisfaction. Changing consumer patterns and the increase in mobile ordering, delivery and drive-thru have introduced new challenges around food freshness and quick service retail outlets. McDonald's have engaged Skyfii to monitor their 12 in-store service channels, including order at counter, order on mobile and drive-through to determine amongst other outputs, the time it may take for customers to receive their order. McDonald's will utilize Skyfii software, which harnesses LiDAR and thermal imaging technology as well as a bespoke algorithm to automatically categorize and analyze the movement of crew and customers as they move throughout the restaurant. The data insights provided by Skyfii will allow McDonald's to understand in real time how long it takes to complete each step of the service and to determine what factors may lead to a customer experience that does not meet their standard. This will allow them to continuously improve operations, food freshness and ultimately, customer satisfaction. Our solution is currently live in 4 McDonald's stores with a further 4 to follow under this initial engagement. And with a large and currently untapped global QSR market, the ability to leverage the technology and insight from this initial contract across not just McDonald's, but a multitude of venues across the broader landscape provides a significant growth opportunity for Skyfii. Our revenue outlook is very strong, as John mentioned and as I had mentioned during the recent quarterly earnings calls, our current challenge is less so on sales opportunity and more so on delivery, and we're working through several initiatives in order to successfully close out and build on some of these near projects. As such, our 12-month rolling pipeline remains very strong at approximately $31 million. We currently have $2.2 million sitting in final stages of contracting and then a larger pool of just over $7 million worth of deals in the client evaluation stage, one step back from being contracted. And I note that these figures represent current financial actuals, not total contract value, meaning specifically these amounts, if fully converted, would fall into the current financial year. Also worth noting that 61% of the opportunities in our 12-month rolling pipeline are deals in the international markets. So it's pleasing to see the offshore investments made during FY '22 are paying off. We're seeing a strong contribution in the pipeline from our core verticals, including airports, retail and from the QSR vertical, collectively representing around 25% of the current pipeline. And finally, over 22% of the pipeline has been generated in the past 3 months, which signals the relative short-term decision-making evident in the market but is also a positive reflection of the investments into our sales teams over the FY '22 year. So before closing with an outlook for the remainder of FY '23, I thought I would provide a short summary of the most recent quarterly performance. Firstly, our business continues to benefit from positive macro tailwinds. Despite some of the macroeconomic conditions we've experienced over the last year, the operating environment in our core verticals is improving with travel levels now well exceeding pre-COVID levels, which is driving significant demand from the airports, stadiums and transit verticals. And with the current staffing shortages being experienced in many of these verticals, technology solutions are becoming mandatory requirements to help these venues manage throughput and operational efficiency. We exited the first quarter of FY '23 with pro forma ARR of $15.7 million. That figure was slightly lower than forecasted internally due to the impact of some one-off contractions in customers during the quarter. Net cash reduced slightly during the quarter, primarily due to delays in key annual renewals in the EMEA and North America region, a seasonally lower start to the year due to the extended summer break in the Northern Hemisphere, however, consistent with our internal forecasting. We continue to have a very positive revenue outlook, as I've stated, with over $31 million of revenue currently in our 12-month rolling pipeline and several initiatives now being put in place to ensure that we close out some of the delivery projects in the second quarter. So with the improved macro outlook, our positive outlook in terms of revenue, including some latent recurring revenue deals, which are already in the latter stages of contracting. And with the continued focus on cash generation, the company is still targeting ARR to grow to north of $20 million during FY '23 and to deliver a cash flow breakeven and sustainable cash flow position during the second half of FY '23. Whilst our Q1 ARR was slightly below the levels we anticipated internally, we continue to see positive momentum within our business and we expect the near-term pipeline to meaningfully convert in the second quarter. In addition to the ARR growth, and as John mentioned in the earnings call, we're continuing to pursue cost efficiency initiatives, including the offshoring of several of our support and engineering functions, which is progressing well and is forecasted to deliver significant cost savings by year-end whilst providing the business with scalability through more cost-effective regions. These initiatives supported by our revenue outlook gives us the confidence to maintain guidance that we will deliver sustainable positive cash flow in the second half of the year. We remain extremely buoyant about the coming year. We believe we have set reasonable growth expectations based on our revenue outlook and current pacing. And with the renewed and consistent focus on cash, we will return to profitable growth during FY '22 and start to deliver leverage into FY '23 and beyond. With that, I thank you all for your time today and for your ongoing support of Skyfii. And I'll now hand back to the Chairman to conduct the resolutions process.