Envirosuite Limited (EVS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Envirosuite FY '24 Q3 Sales Update. My name is Jeremy Gaedtke. I'm the Director of Marketing and Communications at Envirosuite, and I'll be moderating the session today. I'm joined here by our CEO, Jason Cooper; and CFO, Justin Owen. We're very pleased to present our Q3 sales update to you today. Before we get started, a quick bit of housekeeping around the Q&A in particular. [Operator Instructions]. With that, Jason, I'll hand over to you to please begin today's session.

Thanks, Jeremy, and welcome, everyone, to our FY '24 Q3 sales update. As always, we have a fair bit in our Q3 update, so we want to set you through some of the key highlights. So certainly, another consistent quarter that we've had into FY '24. New sales of $2.9 million, which included new ARR of $1.8 million and in project sales of $1.1 million. So cumulative ARR now is at the $62.6 million, which is a good result of the business. Core [ peak core ] there is the new ARR of $1.4 million in EVS Industrial. As you would have seen a few weeks back, we made the market announcement of moving water into our industrial portfolio. And it was a strategic decision that we took, certainly, with the capability now of the Water products' at a somewhat mature point, we felt that we would be able to scale with Water and Industrial more efficiently by that way. And again, cross-sell opportunities within that customer segment. So now you'll see the Water included into all the industrial numbers. We did have another win on Water as well, which is good. A little bit more of that one later on. But it's good to still see that the momentum is coming through in Water. Part of that restructure though, did have the net effect of the cost reduction of $2.5 million on an annualized basis. And so that is largely through organizational structural change and the head count reduction into that water division. EVS achieved growth of $0.4 million, which is a good result, and again, consistent. Churn over the last 12 months has remained somewhat consistent with 3.7%, and it continues to be a key focus for the business, and it's really around customer engagement and customer success. Last one, I apologize, there on the key highlights is around our outlook. You would have read in our outlook statement, the first time we've given a bit of guidance on to where we see the rest of the year for ARR and for NRR from a sales perspective. As a result of that, we were happy to confirm that position around adjusted EBITDA less capitalized development on a run rate basis in the end of FY '24. So it's a good result. I want to talk to Industrial now, and this will include the Water update. So just on the chart here, you see we've got one asterisk on the top line, which includes the Water sales and then 2 asterisks which also includes the $1.8 million of EVS Water ARR. Let's first of all talk about strategy, though, for Industrial. As you know, we have a land, expand and scale strategy, which is focused on securing customers and working with them to -- first of all, deliver the first part of value, but then to expand our capability onto that particular site and that's through broadening the environmental parameters we might be monitoring as well as broadening the software capability in the platform and delivering value for our customers and scale as where we're adding new sites. We're going to talk to how we've executed on that strategy and what that's been for not just the quarter, but for the year and also more importantly, how this quarter plays out to have a significant play into FY '25. We're also seeing a focus. So -- we've reaffirmed this many times in Industrial, we're focused on mining, on waste, on wastewater and the industrial segment. And with that focus over the last 12 to 18 months, we've started to build a brand recognition in those segments. We're certainly attracting Tier 1 customers to our platform and we're getting good engagement with our customers in that part. Last part is geo, the geo focus -- geographical focus. So Americas has been consistent in providing the strongest growth of our 3 regions. We don't see that diminishing, certainly the demand from our customers in that is certainly strong, continues to be strong. There's some legislation that drives that, but it is also just a customer presence and the value proposition resonates quite strongly in that part. And we've said multiple times, greenhouse gas emissions is the third largest man-made contributor in the U.S., it comes from waste and so that is a particular focus for us. But we are starting to see as well growth now into EMEA coming through and good demand, and we've been able to identify that, position well and then build out a strong growth story. So now if we switch from strategy into execution and how does that line up? We did focus on geographic position of the Nordics and Scandinavia, which was 12 months ago where we secured the [ Malmberget mine ] as our first mine in that particular region. Now on the back of being successful in [ Malmberget ], we've been able to go and talk to other mining companies in the same region. We've spoken to [ Malmberget's ] strong customer advocacy in place, and now that's opening up new areas. So you would have seen LKAB as a new customer. Interestingly enough, it actually is an underground mine, but there's an on top line impact around the community and the engagement there. So a new type of mine that we've actually been successful in, but goes to show that with the focus around the geographic location, we're able to execute. Now the good thing for us is that there are multiple mines up in the Nordics, and we are talking with that theme. Second part in the intent to link strategy and execution is around Capstone Copper, Teck Resources and also Glencore. And all 3 have different types of examples. The Capstone proper is a geographic location with multiple mines, it's also a customer that has got multiple sites. So by being successful with Capstone, we've now been able to expand in Q3 and now in the future is how do we scale into the other sites. We also -- as you are aware, we have got strength in Canada, in the U.S. and in South America, and we're able to leverage those case studies of an overlap there. Teck Resources continues to be a standout customer for us, and we're certainly supportive of them moving forward. And Glencore's Cerrejón mine in Colombia has been another success story. And this is one, hats off to the customer there in being very proactive in what they're wanting to do from an environmental standpoint, but also Glencore now is opening up avenues for growth for us around the world. So we'll continue to support on Glencore's mission. We know that the platform resonates quite strongly and re-expansion opportunity is becoming quite significant within the Glencore opportunity. Moving to waste, we did sign up our fourth landfill site with our partner, Byers Scientific and so that shows that this -- that the partnership opportunities and particularly in waste with having that value proposition is strongly resonating in the Americas. Another key win there is Atlantic County Utilities Authority and again showing that waste in the U.S.A. has been a focus. We have put somebody on to that from sales. We'll get our marketing machine working and then we're start working that through. Churn remains steady at around that 7.7%. Aviation, total sales of $1 million, including $0.4 million in ARR. Good jump on the graph on the bottom right around Aviation, $37.4 million in that place. So that's good. Now where does that come from? Again, come back to our strategy. We focus on our core markets. We're focused on customers. We have 190 airports globally, and it's our priority, number one, to support our customers all around the world. We do know that noise in the community remains top of the list of problem statements for those airports to solve as well as the emerging needs to tackle net zero within the broader aviation sector. And we're well positioned on to that. We also know within the aviation part, we had a low churn of around 1%, that the renewals is a key focus for us. But also we have got multiple software packages to be able to support our Aviation customers. So what we've seen now in cycle of carbon emissions is the right price at the right time. So we were successful in the long-term renewal with Dublin Airport for a further 5 years. You probably would have remembered from some of our previous releases around the role that EIS had within Dublin, supporting them on their journey and they are starting to take on more and more of our software packages and certainly the capability and usage of that is quite profound. So now we have got InsightFull and ANOMS Noise Quota Management module included as well as then broadening out the number of users which were actually using the platform. So it's good to see Dublin expanding them out. Also there, we had additional noise monitoring terminals. So these are our high-end NMTs, which generates nonrecurring revenue, with a good win there with Korea Aerospace Research Institute in South Korea. Again, core customers going through regular updates and expansion in Innsbruck and Hong Kong had all upgraded portions of their instrumentation in their field. And they continue to do that, which certainly shows confidence in us and in the solution and the problem statement we're wanting to tackle. We do know that from an air quality perspective, that there is strong demand. We've spoken about the noise forums that we did hold in the last -- in this FY '24. And certainly, from that perspective, the outlook for air quality is strong as well as carbon emissions, and we have been successful in getting carbon emissions certainly in Europe. And our customers are wanting these products, right product, right time. So certainly exciting to see how the future quarters roll out. And as always, within the aviation industry, new airports will be coming onto the market in the coming halves, particularly into FY '25. So we're certainly excited by what that opportunity presents for us. Moving into our FY -- I wanted to go to our '24 outlook, through rest of '24 into FY '25. Certainly, the consistency is core for us. We want to make sure that we continue to focus on the execution of our strategy. We have got good engagement across the board, both in Industrial and in Aviation. And so we know that the demand is there. By demonstrating our wins in industrial in Q3, what we are saying here is there's no doubt our land, expand and scale strategy is right. And that is also connected then with our product strategy to support the scale portion of that. Our sales team is focused on increasing the velocity through there. We look at the pipeline analysis quite a bit. And so the pipeline where it is today, looking at 12 months ahead -- or the rolling 12 months is certainly larger than where it was last year. And we do have a very high hit rate on our opportunity that we come through so the opportunity now is to focus on that. We have continued to invest into training and onboarding for our sales team. Case studies going out and leveraging out what we have done within the aviation industry on the back of carbon emissions. We also invested into -- continued to invest into tools and processes to refine that. Building on customer advocacy is central to our theme. We know that a customer who is a strong advocate for us, will continue to use the product many years into future to drive value. They also will then talk openly about how our solutions are supporting them on their journey, so that's a key part. We also do want to focus on the customer landing and expansion opportunities and certainly the account structures, as we have mentioned from Dublin, or Glencore or Teck, you can see that those opportunities are quite profound, and so we want to have the right structure engagement around there. Moving to growth in '24, remainder of '24 and '25, Aviation continues to be our strongest contributor to our recurring revenue and will drive our nonrecurring revenue. There are quite a few significant projects that we do have in the pipeline, which we're working to close through and the positive part is that with the existing customers that we've got. So we are working with them to define that. Some of those projects, unfortunately, have moved from the first -- sorry, the second half of '24, probably now into the first half of '25. But certainly the projects are moving forward and gives us good confidence where our nonrecurring revenue will be into future years. We do see that noise and community engagement continues to be thematic. And what we're seeing is airports who have not had noise as a problem, started to consider how they would solve that. And as being the market leaders globally on this, we're certainly well positioned to catch up the market share there. And as we've previously touched on around our ANSP, we do know that we have got some significant opportunity in that as we start to mature our product and the value that, that creates for that customer segment -- In Industrial, we will be focused heavily on our enterprise engagement and as a gaining mine in waste and in the industrial around that enterprise engagement. So that's something that we want to be building out. We know that we're having the right discussions with the right customers once that's done, it's our opportunity now to close those out and to accelerate into FY '25. And certainly, from a fiscal management perspective, we have been managing our business quite tightly through this. We've made proactive decisions around the structure in the organization. But as we now transition into profitability, it certainly gives us greater confidence to be able to execute into our sales and marketing investment strategy to drive additional growth. And understanding that the Industrial part, which will have the biggest growth in the coming years is also one of our largest gross margin contributors to our business and will be key to us moving into 60% gross margin as a business and increasing that in the coming years. It remains a key focus for us. We have made decisions this year around some of the contracts that we've touched on in previous quarterly updates to remove the low-margin contracts and to focusing, certainly, onto high-quality contracts, high-quality customers and certainly ones that we can expand and scale up. So we certainly see that critical mass starting to come in with the logos and the customer base that we have got there. So certainly, closing now on the outlook statement, we do have a strong ARR closeout to the year, we've got a range of [ $2 million to $2.5 million ] and NRR of [ $1.8 million to $2.3 million ]. That's something from the sales part. So, we have line-of-sight to those opportunities, and we're certainly focused. We remain well funded to execute and invest for growth and that's an important one. We do want to invest for growth into FY '25. So, we have managed very tightly through FY '24 and now is the part as we transition profitability to invest for growth. And certainly, there is continuing macro drivers around the market operations that we do see, but we see a strong, compelling. So with that, we'll hand over to Jeremy if there are any questions.

Fantastic. Thanks, Jason. [Operator Instructions] We did have a few questions around our growth strategy, sales and marketing strategy submitted ahead of time for this webinar from Gordon Campbell. And I'll probably sort of bundle these questions together into one because they are interlinked. You did touch on in each of those updates, Jason, the strategy around Industrial and for Aviation as well. Can you give a little bit more color around our strategy for expansion and accelerating around our growth, and in particular, where are we seeing the greatest opportunities, new business clients or cross-selling within that strategy?

Yes, a good question. So, as we touched on, we've got to focus here on land, expand and scale. We know that we have a platform that can scale significantly for customers. I want to sort of touch for a moment on our own staff on this one. They've built out 2 platforms in Aviation and Industrial that are market leaders. And so we know that we've got strong competitive advantage in that space. So, what we have done is we're focused on markets where we have a significant impact, so mining, industrial waste and wastewater. In particular, what we're seeing through FY '24 is that mining and waste has got a particularly strong value proposition right now. So, as we've had limited resources to apply to sales and marketing through '24, we have made bets on mining and waste and those bets have paid off, which is good. Where we see that moving forward is to continue to invest. So the product from a product maturity perspective, we'll continue to support mining and waste. We're also more solution-oriented in packaging these up now to customers. And so, putting a bit of a wrapper around it so that they can get on board easier. We are focused on turning revenue on as quickly as we can in that part. And obviously, the quicker that we can turn that on, then there's revenue recognition as well within our business. So, our core focus, get the logos that we want in mining and in waste, make sure that we have the ability to expand on a per site basis and really importantly, make sure that we can scale is customers [ develop those sites].

Very good. Thank you. We have Paul Bridgeford has raised his hand. We can't hear your question coming through, Paul, you will need to take yourself off mute manually as well.

Is that better?

That's great. Thank you.

Fantastic. Thank you. Just in terms of context, I bought Envirosuite shares in 2018 at $0.075, they now languish at $0.052. Basically, the market is saying that they need to see some profitability from the company. Now I really think about positive adjusted EBITDA, less capitalized development on a run rate basis. What does that mean? And how does that translate into profit?

Well, thanks for your question. I'll take that one. What we talked about -- when EBITDA or adjusted EBITDA -- sorry, EBITDA is a measure of cash because it takes out depreciation. What it also -- what we then bring in is the capitalized development costs that we don't run through the P&L but we take to the balance sheet. So, we use that as our internal measure, if you like, as our proxy for cash. So, as we transition to the end of '24, we will be seeing that measure of that -- the combination of those 2, capitalized balance sheet plus P&L, resulting in a positive number transitioning through the end of FY '24. The reason we use those measures, they're reasonably common in the market as measures, as proxies for cash. We've made one further adjustment to that for which we call adjusted EBITDA where we look at it from a run rate perspective. We mentioned in our last update in the full year where we spoke to results where we became -- where we are focused on EBITDA as a measure, not adjusted EBITDA. So, as we conclude FY '24, we will be running with the adjusted EBITDA, which takes into account normalized adjustments. But going into '25, it will be a pure EBITDA less capitalized development costs as our measure. And it's on net basis going into '25 that we see that we will be profitable and cash flow accretive for that year.

So, a net profit going into '25?

Well, that net profit is defined under EBITDA. So, it's more of a cash measure there, Paul.

I understand that. I mean, I'm talking about actually gain of getting a profit out of the company because in the end, that's why you need the company to make a profit.

Yes, 100%.

By when do you think we will have actual profit?

The profit will be impacted by 2 other components being depreciation, but that's why we bring in the capitalized component part because depreciation is in profit, but it's not cash. So, we take out depreciation and put in what we spend on development or capitalized development costs. So, if you like, we're probably taking a worse position in the measure that we are assessing ourselves on as opposed to pure profit. And the other component that will sit in there is interest underlying our debt. And that's a figure that we continue to monitor and where we can, reduce on a go-forward basis as we transition to profitability.

Yes. And obviously, the share price at $0.052 is unacceptable. What do you think the company needs to do to turn that around?

Yes. So, I would agree with your sentiment that the sooner that we get through to profitability that, that share price will start to go north. That's something that we have done, Paul, on a sustainable basis, understanding that we are trying to grow in all quarters. And so certainly, the top line growth has to be underpinned by a sustainable business model, which we have done. We are bringing new products to market to support growth and make sure that we sort of retain our customers. So, I think the 2 key drivers there is the top line growth and that transition in profitability, which we have been clear on this year as a transition year. And FY '25 will certainly be the part where you start to see that as a tangible outcome.

We'll move on to another person who's raised their hand, [ Fred Hinstead ].

So, I do have a different question, but I just want to ask a follow-up question to that. I've just pulled up the last half-yearly results. So, in terms of development -- the capitalized development costs, that's, at the moment, they're about the same as the depreciation. So, I think you left me with the impression with what you said before that the company was in a breakeven position after taking off -- adding back depreciation. But really, the cash flow for the last half year shows cash -- net cash outflow of about $4 million. So, I think that previous fellow's question was really coming to net profit, also, a true cash flow breakeven which the company is some ways away from. I'm interested to know what revenue run rate you need to be hitting to get to that true cash flow breakeven. But my question was really, can you -- in this first -- this last quarter, can you talk to the recurring revenue rather than the annual recurring revenue? Because again, in the last half yearly, there was -- the recurring revenue was about half of what the annual recurring revenue number is.

So Fred, it's Justin. I might just jump in there on the first question, which is our cash and how we measure and what are the impacts to it. Clearly, there's the operating component, which we talk to cash, which is the combination of revenues we're generating and payments to our employees and suppliers. Sitting under that is our investing activities, and we've spoken in prior updates regarding where the money is being spent on investing activities. And there's a couple of components there. One is obviously our capitalized development costs, hence our focus on that one. The other is in our PP&E or monitors and sensors that we have out of customers at any point in time. We allow around -- in our forecasting, we allow around about 150,000 a month, where we see that those monitors have been bundled up with revenue with revenue opportunities to our customers that are recorded under recurring revenue. So, we have an element of capitalized instrumentation sitting on the balance sheet. So that will continue to be an impact on cash. And that is one of the reasons why we went through with our debt facility to fund that. And so that is a difference, if you like, in terms of our measure of cash flow and our measure of profitability. We expect those capitalized instrumentation values to retain at that level or potentially grow as more of our customer base and new customer base transition through to a bundled service of both the platform and instrumentation into our intra-monthly costs. So, it's -- to get to that combined cash flow accretion from operating and investing activities will take some time, but we still -- sorry, will be longer than from pure operating activities plus the capitalized development costs. So hence, our funding to support that. In terms of your next question on revenue at the half year, can you repeat that one, please?

Yes. Just the recurring revenue versus annual recurring, you have a certain definition of it that I look at the last half yearly results. I think last half year results, recurring revenue was around $26 million and the annual recurring is around $58 million. Can you just tell us what that is for the recurring revenue for this last quarter?

Sure. So, when we look at our -- the numbers at the half year, we provided a bridge from our recurring revenue to our ARR for the half year. And essentially, what we look at there is what the exit run rate is in -- for the month of December, multiply that by 12 to get what we term our [ mark ]. And then we add on 2 other components, which is those contracts which are in our renewal process. We're not recognizing revenue on them, but we expect to be generating revenue from them once the renewal process is completed. And the final part there, Fred, is the pending or those projects that are in the implementation phase where we're not recognizing revenue on it. So, they are the elements that go to reconciling recurring revenue to our ARR.

Yes. But can you just tell me what the recurring revenue is for the last quarter? Because I guess, by what you're saying, I expect it to somewhat be on the run rate of what you exited the last quarter.

We don't -- for the purpose of these updates, we don't provide the historical -- or we don't provide P&L numbers of these updates. This is a sales update. We provide the guidance in terms of what our expectation is on sales for the next quarter. And we also provide the -- our expectation around the forecast on our transitioning to profitability through the measure of adjusted EBITDA plus capitalized development costs.

That's a first. Okay. Not prepared to say what the revenue is, but you're prepared to say what are you going to do next month. I've never heard of that before, but okay, I'll leave it there.

Thank you, Fred. We will move on to a couple of questions on the debt piece. So, we've got one here around the improved terms of the debt facility that we announced yesterday. So can you give a little bit more color to -- around that discussion with the facility and the upside of that facility. And are these improved terms on the back of increased confidence in our outlook around profitability.

Thanks, Jeremy. So, the position on the debt facility, there were 2 key components on the more favorable positioning. The first one came down to the underlying borrowing capacity that we have within the facilities. Under the original terms, we had an ability to take 2.5x the average last 3 months' recurring revenue. So, if we took an example of an average being $4.5 million, and we had it at 2.5x, that would give us a capacity of $11 million. We had the deal structured at $7.5 million, knowing that we have the ability to leverage that number up. In our discussions with partners for Growth, we discussed 2 components. That was one in terms of our multiple. And the other came down to the amount of cash that we will require to hold on balance sheet at -- throughout the facility. At that time, the amount that we had to hold was half the facility, so $3.7 million. We have now had that reduced to $1.5 million. Offsetting -- so that's certainly a favorable position for us. And as we continue to manage our cash and cash requirements globally as an entity and as a company, there are times where we do need to ensure that we have cash balances around $4 million to $4.5 million, and there are other times when we can manage to balances that are less than $3 million. It comes around in relation to our expectation around major cash outflows, for example, paying of monthly salaries, for example. So, a very good outcome. More importantly, with this update, there was -- the addition was done on a pro rata basis in terms of existing fees. And the term has not changed. We are still on a 3-year term with no amortization. So, the -- that's, again, a positive outcome for us.

Very good. Thank you, Justin. A question around operating expenses. So, we have spoken about managing our expenses very carefully in FY '24. Can you provide any color on expenses in '24 versus '23? And have those expenses grown or reduced?

Look, I think in terms of looking at from '24 to '23, one of the things that we are acutely aware of is how, as we grow, we efficiently provide capability and support for our new customers coming on board. That was one of the reasons that led us to opening up our Philippines center of excellence around 18 months ago. So that is now sitting with -- we have a seat capacity there at 25, but we bypassed that and adopted the hybrid working arrangement within the Philippines. So that has been a way that we have funded our growth. Second to that is we are also looking at other locations and what we talked about, in that regard, locations of labor. And there's various areas around South America, Chile is one or Santiago, where we have an existing office, where we're investigating potential to put another center of excellence there where we have access to quality candidates and a quality workforce and how that may assist funding our growth going forward. As Jason mentioned, we continue to monitor our costs quite closely and where we can move to a more efficient operating model.

Fantastic. One question that's come through around the EVS Water consolidation into Industrial following that release a few weeks ago. So, what does that move mean in terms of Water growth and company's focus on Water going forward?

Yes. Specifically for the short term, the focus is going to be around recognizing revenue and working with our customers to get up, get going and use the product. As you would have seen in the half yearly report, there is a big delta to the ARR to revenue in Water. So, our focus in the short term is to maximize that part and work with our existing customers. The longer-term growth with Water will certainly be to secure opportunities where there's a cross-sell opportunity within the Industrial sector. As we said, we're focused on wastewater. In that wastewater, we have seen, almost always, where we sell [ SUEZ ], we are selling Omnis -- so we will continue to see that opportunities are already presenting themselves to continue that path. In this quarter, we did sign a Middle East opportunity around desalination. And so, we will continue to sign selective opportunities there. But we are focused very heavily on maximizing the revenue portion of Water, certainly in the short term.

Very good. The other question that has come through is around the -- around dividends, actually. So bearing in mind the outlook, anticipated expansion over the [ outlook ] period, when within our -- question is when within our 5-year plan, we'll be able to return a dividend to shareholders?

Look, that's something I don't want to respond to you today, but we can certainly take that up in the Board and come back to you. But I think our key focus us and I do want to stress this to everyone on the call, we want to get to a sustainable profitability position where we know that we can continue to invest into the company for growth and seize the market opportunity. If you look at our head count, we have been incredibly flat over the last 4 years yet we've grown significantly and its great complexity around what we're doing around the world. So, we have been able to grow whilst controlling cost, which I think is a testament to every single [ employee ] which contributes to the core results of the business.

Another question around the debt piece. So, can the company afford to pay the $7.5 million to $12.5 million extended facility back in the 3 years? And what does this mean in terms of our profitability targets as well?

So, in terms of the ability to repay at the end of 3 years, there will be -- we won't be in a position to have that amount fully paid out in 3 years. What we have got is an ongoing and enduring relationship with, for starters, Partners for Growth, but we also have ongoing relationships with our existing bankers, who is -- for those on the call, is HSBC. And when we first investigated our debt facility, we were looking -- we did have a discussion with HSBC. And as we transition to profitability, they may become a potential source of debt for us into the future. In terms of debt and debt facilities, there will be -- as we transition to profitability, we will continue to use debt as a source of funding as it supports us in terms of our instrumentation that's out at customers and provides us a funding facility for the inventory that we hold on our balance sheet. So, there is the expectation that debt will continue to be a component of our structure going forward, albeit within our managed position supporting the growth potential for the company. On profitability, again, after that call -- that question earlier around our expectation of transitioning to profitability as we exit FY '24 and when we get into FY '25.

Thanks, Justin. A question probably not dissimilar to what you answered before, maybe a bit more color on this one, Jason. So new ARR for each quarter this year has been flat. Does this mean the effect in the go-to-market and sales team is an issue?

Yes, I don't think it's an issue. I certainly think we've been focused on with tight fiscal management through the year is putting our efforts where we know that we're going to get a mixture of both short-term results and building out for long-term scale. So, what we saw with Cerrejón as an example, in this quarter, is the significant expansion that is based on the product doing what they need it to do and then being able to leverage the way that the product is sold in software capability and the modules. So, for us, we really are focused on sales efficiency, sales effectiveness coming through and deploying people into the segment that we know we build long-term efficiency and scale. So, I think it is more of our persistency was core. We wanted low risk in this year as we transition through and we want to be able to execute, and that's where we are focused on. I think FY '25 certainly would be an accelerator based on the new logos and new sites that we have won. So, you'll see that efficiency and effectiveness to increase over the coming years.

Question has come through from Rob Bruce. A follow-up question on the Water piece. So, Robert says, I would have thought that the benefit of merging Water with Industrial was around maximizing cost savings and improving cash flow as opposed to maximizing sales. So, what were the cost savings and a reduction in head count that we achieved from merging the two?

Yes. So, as we released to the market, we've put out $2.5 million and to answer Rob's question, absolutely, it is around the cost base and really focused onto that part. It will certainly [ limit ] the growth, and said, we want to be focusing on turning revenue on to come through. So The cost savings is $2.5 million. which we announced to the market.

Annualized $2.5 million.

On an annualized -- on an annualized basis.

Very good. There are a handful of questions that we're not going to have the time to answer. We are now out of time. So, for those people who have submitted these questions, some of them have been submitted anonymously, I'd encourage you to -- please, if you could e-mail us those questions to [email protected]. We're then going to be able to respond to you directly with those questions as well. But Jason, that concludes our Q&A. I want to pass to you for final comments.

Thanks. Look, going back to the -- some of the questions that were raised, we want to make this clear, we are focused on transitioning the company to profitability on a sustainable basis. And that's really important. I'd caution you not to get to an artificial point, that then you're going to be live with significant problems downstream. So, we want to support our customers. We want to be minimizing the churn. We want to be focusing on where we do get to with a multi-year view, not just a one-quarter result. But the key part here is we've got a strategy in place. We've spoken openly around our land and expand and scale. We're seeing the dividends of that. I think as we transition next year into FY '25, it will come into that a profitable basis, and that's a significant milestone. And I can tell you that all of management, all of staff are focused on achieving that result and ensuring our customers will continue to trust us and put their important assets and operations in our hands. Now, we have got some exciting opportunities in the pipeline for the balance of '24 and into '25, which I think when they come off, will be certainly transformational for us. And so, we're certainly focused on putting our effort in behind that. So, thank you for joining in. Really good discussions. I think we're all aligned on what the focus needs to be, execution is certainly critical. So I thank you for that. Certainly supports what we're doing at a management and a Board level.

Thank you, everyone, and good morning.