Envirosuite Limited (EVS) Earnings Call Transcript & Summary

Good morning, everyone and welcome to the Envirosuite H1 FY '25 Results Presentation. My name is Jeremy Gaedtke. I am the Director of Marketing & Communications at Envirosuite and pleased to be the moderator for today's session. I'm joined here by Envirosuite CEO, Jason Cooper; and CFO, Emma Stepcic. We're very much looking forward to sharing the company's results today. But before we begin, a little bit of housekeeping around Q&A. We do have time for Q&A at the end of the session today and look forward to receiving your questions. To submit a question, please use the Q&A function of the Zoom webinar software, submit your question in writing and we will move to them at the appropriate time. But with that, I'd like to pass over to Jason to begin the presentation. Thank you, Jason.

Thanks, Jeremy, and good morning to everyone. Thank you for joining us for this presentation session. Documents have been uploaded this morning onto the ASX portal, and we'll be walking through the presentation today, as well as referencing some of the information included in the report. Today, we want to show you how we're building a robust purpose-driven business, one that is deeply aligned with our customers and positioned for sustainable long-term growth. Over the past 6 months, we remain focused on driving high-quality recurring revenue, strengthening customer retention and expanding our market presence. The disciplined approach is delivering meaningful results. Emma and I will take you through our financial performance, key strategic milestones and why we are confident in the path ahead. The structure of today is I will start off with introducing Envirosuite, both to the new shareholders, who are joining the call for the first time, as well as our existing shareholder base. I'll then work through some of the key highlights in the H1 results. Emma will then move into financial results. I will close out with outlook, and then we'll move to Q&A, as Jeremy said. Please be active on the Q&A. We want to make this as engaging as we can. So as you know, we are a technology company, and we're focused here on a clear vision, people, planet and industry are able to prosper in partnership. It's important to understand that our customers are the industry, and we're supporting them all around the world to achieve their growth, provide jobs and provide stability and growth. We're also focused on enabling our customers to maximize productivity and profitability, but doing it responsibly. And so that's been a continued focus for us. Today, we're going to walk through some of those examples of actually how we're working with customers in aviation, in mining, in waste, et cetera. Moving into the H1 '25 highlights. I want to start with more of the structural and personnel changes that we have made to the company in the first half of the year. Hitachi Construction Machinery invested $10 million at a 32% premium back in September. Hitachi, as we know, looked at the market for a long period of time and evaluated different companies and technology companies to partner with. And whilst the list started over 200, they narrowed down to us. This has become quite a meaningful change, and I would say, transformational in the journey of Envirosuite. We also appointed the Head of Global Mining Sales in November 2024. Ed Bardo has been now with the company for a period of around 3.5 months and is already making a meaningful impact. And on the lower left there, you can see that the first deal through HCM is in the advanced stages of negotiation. Ideally, we would have liked to announce that today, but it will be in the relatively short period of time before that closes down. From a Board construct, Colby took on the Chair and Eric joined as a representative from Hitachi. The Board has been supporting myself and the management team in driving a growth plan forward, focusing on sales and how we can accelerate sales in our chosen markets, whilst being financially responsible. And then Emma joined in November as our CFO. So part of these results, Emma has inherited, but Emma has linked into the information here and driven some strong insights and already making meaningful change into the business. So I'm excited to have Emma on the Board. Moving now to some of the financial metrics in the first half. We're pleased this year to achieve a positive EBITDA in the first half. And it's the first time we've achieved it in the first half, which seasonally, as you will appreciate, is the harder half to achieve that in. We also achieved $10.1 million in total new sales, underpinned by mining and once again, our Americas success story. 51% growth in the rolling 12-month pipeline for EVS Industrial. This is predicated on the core product and the value proposition that we have, the acceleration that HCM has provided through strong validation, both technology and the investment. It's also a reflection of what we are doing within sales enablement and the maturity of the sales team. You would have seen recently, we announced a significant deal with both NASA and with an ANSP in the North American market. And this has created a whole new segment for us to grow in. We will update what we now see, as the growing and expanded TAM in due course. But we now have set a goal to double ARR every 5 years. And we will give you evidence today to understand why we believe that is achievable. Moving into some of the key metrics, which we feel are important and also consistent with other reporting cycles, our ARR has now grown to $65.7 million. It's a significant step-up of 9.3% on the PCP. But importantly, if you look at the growth in the half, it's a 7.5% growth since our full year results were released. We're starting to see that inflection point now, where we've been able to reduce the churn and grow the ARR. Our customer sites has grown to 451. We'll give a bit more detail later on of why that's an important metric. Statutory revenue is largely flat. EBITDA, though continues -- as a gross profit continues to grow. We have set that future target of 60%. You'll once again see another half, where we had that improvement. And now as an EBITDA, we have a [ 0.2 ], which we've already shared. So our goal is to be #1 in each one of these high-value focus sectors. And it's an important point to remind everyone, we are focused and being consistently focused on those 5 sectors: mining, industrial, waste, wastewater and aviation. In aviation, we already are the global market leader in this space, now with over 200 airports around the world using our technology. We set a clear strategy and focus within the company, and we've been consistent in the way that we've approached this. As I said, we want to become the global #1 environmental intelligence technology company deliver value through customer experience, improve retention and engagement. We want to focus on fast tracking our time to value, and there's some data in here, which we'll get into, accelerate growth in our core markets and leverage our land, expand and scale strategy. Ultimately, we want to be building solutions to solve high-value problems in our core markets, leveraging capabilities in data, science, AI and broader technology. Let's get into the sales part. So $4.1 million in new ARR sales in the first half. As we said earlier, this is underpinned by mining success as well as the Americas. Americas now is contributing a significant portion of our ARR and continues to grow. Our investment decisions over the last 3 years continues to pay dividends. And mining has accelerated in the first half of the year. Certainly, the HCM investment is getting us even more leads through here. So if you look at our underlying growth there for the last 12 months, the top line growth of aviation is now 7.1% and our industrial at 22.9%. I did mention that our industrial pipeline has grown by 51%, and we're certainly expecting a strong second half in the ARR portion. On the bottom left, we show our churn, which has reduced and our growth rate now getting us into the [ $65.7 million ]. Last point I'll touch on this slide is our $6 million in project sales. This is an important part for us because it will lead to ARR growth. But importantly, it leads into a positive EBITDA contribution. That $6 million project sales is heavily weighted towards aviation contribution in this half, both NASA and other aviation projects. I wanted to take the time to explain why project sales play a crucial role in growing our ARR. At the top there, you will see leased instrumentation. Here, we are agnostic to the equipment that we use, but that is then in an ARR model. Below that, you'll see 3 portions of project sales. One is instrumentation sales, which is upfront. Two is solution implementation, and we've given an indicative time line on the bottom. And then 3 is project-specific development, where we have something like NASA, which will take a longer period of time. Now why is this important? It's important because it has a confidence in where the revenue will come from in the second half of this year and into FY '26. The lease component, however, does have an impact on to our cash burn, where we are buying the equipment upfront and then leasing that back to the customer. The reason that we do all of this instrumentation, a, is to make a complete solution, but it is to drive a recurring revenue business model, and that is our focus. It is a key catalyst. So some of the portfolio highlights in here. We have $4 million in new sales on industrial. And what we will continue to do is give greater insights into how the 2 portfolios are operating, one of the key drivers that Emma and the finance team will work through. Our average revenue per site, which is one of the key metrics you certainly should follow our industrial business on has again increased, now up to $107,000 per site and our customer sites is at 249. You'll see that good curve that we have of 13.1% PCP on our total ARR for industrial. What's critically important on this one is our expand and scale is working with 79.4% of our new ARR coming from existing customer logos. We want to continue to win new customers, but very importantly, we want to continue to expand and scale. On our aviation side, you'll see a step change there on the total ARR up to $39 million. And our project sales of $4.5 million has been a meaningful contribution. Customer sites have stepped up to over 200. But importantly for us, we are now seeing a significant TAM expansion with a carbon optimization solution, which has been validated. It is clear that this aviation industry is committed to net zero targets, and we're well positioned to support that growth. A key part of our strategy has been focused on to accounts and customers that we can have for a long period of time. Our land, expand and scale strategy started in FY '22. And you'll see here the noncore and the core. The core sites has grown from 379 up to now 432. Through this period of the last 4 halves, we have lost sites, which we have communicated previously. These were fixed term or finite term contracts, could have been construction. They may have been low margin and may have been in segments that we did not or could not support moving forward, also connected to some of the legacy hardware in the business. What's been important here is the growth of that core business. We decided to share an example of a Tier 1 global mining company of how this has grown with focus with execution. 2012, we landed our first site in the early stages, very early stages of the software platform, and you see that this has stepped up. And in 2021, we expanded site 1 and 2, but also scaled site 3. But where the real accelerator has kicked in is when we set our strategy for land, expand and scale. So expanding out sites 1 and 2, we scaled to sites 4 and 5 and into site 6 and in site 7. And you can see there that we've also focused on expansion. This customer is now having a meaningful contribution to our ARR globally. We're happy to have them as a customer, and we'll continue to work with them. A different example around expansion is here in Scandinavia. Here is a mining company, who is close to a community, and you can see here from the image. We won our first site, but then within 9 months, we've been able to expand that out to a second site. And that's through, again, the product adoption coming in, the focus around customer success and having a clear value proposition that is resonating in mining. A different example here is a customer in Europe, who's been a long-standing customer. They come to us with problems that they're experiencing, and our research and development team are able to understand the problem, our domain experts and [ SMEs ] around the world are able to work with them to develop new innovative technology. And from this new innovative technology, we're able to turn that into product and scale this out. And the underlying problem here is still noise and the impact on community. And this is where we have a rich history of being able to innovate and bring value through. My last slide before I close off and pass to Emma is around the progress that we have made with Hitachi Construction Machinery. Coming from the first discussion that we had back in November 2023 to signing the investment deal with Hitachi in September to the MINExpo. We now have a significant number of opportunities that we're working through in the pipeline. And as I said at the start of the call, we're happy to announce that we're very close to being announced the February first opportunity with HCM. The photo on the right is of a recent collaboration, where both Hitachi and Envirosuite were in South Africa on the Hitachi booth. And again, numerous opportunities and brand awareness has been created through that. Hitachi is bringing a huge amount of value to the company, to the product direction and the product strategy as well as the underlying growth engine. So we will be pleased to update the market with continued progress on this. With that, I'm going to pass to Emma.

Thank you, Jason. I will now take you through the financials, beginning with the income statement. Past strategic decisions have resulted in a positive outcome with EBITDA in the first half positive for the first time at $204,000. Recurring revenue was up 4% to $27 million and actually 5% up when normalized for the [ loss ] of the Australian Department of Defense churn events, which were announced back in the third quarter of the 2023 financial year. The recurring revenue growth was enabled by the increase in average revenue per site in the industrial product and the continued traction in the Americas with both expansions to existing customers and new logos. Nonrecurring revenue at $2.5 million is 27% down on the first half of last year due to lower project sales at the back end of the 2024 financial year. Pleasingly, however, we saw record project sales in the first half, which should translate to elevated nonrecurring revenue in the second half. Gross profit on an EBITDA basis increased by 2% to $15.9 million and represents a 2% improvement in the gross profit margin to 53.8%. This improvement reflects how the business has set itself up to leverage operations and the efficiencies gained in the Customer Success team. We continue to assess business operations for further optimization to the cost of revenue. Total operating expenses decreased 3% to $15.3 million, $0.5 million lower than the first half of the 2024 financial year despite the continued inflationary pressures. This is a good result in the current environment. And as mentioned earlier, EBITDA was positive at $204,000, reflecting the operating cost leverage and overall disciplined management of costs. Focusing on the operating expenses, sales and marketing at $6.5 million is 22% of revenue. This reflects the continued investment in sales growth through sales enablement, Americas sales and Global Head of Mining sales to leverage expansion across the Hitachi Construction Machinery customer network. The higher sales and marketing expenses are balanced, as a result of disciplined cost management with the lower G&A expense at $4.9 million, down 7% and reduced to 16% of revenue from [ HCM ]. Moving to R&D, we continue to invest in technology underlying our platform and deliver -- and the team has delivered significant efficiency and security improvements. Our success as the world-leading environmental technology company reflects our continued focus on investing into R&D. The R&D percentage of revenue has remained consistent at 23%. This reflects the enhancement in the technology platforms and reduced requirement for operating expenditure to maintain the platforms, allowing us to invest more in the development of future products that meet our customers' evolving operational and technology needs. The investment has also improved scalability and time to value for the Omnis platform for our industrial customers, and there is a road map in place for achieving the same across Aviation's ANOMS platform, which will enable faster time to value for aviation customers and drive-up gross profit margin with lower customer support costs. We expect the total R&D as a percentage of revenue to normalize to between 16% and 19%, as ARR grows over the 5-year horizon. Now I want to take you through the reconciliation of the recurring revenue recognized in the income statement to the reported ARR. We start with the annualized recurring revenue for the half year, which is the reported result of $27 million doubled. Next, we add the balancing factor of $3.5 million to come to the MARR. This reflects the recurring revenue that has been implemented late in the period that will be recognized for the full period in the second half of the year. From there, we include $1.4 million for customer contracts that are in the process of renewal. When these are renewed, the revenue related to the customer -- sorry, the revenue related to the out-of-contract period is recognized. Finally, we have new ARR won that is pending start of $6.9 million, reflecting newly contracted ARR, which is subject to implementation with the customer before it can be converted to ongoing recognized revenue. The environmental solutions we provide to our customers are complex and the implementation requirements can vary across our focus sectors. We are further impacted by individual site requirements. Implementation often requires deep collaboration with the customer, particularly when we are landing a new customer. Implementation might also be impacted by the regulatory and fast-changing geopolitical landscape across countries in which we support customers. We are focused on faster implementation as the sooner we can implement, the sooner we can earn recurring revenue. Moving to the next slide. We monitor implementation through our understanding of time to value. That is the time between signing a contract and implementing the platform. When the customer starts gaining operational insights, we can build. Over the past 3 years, with improvements across our supply chain and the automation of solution implementation, along with the impact of our expand and scale strategy, we have been able to reduce the median time to value by 93 days. That is from 173 days across 2022 to 80 days in 2024. We are actively working to reduce this further. We remain focused on our capital strategy and balance sheet through this growth phase. This ensures that we have the right capital structure to support investment in our core sectors and particularly mining with the HCM investment focusing on pursuing ESG and net zero related development and market opportunities. Cash at 31 December was $4 million and coupled with our $4.7 million undrawn debt facility, we had $8.7 million of funds available. In the half, cash of $2.3 million was utilized towards operating activities, $1.9 million was invested in our leased equipment and inventory, which is revenue generating. And another $2.9 million was invested in the growth through the development of software internally. The debt facility was paid down by $1 million and debt costs of $700,000 were also paid. Finally, we paid aging trade payables of $1 million related to the first half of the 2024 financial year. We will step through the operating cash flow in the following slide. Trade receivables were $12.3 million, and the increase reflects the delivery of project sales invoiced in December and nonrecurring revenue invoiced in advance, which both were settled in January. Inventory increased to $4.8 million, and this represents both optimized inventory levels for monitors to support activations in the second half and investment decisions made previously in the expectation of customer orders for long lead time monitors ordered back in the 2023 and 2024 financial years. The demand for these monitors has since reduced. And therefore, we expect that these slower moving items will take around 24 months to clear. Leased equipment held on the balance sheet represents instrumentation leased to our industrial customers. This increased 24% over the half to $5.2 million. Across the Americas, we are increasingly seeing customers prefer to bundle instrumentation into their recurring revenue across the contract term. The revenue model provides a benefit in the outer years, as we retain the recurring revenue when the instrumentation is fully depreciated. The debt facility is $7.8 million, offset by borrowing costs for the $7 million reflected on the balance sheet. The current loan capacity is $12.5 million, so we currently have a $4.7 million undrawn debt facility. We actively minimized interest through optimizing the cash balance with debt levels. With a borrowing formula of 3.5x trailing 3 months average recurring subscription revenue, we are in the position to engage with partners for growth to increase the loan to $16.2 million should this be aligned with our capital strategy. Cash flow for the underlying recurring revenue business is predictable and cyclical with a portion of billings prepaid on an annual and quarterly basis. However, there is still a portion of cash flow that remains unpredictable and lumpy given the nature of project sales converting to nonrecurring revenue. Cash outflow from operating activities was $2.9 million, which included the payment of $1 million for aged trade payables related to the first half of 2024. So after taking that into account, the outflow for the current period operating activities was actually $1.9 million. Further, we saw the seasonal impact on operating cash outflows in the first half with STI cash payments that happened in the first half of each financial year. In additional to the season weighting, we expect the second half to be different with operating cash flows to be positively impacted by the higher recurring revenue based off the MARR run rate coming into the second half and as we build the record high project sales that we announced today. These projects should fall through to a high portion of net cash inflow. Again, free cash flow has been impacted in the period by the payment of aged trade payables with an adjusted outflow of $7.1 million, reflecting the investment in revenue-generating leased equipment and internally developed software. We retain our focus on the cash flow and driving positive outcomes. We have recently even signed an ARR and project sales contract, which includes a significant upfront cash payment for recurring revenue, which we expect to receive in the second half. The outlook is positive with the new business pipeline providing confidence in the future.

Thanks, Emma, and thanks for going through that in the detail that you did. We're going to move now to the summary of the results and then outlook and then into Q&A. Hopefully, we have a few questions coming through. So in summary, Envirosuite achieved $10.1 million in total new sales, 78% of that new ARR coming from existing customers. Our land, expand and scale strategy is clearly working and has continued alignment on that. We've recently appointed a new Chief Product Officer. And one of his key roles here is to focus on how we continue to support our customers in creating value and also for us to be able to provide additional revenue streams. We achieved $0.2 million positive EBITDA in the first half of the year, $6 million in project sales, which will lead to improved cash flow generation in the second half of the year and into FY '26. As Emma pointed out, we have had quite a significant improvement in time to value over the last 3 years. But we're not resting there. We'll continue to improve that. Coming back to our strategy, our clear strategy and focus slide at the front, this has been something that we have continued to work on since we've been in the business. Hitachi Construction Machinery has validated us as a company, our technology, our road map into the future, even our business model and our future growth and profitability ambitions. It will also help us to drive into sustainability and to drive a broader ESG impact. And then lastly, the Board being refreshed and Colby coming in as Chair. It has strengthened the position of the company and has got a clear mandate around growth and driving sales, but also balancing the cost structure. And then lastly, with Emma coming and the broader finance team coming through to help. So moving forward, I want to make sure that we all understand the importance of this. This is the first time that we have put out a goal like this, that we want to now double our ARR every 5 years. If you go back and have a look at the underlying historical trend, our aviation business has been growing single digit. Our industrial business has been growing in the 20% to 25% range. And you'll see certain cycles on the first half or second half being higher. But that's the underlying. That's what gives us that confidence. We've shown to you the focus on our core customers moving forward, and that will be a continued path. We want to be winning those new logos. So we will invest for further growth in mining. We'll continue to support the Americas traction. Our sales effectiveness is improving through the sales enablement that we've rolled through. So that's a 51% growth in our rolling 12-month pipeline. And coming back to almost 80% of our new ARR coming from existing customers is a clear focus for the entire company. In Aviation, we know that we've got new segments now that we can pursue. We are market leaders in and around noise and the community for airports around the world. But now with our new ANSP validation in this space, we want to now push on and drive the sales and growth for this sector around the world. So it gives me, Emma, the management team and the Board the absolute conviction to set that target around doubling our ARR every 5 years. So with that, I want to thank you for the presentation. We will move now, Jeremy, to the Q&A.

Thank you, Jason. Thank you very much, everyone, for submitting your questions so far. Before we begin with the first question, just a quick reminder to please submit your question via the Q&A function in Zoom and we will move through those. We've had a number of questions around profitability. So Emma, I might pass this one to yourself to start with. What is Envirosuite's plan and time line to achieve profitability?

Yes, sure, Jeremy. So as you see, we did have an EBITDA positive half, which is very pleasing, and we expect to be EBITDA positive on an annual basis going forward. Based on our projected ARR growth and the operating leverage margin improvements that we are seeing, we will start to move towards NPAT profitability, and we do expect to be in an NPAT profitable position from 2027 onwards.

Thanks, Emma. Quite a few questions also around the cash utilization in H1. So Emma, maybe while you've got the microphone, a little bit of further commentary around how we've used cash during H1.

Yes. Thanks. So cash in H1 has been generally used, a, towards our operating activities; b, we've invested $1.9 million in leased equipment and inventory, which is revenue generating. We have also invested in future growth, and that's $2.9 million that is being invested towards internally developed software. In addition, we spent $1.1 million repaying the loan, and we do this in order to manage the debt costs. We also paid $700,000 towards those debt costs, and we paid $1 million towards aged trade receivables, which related to a prior period. H2 will be different. We will have removed the seasonal expenses such as the STI payments that happened in the first half of the year. We don't have any of the aged trade payables that aren't related to this period. And we have the higher recurring revenue of the MARR run rate increase. Additionally, we have the record project sales that we announced today that we should see come through as cash in the second half of the year. And as I noted, we are focused on the cash, and we have agreed recently a contract, where we do have a large cash upfront payment as well.

Thanks, Emma. Jason, one for you. A few questions around what our capital strategy is moving forward?

Yes. Thanks, Jeremy. Look, so this is something, obviously, that the Board and Emma and I talk about, and it's always what's right at the right time. And so certainly, with our partners for growth on our debt provision, we feel and as Emma has gone through on the construct that, that gives us the right runway for the business to go and execute under its current strategy. So we'll continue to focus on sales. We will continue to focus on cost management coming through, and we'll continue to evaluate options, as the company evolves through. But we're pleased that we do have a debt facility in place with Partners for Growth, and it is in a non-dilutionary way that we've done that. So we'll continue to operate and communicate [ with both ].

Thanks, Jason. There was a good question from an investor submitted via e-mail ahead of the webinar today, actually. So thank you to that investor for submitting the question. The question was related to EVS Water and the products there. Can we please have some clarity and feedback regarding how sales for water are going within the industrial portfolio? There's a couple of follow-up questions around any barriers to uptake. What's the current ARR? And what's the future hold for SeweX?

Okay. There's a lot in that question. But thank you for putting that in ahead of time. It does help us on to that part. So we -- as we announced last year, we had to make a hard decision around the water technology business, where we were struggling with customers around the customer data set. And so, we have put our effort into turning revenue on, working with customers to understand their constraints and then working within those constraints to generate both revenue and the value within the technology. The business has now been absorbed into the broader industrial part. So we're getting cost synergies in place with both the development team and then the support infrastructure around that and that's something that we will continue to do. We won't be separating out the numbers for water. We will be rolling that into the broader industrial part. So at the moment, the focus here is to recognize revenue and turn that on. The customers that we're dealing with are quite strong customers around the world, they are Tier 1 customers. And so, they're wanting to have a good impact into this area. So we want to make sure that they've got referrals that are working through. SeweX, SeweX continues to be sold. It is being sold more closely with Omnis. And so we are seeing more of a natural tie-in, and this is in relation more to the odor issues that are evolving within Omnis. So Omnis continues to grow through and is an important part of our business.

Thanks, Jason. A question come through here going back to a little bit of the cash and cost conversation. Should we be looking at cutting more costs out of the business? Maybe I'll pass to you first on that one, Jason.

Yes. Look, it's clearly something that we look at all the time is have we got the resources in the right place? Are we investing into the right areas? We have gone through very controlled head count management over the last 2 years and where we felt given certain data points from growth expectations, as an example, the water, we have then made those tough decisions coming through. But also recognizing we have customers in 46 countries around the world that there is a support cost that we have to support. If you've got BHP as a customer or if you've got Heathrow Airport, as a customer, we need to make sure that we are supporting these customers adequately. What we will get as the ARR continues to grow is operating leverage on that cost base. So that's something that I personally continue to focus on. We have leveraged certain areas such as the Philippines recently to support us on that to make sure that we get through the right volume of work at the right cost point. And that's something we'll continue to evaluate on all functions that we have in the business. But I feel today, we do have the right head count in the business. Anything that you want to add?

Thanks, Jason. I can see more questions coming through. Thank you, and please keep the questions coming. One question that's come through here. What are the typical sales cycles given the recent Hitachi Construction Machinery investments are probably more related to mining sales cycles?

What we've seen with mining over the last 2 years is it probably started around 12 months from initial lead or outbound into close order. In the last 12 months, that's come down to around 9 months. And so, understand there's different procurement hurdles, technology parts, security, vetting, et cetera. What's exciting, and I want to call this out as a parallel point, what's exciting is the opportunity that we're hoping to close in February with the HCM customer is that we only met them at MINExpo in the end of September. And so, this will become a record time from first interaction into closing that order out. And what we're hearing from all of our customer interactions, not just HCM led, is that, that validation of a global technology company like Hitachi Construction Machinery coming in of independently vetting the business model, the technology, the road map and moving forward has been one of the strongest accelerators that we've had. And so, I see it as a real turning point for us in the sales phase.

Thanks, Jason. Next question that's come through here is in relation to the U.S. and the Trump administration. What are we seeing as a positive or negative impacts for our business -- regard to business around Trump administration?

Yes. I mean, let's start with the positives. I think Trump is all about driving industry forward. As I said on the start of the call, our customers are industry. We want to support industry moving forward. I'm sure you can all appreciate that there is regulatory differences all around the world into different countries, into different regions. And so, part of the platform's benefit is that it's a globally scalable platform. And so, it doesn't really matter what the regulations are in that particular area. Our platform can accommodate that. So as the regulatory tailwinds move or transition through, the platform still will be able to support that. The other part is, if you look at mining, as one example, most of our mining customers are outside the U.S. And so, there are certain parts that Trump will touch, and there's also a lot of other areas that the Trump administration will not have an impact on. So we're not seeing any change at all at this point in time in the level of engagement or discussion either from existing customers or new customers.

Good. Thank you. A couple of questions that have come through around divestment, the Board and management considering selling any parts of the business?

Look, we look at the business. I think that we have got a fantastic business here. It's a business of 2 speeds, industrial and aviation, each solving different problems. But the aviation business provides a strong operating leverage for us around the world. We -- as I said, we have customers in 46 countries. If BHP wants to go into an area, we need to support that. So I think the business looks great by itself. However, we are always open and considering what are the right strategic options to have in. There's a point in the directors' report, where we have engaged now with Moelis Australia. And so, we're always looking at what is the right path for us to move forward.

Thanks, Jason. Questions come through around aged trade payables, Emma. Question around the -- why there was an aged trade payables in these results and around when we're paying those within supply terms.

Yes. So the aged trade payable did relate to the first half of the 2024 period. During that time, there was some cash constraints, and there was a decision made with that supplier that there would be a longer payment cycle in relation to that amount. With the availability of the investment from HCM, we were able to then flow that through and take that out of the business. We don't expect to be able to -- or to be needing to do any aged trade payables in the future.

Thanks, Emma. Jason, back to you for a question that's come through here around the air navigation service providers opportunity we've referenced and probably a little bit around the announcement we put out last week as well. Can you unpack that opportunity a little bit more for the audience around what it is and what it means in terms of opportunity size and potential for Envirosuite?

Okay. Yes. Look, this is quite a meaningful shift into our aviation strategy. Understand that the aviation industry has got strong net zero targets in place. 2050 has being that point in place at the aviation industry. So this impacts airlines, airports and then the people, who operate the air space, so they are called ANSPs. And what they're looking at is how you drive down the fuel burn, how you improve efficiency. Sustainable air fuel, SAFs, they will come in play. But realistically, that's at some point in the future. It's hard to predict when they come in. So what airspace operators are doing actively now is how you drive efficiency from gate to gate. And that point there is something that you can control. So what we're doing is we're working with the airspace operators to understand the efficiency of each individual air traffic point when someone leaves that gate flies to another destination land will goes to that gate. Now if you understand the data and then you understand the different vectors that can change that, certainly within 100,000 radius of each airport, you then have an ability to make a meaningful reduction in both greenhouse gas and also the efficiency of the airport. So we see this as a pivotal point and ANSPs around the world will all have the same common goal of reducing carbon emissions through this. So our technology is uniquely placed. We have got strong scientific differentiation in that, and now we're able to build that out. So yes, we're really excited. What does that mean for TAM? We need to do a bit more work on that before we put a number out that we want to hold ourselves measurable against it, but it is quite a meaningful shift into where we want to grow.

Thanks, Jason. Thank you for that question coming through. There's another question that's come through here around our improvement in our churn last 12 months metric. Can you provide a little more commentary around what's driven that improvement?

Yes. So this has been a focus for us, absolutely in the way that we have been hiring people in our Customer Success team, the specialists, a technical differentiation in place. It's the way we've thought about product, product adoption, product usage metrics, the way that we've bundled packaging to come through. It's been the focus on our, what we call core customers. So we're wanting to shift away from those fixed term, which we set back in 2022. So it's a combination of having the right customer in the right segment with the right value proposition [ at start ]. The second part then of continuing to add value and step them through. Customers are willing to pay for the benefit of what our technology can do. And so therefore, we're working with our customers. It's being responsive to customer needs, but not necessarily driving the product into 65 different ways. It's about building a scalable product into those focus sectors that we have done. So I feel it's a top to bottom. It's a strategy. It's a customer success. It's product coming in. It's people on the ground in the support functions as well.

Very good. Thank you. That was the final question. It concludes our Q&A for today. Jason, I might pass back to you for some closing remarks.

Thanks, Jeremy. Thank you, everyone, for tuning in. Really pleased with the result in the first half. I think $10 million in new sales sets us up and really positions us to get through what we set ourselves, as the goals with the Board for the full year FY '25. This is about growth, and you'll see the big uptick. So to have 7.5% growth in the first half for ARR is a meaningful change in the business vector. I want to thank, obviously, our staff for digging in, thinking about this problem executing, and it is all around execution. We have the strategy. We have the building blocks, and it is around execution. We will continue to drive that execution with a focus in what's important. Thank Emma for joining and having a positive impact in the first 3.5 months. It's been great to work with you. We do have some clear opportunities ahead that we'll continue to work with, but it's a way that the management team and the Board is working, where I feel we're really well positioned. We have set ourselves a target, and we were comfortable in setting that target. It's a stretch, but it's a very achievable target based on where we've come from and the underlying business that we've built out. So we will continue to communicate how we're tracking to that target, both with macro parts, as well as then getting more into the detail around aviation and industrial and how we're tracking through. We'll continue to watch how we allocate our capital and where our head count is deployed. But thank you, everyone, for that. Good questions coming through, and we'll communicate on any material points via the ASX, but we will also have another communication obviously, on the full year results. So thank you to our shareholders for joining in. Thank you to our staff. And importantly, thank you for our customers all around the world.

Thank you, everyone. That concludes today's webinar. Good morning.