Straker Limited (STG) Earnings Call Transcript & Summary

Thank you. Good afternoon to everyone who has joined us today, either in person or online. My name is Heith Mackay-Cruise. And it's my absolute pleasure as Chairman of Straker Limited to join you -- to welcome you to this annual meeting, our 5th as a publicly listed company. Thank you for your attendance. It being 2:00 p.m. Australian Eastern Standard Time and 4 p.m. here in New Zealand, the nominated time for the meeting, and having been informed that a quorum is present, I now formally declare the meeting open and ask my fellow Director, Mr. Amanda Cribb to do a traditional Maori welcome.

[Foreign Language]

Thank you, Amanda. I will now take a few moments to explain the hybrid meeting and voting procedures that we are using today. I would also like to remind those shareholders participating online, that if you do experience any issues with connectivity to the online platform for this meeting, please revisit the instructions provided on the web page for the meeting. You can also refer to Link's online guide available on the platform under Downloads, as this will assist you with the processes for voting and asking questions. Now for those shareholders participating in the meeting or via online platform, you can cast your vote directly using your electronic voting card that you received when you validated your registration. To cast your vote, scroll to the bottom of the voting card and click the blue button, Cast the Vote. If you change your mind, simply select the Edit Card button. You can change your vote as many times as you wish up until the close of the poll at the end of the meeting. Please ensure you submit your votes before the conclusion of the meeting as once voting closes, all voting cards, whether submitted or not, are automatically submitted and cannot be changed. You can vote at any time during the proceedings until I declare the voting closed. I will close the voting after all the resolutions have been considered and once we have concluded the Q&A section. At the conclusion of the meeting, you will also see a red bar with a countdown timer at the top of the webcast and slide windows advising the remaining time left for you to submit your votes. Please note that only shareholders, proxy holders or shareholder representatives may vote. Now for those of you attending the meeting in person, you would have been given an attendance card when you registered on arrival. If you have a white voting card, you are a voting shareholder, proxy holder or corporate representative and have chosen to vote using a paper voting card. And obviously, you're entitled to speak at this meeting. If you've a blue card, you are a nonvoting shareholder. And while you are entitled to ask questions and make any comments, you are not entitled to vote at this meeting. If anyone with a white or blue card wishes to speak, please make yourself known. We will have a roaming mic at the appropriate time. Please identify yourself to me before asking your question. I now declare voting is open and will close after the Q&A section. We will provide shareholders with the opportunity to ask as many questions as you wish, and we will consider questions before each resolution. If you wish to ask a question, please click online the Ask a Question box at the top or bottom of the web page for proxy voting, select a category or a resolution to which the question relates, type your question and click the blue Submit Question button. This will send the question through to our CEO or Company Secretary. And if your question has been answered and you would like to exercise the right of reply, you can do so by submitting another question. I will consider all questions submitted online and alternate between those questions here on the floor and those online. I would like to begin the meeting by introducing my fellow directors who have joined with me up here today and also some executives who will be presenting today, both in person or online. Joining in person on my far left is Mr. Steve Bayliss, our Independent Non-Executive Director and Chair of our People and Culture Committee. On my immediate left is Ms. Amanda Cribb, who you just heard from, who is our Independent Non-Executive Director and Chair of our Audit and Risk Committee. Between them is Mr. Steve Donovan on my left, Non-Executive Director. On my far right is Mr. James Johnstone, Non-Executive Director. On my immediate right is our Founder, CEO and Managing Director, Mr. Grant Straker. In the room is Ms. Matilda Emmanuel, our company's Secretary. And presenting today online from Europe is our CFO, Mr. David Ingram. I would also like to acknowledge the attendance of Mr. Mark Nicholson in the room here today as well as our audit partner, Richard Croucher, from our auditors, BDO; Ms. Louisa Di Bella from Talbot Sayer, our Australian lawyers, who are online, Mr. Dean Oppenhuis from Bell Gully, our New Zealand lawyers, who are also participating online. Today's agenda will include a short address from me, followed by a presentation from Grant Straker, during which he will provide an update on the business. At the conclusion of Grant's presentation, we will respond to shareholders' questions which have been submitted by the online platform or in person. Following the question-response session, we will deal with the formal business of the meeting, including considering the resolutions as set out in the Notice of Meeting. Each resolution will be considered in turn, and we will allow time to respond to questions regarding each resolution. I will take questions from the shareholders in the room first, followed by questions that have been submitted online, and the meeting will conclude at the end of the formal business. So before I talk in detail about the performance of fiscal year 2023, I would like to start by commending the dedication and commitment of our Straker team. I'll start, some here in the office with me now and many online in offices all around the world are critical in delivering our vision to be the leading player in the language industry, providing AI-driven technology solutions for all our customers. Their hard work has yielded strong results, both operationally and financially. Looking at the market conditions endured by the language service provider industry, that can be fairly described this year as underwhelming, but still positive. The industry's growth rate slowed markedly in the face of uncertainty induced by events that now seem to have faded from the headlines, surging inflation, rapidly increasing interest rates and energy crisis, geopolitical uncertainty in Eastern Europe and widespread layoffs in the tech sector. The combined effect of these unfavorable influences was to engender uncertainty in our customers, resulting in a moderation of spending as they lowered order volumes and reduced the number of languages being localized. Our sense, however, as we sit here today is that this negative dynamic is starting to stabilize. The other feature of the marketplace in fiscal year 2023 was the emergence of generative artificial intelligence, best exemplified by the November 2022 launch of ChatGPT. AI has long been a feature of our industry and more importantly, of Straker's own technology offering. However, the sudden emergence of ChatGPT in particular, has given more prominence to AI in the considerations of customers and investors to a degree not previously experienced. Straker unequivocally sees generative AI as an opportunity, whether this be in an expected surge in automated output that needs to be localized, revenue opportunities with this anticipated deluge of content or in a heightened awareness among C-suite executives at potential customers that they require a sophisticated localization partner with expertise beyond the capabilities of the vast number of [ cut-edge ] industry size players that are still the hallmark of much of our industry. Grant Straker will elaborate further on these matters in his presentation. I would like to make a brief comment on our name change. There is perhaps no better way to underscore our value on the dynamic state of the industry than the recent change in the company's name to Straker. Dropping the reference to translation may seem a modest modification. But to us, it is a very symbolic of the evolution of Straker's technology, and it's broadening applicability beyond our traditional business of localization and translation into new, adjacent and fast-growing markets, such as the verification of AI-driven content. By retaining the Straker name, however, we also ensure continuity of brand recognition with our existing clients. Straker's financial results in fiscal year 2023 did reflect the tougher macro conditions I described earlier and which we're clearly beyond our control, but also management's proactive response to control costs. We continue to deliver growth this year, building on our reputation as a changemaker in the international translation sector and consolidating our reputation as a globally capable technology-led translations partner. The company delivered revenue of $59.4 million in fiscal year 2023, a top line increase of 6% over prior year. All of this was organic as we did not close any acquisitions last year. Customers restrained on spending increased as the year progressed, particularly affecting the second half of the year. Whilst revenue was slightly below our revised guidance, in our view, this is a credible result from the company in the context of both market conditions and the extraordinary 78% growth Straker recorded in the prior year. In terms of profitability, the company closed a year strongly as we enjoy the simultaneous impact of materially expanded gross margins and the results of management's rigorous focus on costs. The company handily exceeded its market guidance on the former and achieved a 20% reduction in the latter over the course of the year. This provided dynamic cumulative -- I can't understand that word myself, in a consecutive word of profitability with adjusted EBITDA of $1 million for the full year, materially higher than the prior year. Our CFO, David Ingram, will go through the numbers in more detail during management's presentation immediately following my remarks. Operationally, there were a number of areas of progress this year, not the least of which was the extension of our existing 2-year strategic translations agreement with IBM. Signed in November 2022, the new agreement runs for a further 3 years and now covers around-the-clock translation of any combination of languages IBM might request. From a product perspective, we developed and launched the Ray Language Cloud, a leading frictionless language cloud product in the market, plus its integration with [ Workplace Super Act ] like Slack and Microsoft Teams. This aligns with our strategy to be where the customer works, an approach designed to allow clients to order and manage translations with their normal workflow. IBM was our launch customer for this application, offering outstanding validation of its utility. I would also like to bring to shareholders attention, the strong performance of Straker's most recently acquired business, IDEST based in Europe. It outperformed market conditions and has continued to perform strongly in its second year of Straker ownership. Our operating cash flow was $1.4 million in fiscal year 2023, which was a strong turnaround compared to an operating cash outflow of $2.4 million the prior year. In fiscal year 2023, the company saw improvement in operating cash flow half-on-half and the general trend of improving free cash flow on a quarterly basis as the year progressed. Assisted by this cash flow performance, Straker ended fiscal year 2023 in a strong financial position, underpinned by a debt-free balance sheet and positive operating cash flow. Cash at March 31, 2023, was $12.5 million. And as recently announced in our quarterly activities report, continues at $12.4 million at 30th of June 2023. This balance sheet strength provides a significant financial flexibility when thinking about our capital management approach. We believe that our current capital strategy to pursue organic growth, to examine appropriate acquisition opportunities as they may arise and to continue to invest in research and development to deploy Straker's technology into new verticals and sales channels, we will better position Straker for the years ahead. I would now like to turn development -- to turn to developments with your Board, which continues to evolve. Shareholders will note several changes, most notably the retirement of Phil Norman as Chairman after 8.5 years of valuable service to Straker. Whilst we had the chance at last year's AGM to thank Phil for this significant contribution to the company, I did want to personally thank him for orchestrating such a seamless transition in Board leadership. During the year, Paul Wilson, the representative of major shareholder, Bailador Technology investments, retired after 7.5 years of valuable service to the company. His successor, Mr. James Johnstone, has joined the Board as Non-Executive Director, representing Bailador. James has a long association with the company, having previously been a Board member prior to Straker's IPO in 2018. As you may know, I joined Straker as Non-Executive Chairman 12 months ago, and I'm very proud to have led several changes implemented by the Board to improve its operating structure and focus, including reconfiguring several Board committees, inaugurating the People and Culture Committee and increasing the frequency of meetings to help the needs of the organization at large. From our shareholders' perspective, amongst the most tangible and relevant change to highlight is the introduction of a share ownership policy. No longer will nonexecutive directors be granted any options. These are protected for the management team only. This policy also mandates that each director requires shares in Straker on market within their initial 3 years of service, equivalent in value to their annual director fees. This kind of policy is not necessarily a common one, particularly among small companies. But as I noted in the annual report, this important initiative fosters alignment between the Board of Directors and all of our shareholders, which is often a key element in corporate success. On behalf of the Board, I would like to thank our CEO and Managing Director, Grant Straker, for his continued commitment, leadership and vision as well as the highly talented and dedicated team he has assembled for their hard work in fiscal year 2023. I send my thanks to my fellow directors for their enthusiasm, dedication and counsel, which are particularly valuable as Straker continues to grow in a dynamic industry, yielding vast new opportunities. And I would like to thank you, Straker's shareholders for your continued support and forbearance in the face of difficult share market conditions, especially since the end of fiscal year 2023. Despite what might be seemingly implied by our current share price, we maintain a strong belief that our industry will continue to exhibit a steady trend of growth. The growth that it has enjoyed for so many years and that Straker is very well positioned to participate in this and thrive with the tailwinds of AI. I will now hand over to Grant for a more detailed discussion of current industry trends, particularly the opportunities we perceive from the impact of AI on our industry as well as some comments on our financial outlook from David.

Thank you, Heith. Welcome, everybody. So I shall jump straight into my presentation -- so first of all, just in summary, we remain in an industry that's evolving, but is a huge industry. It's still -- and there are different numbers, [ $60 million, $70 billion U.S.-sized ] totable addressable market. We have technology that is industry-leading, and generative AI is ultimately starting to show us what we've always believed will happen. And Heith has talked about the share price. And what -- and I think that we've always been a bit underpriced despite delivering 85% growth the previous year. We never quite hit the peaks of other companies with similar profiles. And I believe that because people -- the investors overall believe that one day there might be some sort of technology that might supersede us. That technology has arrived and what we're starting to see is that technology enhances us. And so one of our plans is obviously to get investor support around that. And I think that that's a really, really exciting. But we have superstrong fundamentals in our business. We have 12 years of data assets. We could see this coming from a long way, and we built our systems and platforms to support that. We are a global company with a global reach. We have [Audio Gap] all around the world 8,000 customers. So we have scale. We have technology. We have a large addressable market. We have a fantastic team. We have a lot of growth opportunities. So it is a very exciting time to be at Straker. So if we look at the highlights by 2023, as Heith has mentioned, cash flow super important. And I think the way to look at these numbers is to understand what we did to drive the business [Audio Gap] we could see headwinds coming as we could see things that we couldn't control, wars in Europe, recessions, China and the U.S. not sort of playing together as well as I had in the past. All of those factors played into our decision in the middle of last year to focus on certain areas. And so from a leadership viewpoint, we're very happy with where we ended up because ultimately, we could see one that cash was going to be really, really important for this business. And so that's what we looked at our leverage we can get from our technology. We implemented that. You could see that in our gross margins. we looked at the opportunities for investment in technology as we saw AI also come along into the mainstream. So all of those things, we made a lot of decisions way back then that are certainly going to pay off for us going into the next financial year. So it was a -- from a leadership view point, I think we've made a lot of good decisions that are starting to pay off. And ultimately, we're a cash-generating stable revenue, and we've got still some significant investment in the new opportunities. And that's a good place to be as a technology company right now. So a bit about our business or the industry that we play in. The translation industry is still forecast to grow. And there's a good statement that in 2016, Google Translate translated more in 1 day than all of the translators and the world translated that year. So technology was already doing way, way more than humans, but the industry continued to grow. And that was a step change when that came along. And I think what we're seeing now is another step change. And we'll start to see the industry continue to grow as people now have access to do more languages, to do more voice detects, to do all sorts of different ways in which they can work that they wouldn't have, and they will continue to spend money on this process, and we will continue to be the provider of choice and show that we have technology that can help them. If you look at the market size of this chart, is just showing that 35% -- 39% of the industry is in Europe, 37% is in the U.S. If you look at where our Teams spread, we are really well positioned to leverage this. So again, we've got the right technology, right people in the right place. So a little bit just about what we do. It's very hard to simplify what we do because often, we have taken very complex processes and making them simple, and that's really the value proposition. But if you look at what customers want, regardless of what the technology is changing or how it's happening, they want the automation of content business processes. They want to make it simple. They just want content to flow out of their systems into a process where they can localize it so that they can grow their businesses and do what they need to do. And that's what we do very well in a whole range of formats. Then if you look at -- they want a trusted, verified, accurate translation. And you can't get that from a computer, you get that from a human. So again, we have the technology and the humans and 12 years of data, that means we can do this better than anybody else. And so that's what we add in the middle, and then we automate all of the process flows out. Now as technology changes, where we get that content from will change and where we put it back to it might change. But the fact that we will offer a trusted and verified service and that we can automate these processes through different tools is still going to be a super valuable offering. And in many ways, I think that the industry will now start favoring large companies in the industry like Straker over the 20-odd thousand smaller companies because we can invest in the technology as it starts to [Audio Gap] rapidly. So again, a huge opportunity. We do it for -- we have 25 leading customers, 60% of our revenue, and about 300-plus enterprise customers -- and a lot of transactional smaller customers, which are still important. So when you look at this, we've got a good spread. An exciting thing for us, for me, when I look this is in that middle range. There is a huge range of untapped potential in those customers. A lot we are not doing all their work for them. We might be doing 1 language or we might be working in 1 particular geography. And as people start to consolidate and look at how they're going to grow, how they're going to simplify, what they do around this because everybody is now thinking about AI and how it's going to help and how they can get more out of it, that's a huge opportunity. So again, very well positioned with our customer base and who we work for. I'm going to now show a quick demo. [Presentation]

So now just moving on to our strategy. So our growth playbook from when we IPO-ed and before we IPO-ed, which did deliver very strongly, 20% CAGR since IPO, has been that we would acquire small, smaller players consolidate onto our technology platform, broaden the customer relationships, get some consolidation benefits inside of those organizations and then repeat that process. Now we did that very successfully 9 times. So that playbook worked incredibly well. Now in the last financial years, as Heith said, we didn't make any acquisitions. That's because once we started to see headwinds come into the industry, even though we had the cash to the balance sheet to be able to do an acquisition, when the tide is going out, you don't want to rush in and jump on the first boat. You really want to wait until the tide is out so you can see what you're buying. And that's really what we've done. And so now that the industry has changed. And again, that's a good example of Straker. The tide did go out globally and we remained with the ability to actually generate cash and get benefits. But not all companies going to do that. So now we're starting to have a good look at the opportunities that are out there and how we can actually start to see what assets would really add some value -- so again, just looking at how this playbook has worked over the last couple of years. Obviously, FY '21, significant growth -- sorry, FY '21 to '22. And then you can see that the growth wasn't huge last year, but it was growth in a very tough economic environment. And we had a good mixture of acquired and organic in FY '22. So as we go forward across the year, we start to look at both organic and inorganic opportunities. Looking forward, we can certainly see some big opportunities to start repeating this type of model. So something that I don't think people really understand about our business is just how much of our revenue is repeating revenue. We're not a SaaS business, but 95% of our revenues from customers that repeat purchase. It doesn't mean that they are on a SaaS or a past contract, but they come back to us. They might do 1 job, 1 time a year. They might do their annual report into 4 languages, but they come back every year and do it again. So we have a huge range of existing customers that continually come back to us because of the service and the way that we help them out. So obviously, we're looking to grow some of that in different areas, but it is a really exciting part of our business. But a good spread between pure SaaS revenue, MSAs contracted, master services agreements, contracted revenue that we have with the likes of the EU and then a lot of transactional business. Even those transactional customers just by once a year, do come back to us every year. So again, something that I think is undervalued by the market around our core business. So we've talked a lot about the language cloud. And Again, just to set the scene on the industry, the industry has 20,000 language service providers, most are below $10 million in revenue. If you look at case studies of other industries that have consolidated, it's very hard as technology impacts for those smaller players to keep up with the wave of technology change and to lead in bridge. We believe we are very well placed to do this. And again, there's 2 types of players in this industry: there's technology providers and there's language service providers. We are that hybrid, where we can provide the language service component and the technology component. And again, we've now got the workplace apps, which is a channel that gets us out into a wide-ranging, much broader segment of customers through a network effect. So again, there's $40 billion of revenue that sits in the [ danger ] zone and that -- and we're not the only people that believe this that many people believe and many very savvy investors believe will get consolidated. So it is an exciting time for us and the language cloud delivers this. In terms of just showing that, if you look at IBM, they are very early adopters of the language cloud philosophy, which is a strategic vendor, technology that -- and a service provider in one. So many people will be familiar with this Crossing the Chasm graph. But the idea here is that many other companies in our view, we believe, maybe not as big as IBM, but many companies that have different levels of requirements in this industry will start to look to consolidate. They don't want to go to 10 different vendors. They don't want to have technology here and clunkiness here and all these things. They're going to want to consolidate. And IBM being an AI-driven company and leaders in this space made that decision 3 years ago that this is where the industry was going to go, and it's been a very successful project for them and for us. So again, we believe that this is a canary in the coal mine of where the industry is heading -- so AI, it's been a huge topic of conversation, particularly with investors, with everybody. So what are the 4 big changes that we think will happen: so one of the first ones is that there's lower barriers to quality machine translation. So everybody has been had access to something like Google Translate. But with large language models, it is a step-up in quality from what you were getting with Google. And so it's lowered the barriers to basically free quality and machine translation. That is not a bad thing for us. It means that there's going to be more work to be required to turn that machine, it's not human quality, it's just better quality, into verified quality human-level translation. So that's one. I believe that there's going to be changes in channels as content flows move with integration. So a lot of content is now starting to flow in different ways. I think a lot of tools that people are using now around content, whether it's video production or whatever it is and now these sort of AI-based ones. And so as content starts to change into those flows, again, we believe we can be at the heart of that content change, but that's a secondary change. Changes will -- change in customer requirements, and this is what I talked about in the previous slide. We believe that customers will start looking at different ways in which they work and different types of providers and different tools that they use. And then data security and trust is going to be a really significant part of the change because it's already a #1 issue that has been raised around large language models. You can't have your secure company documents just put into a public large language model index and then available for the world. You're going to want to have closed loop, very secure processes, and this is stuff that we have developed and already have in place. So again, opens up some big opportunities. And back to the point of $40 billion opportunity, a lot of those small companies in that segment won't have the ability to service large customers with that type of requirement, and we do have it. So -- there's also some things that haven't changed, which we've already alluded to, but the need for translators to validate machine-driven content, regardless of the quality, it's just going to be larger volumes of content, more different languages, but you're going to need shipments to validate it. We believe that is still going to be a critical phase. The need for process automation, just coming back to the earlier diagram that I showed about what we do. If anything, it's going to be more, people are going to want to automate more of their content and their process as they work in different ways and the need for trusted, secure partners. So trust in terms of what you're getting in terms of quality and also trust and where your content is being stored and how it's been handled. Really, really critical things as a public company, we offer that level of trust. And so I think with our technology, and we're at. So I think that's, again, something that we can start to leverage. And if I go back a couple of years, maybe that wasn't front and center of a customer's mind like it is now. So the opportunities that we are going to get from this will be significant. AI disruption, this was something that a chart that [indiscernible] consulted with him previously. He did a range of different industries around how we believe our large language models will change the industry. And it's interesting because the 2 areas that we play the most, they enhance machine translation, he believe we'd get about a 400% increase from 2 billion to 10 billion words a year. And then human plus machine would go from sort of 600 million to 800 million. Again, he's just taken a guesstimate as what you would put this down to. But ideally, what we're seeing here or what is showing us here is that the 2 areas of the industry that we play and will increase. So if we end up and rebuild the technology that we've built and we can get that out to market to show people how we could really help them in this, again, huge market opportunities. And these slides are here just to show that there's a perception that possibly it may impact our business negatively. It's actually going to impact it positively. And I'll put transcreation up because that's going to increase a lot. And we can see that people might write a marketing document now and ask a generative-AI engine to write their marketing content for Germany without even getting that translated. But then they might want that content verified and fact checked, and a lot of other areas. So we see some opportunities to use our platform to do that. So Straker [Audio Gap] playbook has been around acquiring companies growing, given organic growth off the back of that. So here is how is our playbook evolving. So what we can see is that -- we're investing in different channels. We can see the change through Slack and Teams, and I think people have heard us over the last 12 months talk a lot about this. And we can see that, that's becoming a default workplace and a default channel where people can [Audio Gap] and use it as a place where they can put things at work in tools. We do it ourselves in Slack. And the whole point around this is that people have too many apps, and they just can't deal with too many apps anymore. So they want less apps and they want to centralize on the ones that they're working with every day. Now we do it for HR from -- approving leave. I'm doing it inside Slack. I don't have to go into another tool to do it. I don't have to log in somewhere else. So we believe that's how people will want to deal with translations. And so we've invested significantly in that space. We believe that the evolution of our acquisition strategy will be very much about strong vertical acquisitions. With IDEST, we went into the government -- the large government [indiscernible] large governmental organizations. And they -- we can see that vertical. We have some strength in there and it's delivering some really good stuff. So again, we will look at certain vertical sectors, whether they be legal or medical and we will look at how we really focus that acquisition strategy. We believe partnerships will start to play a part more as we evolve our strategy. We have a good partnership with Microsoft, have a good partnership with Slack, for example. Can we get some other partnerships with other players that have a lot of content flow or a lot of apps that we can leverage off? We believe that there's going to be verification requirement across a lot of apps. And our platform is ideally suited for that. We are attending a range of AI-driven conferences in the next few months to see and explore the type of partners that we can work with. So again, it's a big opportunity that we did not have even 12 months ago that we can see as it changes. And then also to this Platform-as-a-Service revenue model. We have a language cloud, people can sign up. They can take it as a Platform-as-a-Service. They're still paying for the translations that they require on the volume of that translation, but the underlying technology, whether they're using a Slack or Teams or however they're using our tech is something that they will pay for. So again, I mean, these slides we've shown before, but you can just see the huge volume through COVID of how Slack and Teams has completely changed the way that organizations work. So some initial success from that we've had. So we've got IBM using our Slack app in terms of just first users trialing and working through that. We've got a good partnership with Slack, and they're talking about us and how we work with them. July was really launched the product, get it out there, get some people playing with it, start to get some feedback before we really start to drive the commercial side of it. And that's been successful. We certainly had 120 downloads, over 113 companies. So again, we've started to generate leads and conversations that we didn't have before. We've got some intros into some key Microsoft people that we can talk to around the world. And in August, the month we're now starting to localize more. We're starting to build out the marketing engine now that we've got that feedback and we're starting to look to really drive out and start to attend some conferences in that September, October, November conference window in the U.S. and Europe and really start to drive this platform. So just to look at, again, people can go in and sign up for this now. And we're starting to get feedback on exactly how we will work with this model and particularly in the enterprise space. So again, very exciting and very simple for customers to work with us and [indiscernible] with us. So I'm now going to hand over to David Ingram, who's going to talk to us on the business fundamentals. So David?

Good afternoon, everyone. The first slide shows our revenue and OpEx trend. In FY '23, we consolidated the 78% growth we achieved in the prior year. and as global factors affected growth, we have moved quickly to gain consolidation benefits from technology to move into profit and positive cash flow generation. In FY '24, we look to widen the gap between revenue and OpEx and expect OpEx as a percentage of revenue to be closer to 52%. Importantly, this has been done by keeping the investment in R&D and new business TAMs. So on the next slide. So revenue was 6% up on the prior year to $59.4 million. We had a strong first half, but revenue was impacted by macroeconomic conditions in the second half. In particular, we have a large tech customer base, and these companies, in particular, moved quickly to reduce their costs. Regionally, APAC had a strong year, growing 10%; while Europe had 19% growth, helped by full year contribution from our Belgium acquisition, IDEST; while North America declined 6%, they had a solid year of subscriptions growing this [ 15% ]. Subscription revenue accounts to 11% of our revenue base or the other paying translation services. Further to the positive, we have no significant client losses, and we continue to pick up some good enterprise wins. Significantly, gross margin showed a large improvement, increasing from 54% last year to 57% this year. Margin improvement was helped by product improvements, increased automation requiring reduced human intervention, price increases and acquisition synergies. Furthermore, we strategically decided to discontinue lower-margin business which contributed positively to our overall outlook. This achievement is particularly impressive considering the dilutionary impact caused by the IDEST acquisition, which currently operates at lower margins. Adjusted EBITDA improved from $0.2 million to $1.4 million for the year, with Q4 achieving a profit of $1 million as cost-saving actions taken in Q3 took effect. As part of our restructuring in Q3, we reduced headcount and associated salary costs by approximately 15%. The restructuring reflected synergies from our recent acquisitions and rightsizing the business in light of it's diligent economics. It's important to note that we continue our level of investment in R&D as we continue our product-led strategy. On the next slide, the balance sheet. Look, we have a very healthy balance sheet. Our cash balance is $12.5 million. And when you have no debt. Trade receivables was down 17%, reflecting both improved cash collections and the drop-off in sales in H2. Current liabilities, excluding FY '22 [ earn-out accruals ] was also down 17%, and this kept working capital at $11.5 million, a 2% reduction on FY '22. There are no [indiscernible] payment in FY '24 with a contingent liability of $1.7 million approved for IDEST, which would be due in April '24. On to the cash flow. Our cash flow was a big improvement. Operating cash flow was positive $2 million for the second half and $1.4 million for the year. We met our goal of being free cash flow positive in the second half being $1 million positive, a reduction in costs and strong collections were the drivers of this performance. $1.7 million was paid to acquisitions, of which $1.2 million was for achieving their earn-out targets and $0.5 million as a final working capital adjustment. I will now pass you back to Grant.

Thank you, David. So I'm just going to cover off our outlook statement for the year. So our outlook for FY 2024 as we expect modest revenue growth, stable gross margins with reducing OpEx and to be both cash flow and EBITDA positive for the fiscal year 2024. And look, just -- again, just to summarize, we're in a large market. Our technology is proven. We've got the market aligning to our vision of where we believe the market would head. And we've got some big disruption happening, which is going to open up a lot of opportunities. And underneath all of that, we've got very, very strong business fundamentals and a very strong balance sheet. So a super exciting time to be leading the company. And I will now hand over to any Q&A.

Yes. Thanks, Grant and David. So now is an opportunity for shareholders to ask any questions about the business, including my address, comments from Grant and David's presentation. [Operator Instructions]. And obviously, those in the room, please raise your hand and -- if you wish to ask a question. So we can take at this point in time, questions on anything to do with the business. So I'll start with any questions here in the room?

So Heith, just for that. I was just going to say, [Operator Instructions]

Are there any questions in the room? Okay, are there any questions online?

Yes, we have got 1 question online [indiscernible]. Competition. With AI start-ups able to raise cash, can you see any impact? So can I answer that one David?

Yes, sure.

Yes. we can. We can see some positive impact. And that's why we're going to AI conferences over the next few months because what we can see is that many AI start-ups may well start to use large language model translation requirements inside of what they're doing on their apps and that opens up a huge opportunity for us to use our verification service to grow our business. So we actually see the funds that are going to flow into AI start-ups, it's been something really positive for us.

Thanks, Grant. Just to check again, if anyone has any questions in the room. We do like an engaged AGM. So we do encourage questions. Otherwise, I may have to plant them and ask Merryn, the co-Founder, to ask a question. Any more online?

There's no more online at the moment.

All right. Well, if there are none in the room, [Operator Instructions]. But I might just keep things moving. So will now progress to the formal business of the meeting. And I'm informed that the Notice of Meeting was appropriately sent to all registered shareholders within the requisite time period. I also note that both the Notice of Meeting and the annual report are available for shareholders to download in accordance with the instructions given for attendance at this online meeting. I now table the Notice of Meeting. And unless there are any objectives -- objections rather, I will take the notice convening this meeting as read. During the course of the meeting, I will put each resolution to the meeting. Please be advised that I will be voting for all undirected proxies in favor of each and every resolution. So I now disclose the proxy votes on the screen. They will come up with each resolution. It should be noted that these figures are at the closing time for receipt of proxies, which was 2:00 p.m. Australian Eastern Standard Time and 4:00 p.m. New Zealand Standard Time on Monday, the 21st of August 2023. And I've been advised that all proxies received for the meeting have been checked, and I declare them valid for voting. There are voting exclusions that apply to the resolutions being put to today's meeting, and these are outlined in the Notice of Meeting. So the first item of notified business is to receive and consider the financial statements and the auditor's report for the year ended 31 March 2023, all of which is set out in our company's 2023 annual report. The annual report was published in June 2023 and is also available to download on the online portal for this meeting. There is no formal resolution required for this item, but I do invite shareholders to raise questions on comments -- or comments on the financial statements or on the auditor's report, both our Audit and Risk Committee Chair and our auditor are available for any questions. So are there any questions on the financial statements and the reports that accompany those statements? Nothing in the room, anything online?

Not.