Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Integrated Research Limited FY 22 Results Investor Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. John Ruthven, Chief Executive Officer. Please go ahead, sir.
Good morning and welcome to the FY 22 full year results briefing for Integrated Research. My name is John Ruthven and I'm the CEO of IR. With me today are Peter Adams, our outgoing CFO, and Matthew Walton, our interim CFO. I will open the presentation and then hand to Peter to take us through a detailed financial review. He will then hand back to me to talk through strategy and priorities. As a conclusion, we will open it up for questions and both Peter and Matthew will be available to take questions at this time. This morning, we posted our results presentation to the ASX website, which we will be referring to during this call. You can also find a copy of it in the ASX announcements section on our website at ir.com. Moving to slide two.
Integrated Research or IR, as we are better known, is a global software company providing performance and experience management solutions for critical business systems. We have three product lines. First is Collaborate for unified communications and UCaaS or Unified Communications as a Service. Second is Transact, which sits in the payment space. Thirdly, our Infrastructure product for Hewlett Packard Enterprise or HPE NonStop environments. Common to the customer use cases that we support are complexity, mission criticality and scale. Going to the next slide. We have over 600 customers across our global enterprise customer base, including more than 25% of the Fortune 500 companies. Well-known global brands in key industries, technology, telecommunications, financial services, government, healthcare and higher education. We had strong growth in users on our SaaS platform for our cloud and hybrid solutions over the prior year.
These customers rely on our solutions for performance and experience management of their core mission critical systems. I'm on slide four, CEO key messages. It goes without saying that FY 2022 was a challenging year. The macro environment contributed to sales cycle deferrals and pressure on our retention, particularly for Collaborate. Enterprise customers continue to assess their platform strategy for keeping their technology on premises against the benefits of UCaaS solutions like Microsoft Teams. While we saw over 450% growth in users on our SaaS platform, this growth has been slower than anticipated. Enterprise customers moving from Cisco and Avaya go through a rigorous evaluation process to select their UCaaS experience management solution vendor like IR. To date, this has not been a single sales motion and is a process that takes time. At the same time, we recognize that we have had field execution issues.
In part to address this, we have made leadership changes in both the Americas and Europe. We have realigned the business to drive both efficiency and execution. We remain confident that the market trends across both the Collaborate and Transact product portfolios support our future growth ambitions. Our three-phase growth strategy of innovate, execute and scale remains appropriate for the business. However, we have seen an extension in the execute phase as we look to gain traction with our new products, with scaling the business to follow. Importantly, the balance sheet continues to support our self-funded innovation and growth agenda. We are pleased to have reported a strong cash position with no debt. Company achieved annual profit after tax of AUD 1.5 million, which is at the upper end of the guidance provided to the ASX in early July.
Statutory revenue for the year was AUD 62.9 million, down 20% over the prior year. The decline in performance was a consequence of external trading conditions, market disruption, delays in new product traction and sales execution. Typically, the fourth quarter of the financial year is the company's strongest period for sales. However, the deteriorating macroeconomic environment caused by geopolitical unrest and inflationary pressures resulted in customers delaying or canceling purchasing decisions. Sales execution risk was much higher in FY 2022 due to the lower renewal volume compared to preceding years. Cash receipts from customers totaled AUD 75.5 million, down 4% over the prior year. Company continues to benefit from term-based, non-cancelable license contracts with a high quality customer base.
This, together with other revenues, has yielded an improvement in net cash of AUD 12.3 million, up from AUD 5.5 million in the previous year. Now on slide six. As provided in previous investor updates, we continue to report revenue on a pro forma subscription basis, which we believe is a more reflective of the underlying performance of the business. Subscription revenues for the year were AUD 68.4 million, down 2% and represent 86% of total pro forma revenue, which also includes revenue from testing solutions and services. Our cash conversion rate for the year ended 30 June was 95% and shows the close alignment of this revenue series to cash receipts. Going to slide seven.
As previously shared, we've been working on an internal unit economics project to better inform management on the progress of the business, as well as provide better insights for investors. The first phase of this was a key performance indicators table that was included in previous earnings presentations. Coming off a difficult year, it shows in the dashboard. Pro forma revenue retention was ahead of plan, but by contrast, we fell short on customer retention and TCV from new products to existing customers. The customer retention shortfall was more heavily weighted to Collaborate, with some customers transitioning off their on-premises platforms. In Q4, a number of new customer opportunities were deferred, and we came up short on our new customer wins target of 75 with 41 new wins. This has a knock-on effect of missing our TCV target for new customers.
Despite the difficult trading result, we maintained our investment in innovation across our two primary product domains. New product traction is behind plan and changes to field leadership and the go-to-market strategies have been made to address this. Falling short on our TCV objective impacted our ability to grow the cloud deferred revenue backlog. We remain focused on ensuring that the company operating model is transitioning to support an annualized subscription business model. I will now hand over to Peter to provide a detailed overview of our FY 2022 financial performance.
Thanks, John. We are on slide nine. As communicated at last year's AGM and the half year results release, Total Contract Value, or TCV, is a key measure of IR's performance. TCV represents the total value of a revenue-generating contract written in the year. It includes software license and related maintenance, cloud bookings, testing bookings, and consulting services. TCV for FY 2022 was AUD 56.7 million, down 25% over the prior year for reasons that John highlighted earlier. You will see that we have reported annual recurring revenue for the first time. Annual recurring revenue as of 30 June 2022 was AUD 68.1 million, up 3% over the prior year, supported by long-dated, non-cancelable contracts. Net revenue retention was 94%, up two basis points. Transacted infrastructure revenue retention was close to 100%, while Collaborate revenue retention was 88%.
The lower Collaborate retention rate is driven by customers delaying their renewals as they evaluate their future UC solution requirements as a consequence of the increase in work from home and other hybrid working environments. Turning to slide 10. In FY 2022, cloud and hybrid solutions represented 13% of TCV, an almost doubling of the contribution from the prior year. As of 30 June 2022, there were 470,000 users on the new platform in either a hybrid or cloud capacity, representing growth of 459% over the prior year. Contract life is relatively stable at 2.6 years. Looking at the TCV renewals and new chart, there was a far greater percentage of new and capacity sales relative to the prior year. Turning to slide 11, TCV by product.
Collaborate TCV for FY 2022 was AUD 27 million, down 27% over the prior year. The dissection of renewal and new business shows two diametric movements. Renewal business of AUD 10.5 million was down 57%, in part due to there being fewer contracts up for renewal and in part due to some non-renewals from the UC market disruption mentioned earlier. New and capacity sales of AUD 16.5 million was up 31% over the prior year. The source of new business was broad, including sales across both on-premises and hybrid solutions. Both Transact and Infrastructure TCV results were down due to the timing of renewal contracts and new solutions taking longer to gain market traction. We're on slide 12. Asia Pacific was the standout region for FY 2022.
APAC achieved TCV of AUD 14 million, up 36% over the prior year, with growth experienced across all product lines. Notably, the achievement was across both renewal of existing business and growth in new business. By contrast, both the Americas and Europe experienced declines in TCV. The Americas turnaround plan has taken longer to execute. With Europe, while there was growth in the first half, performance fell in the second half. This is likely due to the consequence of regional insecurity together with other negative business sentiment. We've taken action to improve performance across both regions, including change in regional leadership, which John will speak about later. Slide 13 presents pro forma subscription revenue for both geographic and product sets. For simplicity, we have combined Transact Infrastructure in the geographic set and Europe and APAC in the product set. These charts provide more insight than provided in previous presentations.
To be clear, these charts are not to be confused with either the TCV charts on prior slides or the statutory revenue shown in the financial report. Pro forma revenue is a trailing measure of performance and the result of historic TCV achieved. The numbers represent recurring revenue based on amortized license fees, maintenance, and SaaS revenue for the year. What do we glean from these charts? For each region, we can see the makeup of product and whether the product set is growing or declining. For instance, APAC has higher subscription revenue from Transact and Infrastructure compared to Collaborate. It is also showing growth across both product sets, with Collaborate growing at a faster rate. If we take Transact from the bottom row, we see that it has an equal distribution between the Americas and rest of world, with the Americas growing more strongly.
Turning to slide 14, titled Operating Leverage. We finished the financial year with 202 staff, compared to 240 staff at the start of the year. The decline in staff numbers reflects the realignment of the business to the changing market environment. Our innovation agenda remains unchanged, as illustrated by the left-hand chart. The jump in R&D expenditure primarily reflects the amortization of the new cloud platform and release of new products to market. John will later provide further insight into the nature of the development spend and new solutions to market. Our sales and marketing spend pulled back during COVID, with less travel and trade shows. This trend will slowly reverse as customer face-to-face meetings and marketing events return. FY 2022 represents the first year where we have incentivized the sales team on TCV. This will continue into the FY 2023 financial year.
Cash flow from operations shown on slide 15 was AUD 16.9 million for the year, with a cash conversion rate of 95%. The company continues to benefit from non-cancellable term-based license contracts. This cash generation continues to support ongoing development and fund future growth. The balance sheet shown on slide 16 shows a significant improvement in net cash for reasons shown from the previous slide. The company is free of debt and has AUD 12.3 million of cash. Trade receivables of AUD 68.8 million is a strong source of future cash flow. I will now pass back to John for the rest of the presentation.
Thanks, Peter. I'm on slide 18. IR's target market is the 600 million unified communication users, whereas our true sweet spot is the nearly 180 million sophisticated conferencing users. Today, we have 5.8 million users or around 3% share. The addressable market is growing at over 7% CAGR. Driving the requirement for specialized tools to manage these complex environments is the proliferation of remote working and the user expectation that they should be able to do their work seamlessly. The CIO's challenge is balancing user experience and expectations with the increasing complexity of managing these environments and the proliferation of devices. We expect that there will be a long tail to on-premises based on the large enterprise market that we serve. This view is supported by our customer engagement and recent wins. Moving to slide 19.
The uptake of remote working was accelerated by the pandemic, and Gartner says it's here to stay. At the same time, the conferencing and unified communications market is moving rapidly to the cloud, led by Microsoft Teams. The mix of cloud, on-premises, and hybrid solutions increases complexity, and managing this complexity is core to IR's value proposition. We support existing on-premises solutions as well as hybrid and cloud solutions, effectively supporting a customer's digital transformation journey. User experience is key, which comes with the expectation that their collaboration and UC environment just works. When they don't, support staff are under pressure to quickly identify and resolve the source of the issue. As I move to slide 20. The opportunity for Transact is significant, with IR currently monitoring approximately 600 million transactions a day and a global payment CAGR of 18.6% forecast in FY 2023.
This growth has been brought about by the rapid rate change in the payment sector over the last couple of years and the overwhelming shift to cashless payments. Now on slide 21. We continue to see a massive shift in consumers and businesses moving to non-cash payment methods. In support of this is the expansion of payment types and channels, increasing use of debit and credit cards, as well as real-time payments displacing legacy batch systems. With all of this comes increasing complexity, additional systems, applications, and the greater risk of issues and failures. In response to this, we've launched new products and continue to enhance existing ones to upsell to existing customers and win new ones. User expectations continue to increase around a seamless experience. At the same time, payments providers are looking to monetize their data in order to acquire new customers, grow revenues, and optimize costs.
Moving to slide 23, strategy. Our strategy remains focused on the three core product lines: Collaborate, Transact, and Infrastructure. Consistent and core to these pillars, the strategy is to leverage the structural market changes of remote working and cashless payments, support our customers in their evolving journey as they transition from on-premises through hybrid and cloud, leverage our existing customer base and market positioning to move into adjacent and higher value segments, continue to build long-term recurring revenues as we transition the business model away from upfront revenue recognition. Finally, organically drive this change through self-funding development of new SaaS products. Now on slide 24. To deliver on this strategy, we're executing a multi-phase transition. Innovation, execution, and scale. In the innovation phase, we brought to market our new SaaS platform as the foundation for a range of new products.
This innovation is ongoing and the launch of new and enhanced products will continue in order to meet current and emerging customer use cases. The execution phase is taking longer than we anticipated as we move to selling a much higher percentage of new business. We're confident that the go-to-market design is right and investments in our demand generation capability will pay off. We're also iterating our generation one new products with our customers and partners to better position and grow. As we transition to scale in the future, we will move from contracting upfront revenues to better quality SaaS subscription revenues with higher levels of annual recurring revenues. As Peter referenced earlier, slide 25 highlights that our innovation agenda remains firm. Across the last two years, we have enhanced our cloud platform and brought new solutions to market for both Collaborate and Transact.
We've continued our investment in our on-premises solutions and the combination of all these investments has facilitated a capability to serve on-premises, hybrid, and pure cloud environment. This means we can flex with the market and support customers on their individual journeys. Moving to slide 26. Core to our strategy and investment in innovation is supporting our customers on their journey, whether they require on-premises, cloud or hybrid solution. This is a balancing act between the two primary product portfolios of Collaborate and Transact. In the last year, we launched space managing for conferencing rooms and monitoring connections between session border controllers, or SBCs, and direct routing. What this essentially means is that we can monitor audio calls for organizations who connect external phone lines and use Microsoft Teams as a office phone system. The SBCs help us monitor these audio calls on carrier networks such as Telstra, for example.
On the Transact side, we are active in the market with SaaS-based payment analytics product, which enables payment providers and merchant acquirers provide their merchants with richer data and greater insights. Supporting our existing customer base, we continue to innovate our on-premises solutions. In Collaborate, this is very much about supporting their hybrid journey. For example, to have an existing Cisco customer integrate the management of their Teams environment into a single pane of glass, rather than sifting through multiple dashboards and reports to make sense of the performance and user experience in their environment. In Transact, we delivered new products to market for high value and real-time payments. As we look into the future, for Collaborate, we'll add support for additional devices like headsets, as well as increase the richness of our analytics and insights.
For Transact, we have completed feasibility on a private cloud deployment to address data governance concerns for some large payment providers. We've also expanded our service provider analytics capability. Foundational to this is the ongoing evolution and enhancement of our platform, both in SaaS and on-premises environment. These themes here are third-party integration, security, and service provider support. Moving to slide 27. Let's actually take a look at the product. This is a Collaborate use case which demonstrates how IT operations can drill down to root cause identification. Moving away from a simple traffic light table to a modern instrumented dashboard that provides a rich set of information for analysis and troubleshooting to inform resolution. For those interested in seeing a visual demonstration, I would like to direct you to our website, which provides numerous videos of our team members demonstrating the dashboards.
On slide 28, we've summarized a customer case study with GSK or GSK. Their challenge was the complexity brought about by numerous systems, platforms, and geographies, and being able to troubleshoot and resolve issues in a timely manner. Critical to IR's solution is our real-time capability that resulted in GSK reducing resolution times from an average 16 hours to under five minutes. Now on slide 29. Similar to the previous Collaborate slide, the Transact user journey is one of making the complex simple. We bring out the hidden meanings of your processing data in a single view. Moving to slide 30. This scenario at Rabobank highlights a typical use case for many IR Transact customers. They are continually upgrading their systems to support new payment types. However, when doing this, they need to maintain a common set of monitoring and analytics tools to support their changing environment and regulatory obligations.
This is why we have introduced support for new payment types such as real-time payments, while still supporting a consistent look and feel as for existing card payments. Moving to the final slide 32. We're in the execution phase of our strategy. We have a firm foundation from which to grow and have clear priorities for the year ahead. Critical to our return to growth is the Americas and Europe. We've made leadership changes, enhanced our go-to-market model to balance the requirements of retention, upsell, and winning new business. Getting the new products we have launched into the hands of our customers and prospects is a critical focus. We've invested in our sales engineering function to improve our demonstration capability as well as opportunity qualification and getting the technical win.
We have clear line of sight to our customer renewals where they may be at risk, as well as our customer plans for their unified communications and payment platforms. While we can't influence their migration decisions, we've optimized our go-to-market to maximize our retention opportunity. Our phased strategy kicked off with bringing a SaaS platform and product to market. In modern software development, this implies moving quickly to get generation one product in market. Focused work is ongoing with customers to bring generation two products to enhance performance, add new capabilities, and reduce the cost of running the platform. We've realigned the company to be more efficient and retain a strong balance sheet to support our self-funding model of integrated innovation and growth. While we're not providing specific guidance, IR is well positioned for self-funded innovation and long-term growth. Operator, that concludes the presentation.
We can now open it up for questions.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are using a speakerphone, please pick up the handset to ask your question. Ladies and gentlemen, we will wait for a moment for the question queue to assemble. Our first question is from the line of Chris Savage from Bell Potter. Please go ahead.
Thank you. Good day, John. Forgive me, I joined the call a bit late, so if you've touched on good questions I'm gonna ask, please forgive me.
No problem. Thanks, Chris.
FY 22, you'd always flagged it wasn't a big year for renewals and hence the focus more on adding new logos. Is FY 23 a big or bigger year for renewals?
We have a stronger renewal portfolio or inventory in FY 2023 than we did in FY 2022. I think that gives us a better foundation.
Are you able to pinpoint which area, like between Collaborate, Infrastructure, and Transact, or is it just across all three?
Yeah, it's pretty much across all three. From a weighting perspective, it's probably weighted a little bit to the second half.
Okay. Were there any renewals that got deferred in FY 2022 and in particular the second half that now might fall in FY 2023?
We run a reasonably tight cadence on taking renewals in the period that they are due. At times, you do have renewals that will move into an earlier period driven by a customer requirement or event. For example, we've got one in play this year, where a large financial institution is divesting a unit, so they are coming back to the table for a new agreement. In terms of renewals though, we didn't see deferrals of those. What you may see in the graphs where it shows the renewal value and on a year-over-year basis, a reduction, that could be affected by principally three things, which is that a customer renews for a shorter term. As we all know, our revenue upfront model means that a shorter term drives less TCV in revenue.
Secondly, that they may have reduced their usage and in some cases, losses. From a loss perspective, we haven't seen any significant competitive losses. Losses would be more attuned in Collaborate, for example, where the customer moves off their on-premises platform or infrastructure. They might cease using the NonStop platform.
Sure. Just on that point, I know it's been a trend for a few years now, but are you seeing customers renew on shorter term?
Largely, I mean, you'll see that the average weighted life of contract is 2.6 years, which I think is up, actually up slightly from the first half, but it's back from a couple of years ago where it was slightly more, four years. We've certainly seen a greater impact in contract length with Collaborate. Whereas with Transact and Infrastructure, customer confidence is still pretty high on their forward capacity plan.
Given it's up slightly to that 2.6, do you think now it's stabilized across the three and particularly in Collaborate?
We certainly hope so. I mean, there are instances where customers simply want to renew for one year. I guess the truth is that, you know, as more of our business moves to subscription and ARR, customers may want to simply let the contracts roll over. However, our objective remains to have long-term non-cancelable committed contracts as a strong foundation for the business.
Sure. All right. Thanks very much.
Thanks.
Thank you. Our next question comes from the line of Ray Tollefson from Team Invest and Shareholder. Please go ahead.
Yeah. Good morning, John Ruthven and Peter Adams. A couple of questions from me. Other than the generic reasons you gave for the sort of delays and that, in particular, I'm interested more in the cancellations. Did you get any feedback as to why clients were canceling their contracts?
Ray, I'll take that in the first instance. Peter, feel free to chime in. The primary reason for cancellations is that the customer is moving off the platform. What we are seeing with the Collaborate portfolio is that customers are moving from Cisco or Avaya to Teams, so they either may reduce their on-premises usage or in some cases migrate away from it. The same is true in the Infrastructure domain where our solution sits on top of the HPE NonStop, and if a customer ceases using that platform, then they wouldn't renew our contract.
Do they go to some other monitoring type of service or they just don't need it?
If they've migrated away from the platform, then they are essentially running those workloads on an alternate platform base. One that we don't monitor.
Okay. Second question. Given the new product uptake's been slower than you expected, how is the actual need for new products determined? In other words, is it client feedback or are you sort of trying to lead them into what you think they should be doing?
It's a good question, Ray. It's truthfully a little bit of both. Our product management team, we've made some changes in the last 12-18 months to align them much more closely to the field. They would take inputs both from in the near term, if you will, from specific customer requirements. We also expect that they are well-versed in the industry so that they are ahead of customer requirements and potentially solving problems for customers that they don't even know they have yet. There's a little bit of a science to how you do that.
Of course our field organization would be providing very specific input in specific sales opportunities where we'll come up against specific use cases and a customer will say, "That's great that you do these things for me, but I have a specific use case." Then we will either meet that by a product response or in some cases we can use our professional services organization to provide a customization or configuration for them.
Okay, thanks. Just before I close, thanks very much, Peter. I've met you a couple of times at AGMs and you've always been very easy and to talk to and, you know, open and that. A bit of a shame to see you moving on. Anyway, thanks very much for your services today. All the best for the future.
Yeah, thanks very much. Really appreciate that feedback. Thank you.
Thank you. Our next question comes from the line of Nicholas Debenham, an investor. Please go ahead.
Yes. My question is to Peter Adams. On the surface, as you see in the statutory results, particularly if you remove currency gains and the grant income and the absence of dividends, IRI looks like a company in trouble. However, when the pro forma revenue and pro forma EBITDA and the cash flows from operations are looked at, the company appears in much better shape. My question is, do you feel you are fully utilizing the accounting rules so that the statutory results can reflect the pro forma results as much as possible?
Yeah, that's a really good question and a challenge that we have faced internally, because you would probably appreciate that if we were starting this business from scratch, we would just go straight to subscription-based accounting. As you're aware, we're a business that has been around for more than 30 years, and the heritage of the business has been based on an upfront revenue recognition model. I think that hasn't always served us well in terms of looking at underlying performance because you get the lumps and bumps from the timing of renewal contracts, et cetera. We have, I guess you'd say, worked hard at trying to convert our on-premise stream to enable revenue recognized over time.
Unfortunately, without sort of going into technical detail, we have struggled to, I guess, convince others around us, auditors, and the like, to achieve that revenue to be recognized over time. I guess the outlook is that as we increase the amount of cloud-based revenue relative to on-premise going forward, we would see the balance swing. But there are some facts and that is if you take our infrastructure segment, for instance, those customers are never going to move to cloud and that revenue will continue to be recognized upfront.
Unfortunately we are in this blended model and as a consequence we will continue to provide the pro forma revenue numbers that are in the investor deck.
Thank you very much, Peter, for that answer. Just to confirm that I'm a big believer in the company, so I do see through the pro forma results as being very encouraging.
Great. Thank you very much.
Thank you. Our next question comes from the line of Peter Cooper, an investor. Please go ahead.
Good morning, John. It's Peter Cooper, another Thematic investing member from Melbourne. Just a couple of quick questions. Firstly, what's the sort of anticipated expenditure on development in FY 2023 compared to FY 2022?
I mean, there's a strong theme in what we've presented today that we, at this critical time in our transition, we don't want to back down on our innovation agenda as in we've got lots of work to do in terms of bringing our generation two products to market. We haven't put a specific number out there, but thematically you could take away that we wanna continue that strong investment to continue to bring the new products and enhancements to market.
Okay. Look, I'll take that as continuation of the current level of expenditure. Look, the second question is, from my observation over the last couple of years as being a shareholder, the biggest issue that IR has is in the Americas. I think you can see if you go back over the last couple of years, shareholder presentations, you can see that decline. You've now appointed Rodney Foreman to head the U.S. operation up. Specifically, what is Rodney and IR going to do that is different to change that direction of performance over the next year or two?
Yeah. I think first and foremost, Rodney comes in as a very strong and experienced industry leader. In fact, you know, he has ASX experience. Most recently he was actually the Chief Revenue Officer for Megaport. He's got a clean understanding of, you know, what being an ASX-listed company is. He's only been on board a couple of weeks, but has already demonstrated that he drives a very tight ship around sales cadence. He's also in his background, in fact started as a product manager, so he's got a very strong technical understanding. He's already working very hard in terms of market segments that we should be going after, market segments where we are presently but could do better. Then also looking for greater efficiency and effectiveness in our go-to-market model.
I don't know that it answers your question, what's different to before? What I do have a high level of confidence in is that his method and his leadership will drive significant change in that business.
Yeah. Okay. Well, thanks, John, and good luck for the next year. Thanks.
Appreciate it. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Our next question comes from the line of Tim McArthur from Asymmetric Asset Management. Please go ahead.
Morning, all. Just a couple of short ones from me at the moment. One is on your interest and finance income, please. Are you running a much higher cash balance during the half than at the end of the year? What's explaining that high level of finance income?
Yes, I'll answer that question. The finance income comes from the way that we construct our customer contracts. We're signing just a term-based license for multiple years. Within that, under the accounting rules, we are required to carve part of the contract value and allocate that to finance income. Basically it's those customer contracts that's driving that finance income, not our cash balance.
Okay. That's also on the cash flows as interest received, that's the same accounting.
Yep.
That's driving interest received?
Yes, it is. Yep.
Okay. All right, thanks for that. Just on competitors. An earlier question you were talking about losing a customer if they leave HPE and go somewhere else. Are you seeing more competition from that type of change where a customer is leaving HPE NonStop completely? Or have you got competition even on HPE?
I mean, we have competitors on the HPE NonStop platform. In terms of that platform itself, their user base is reasonably stable. Similar to Collaborate, we don't control a customer's choice in terms of their platform, whether in Collaborate, Cisco, Teams, et cetera. That's their own journey. Our strategy has been to ensure that we can support them on whatever platform that they choose. What we've seen in enterprise customers in Collaborate emerge very strongly is the hybrid phase, where they in fact are running part of their environment on premises and part of it in a UCaaS environment.
Sure. The issue for you more is if the customer is just not on the HP and the Cisco rather than the competition that you're seeing when they are. Like, your platform is still quite often the preferred platform?
It would be incorrect to say that we don't face head-to-head competition on those platforms. If a customer chooses to migrate off a platform, that's not a decision we control.
Right. Okay, thank you.
All right. Cheers and thanks.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. Ladies and gentlemen, if you wish to ask a question, please press star one. Our next question comes from the line of Greg O'Keeffe from Taiko Super. Please go ahead.
Yes, thank you. My question is, you've got increased new customers, new contracts. I see in Europe 9, Americas 20, and Asia 12. What sort of average contract value are we looking at for those customers?
As the earnings deck stipulates, we've changed our model to TCV in the way that we measure the business. If we use TCV as a measure, our average contract value would sit somewhere between AUD 200,000 and AUD 300,000.
Thank you. I'm sure that I'm also an investor. My other question to John is, I see you have 20,000 shares invested in the company. I myself have 25,000, which are rapidly diminishing in share value. On my calculation today, you have about AUD 10,300 invested in the company. It doesn't bode well for confidence of shareholders that you have so little invested in the company. What do you say about that?
Well, I mean, it's a perspective. Bear in mind that in terms of remuneration, I have reasonable exposure to company equity as part of that remuneration. I think I am exposed to the share price in a considerable way, but I take your point.
All right. Thank you. Thanks for that, and good luck for the future. I'm holding in there.
Thank you. Cheers.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one. Since there are no further questions, I will now hand the conference back to Mr. Ruthven for closing comments.
Thanks, Ryan. Appreciate it. Thank you all for joining today's call. I would just draw your attention to the closing slide again in terms of the key priorities outlined. Critical to our success in this execution phase, as we've highlighted, is a return to growth in the Americas and Europe. Getting new product traction, our new products into the hands of customers and prospects, and ensuring that we remain diligent on the retention of both customers and our revenue base. With that, we'll leave it for today. Thank you.