OneSoft Solutions Inc. (TSXV:OSS), a developer of SaaS solutions for the oil and gas pipeline industry, reported a successful fiscal year 2023, with a 50% increase in revenue exceeding $10 million.
The company also saw a significant improvement in adjusted EBITDA, an increase in cash reserves, and a reduction in quarterly losses. With a considerable market share in the US, OneSoft Solutions is looking to expand globally, leveraging its large data lake and high annual recurring revenue. The company's optimistic outlook for 2024 includes expected revenue growth and positive adjusted EBITDA, backed by new customer acquisitions and module developments.
Key Takeaways
- OneSoft Solutions exceeded its fiscal year 2023 guidance with over $10 million in revenue, a 50% year-over-year growth.
- Adjusted EBITDA improved by $1.9 million, and cash reserves increased by $0.5 million.
- The company reduced its quarterly loss by $349,000 from the previous year and generated positive EBITDA.
- Significant market share in the US with global expansion opportunities.
- High percentage of annual recurring revenue and near-zero churn rate.
- Positive financial position with sufficient cash to finance operations.
- Guidance for 2024 anticipates increased revenue and positive adjusted EBITDA.
Company Outlook
- OneSoft Solutions provided a positive guidance for 2024, expecting increased revenue and continued customer acquisition.
- The company is focusing on international expansion, particularly in the EMEA market, and is participating in conferences to establish partnerships.
- OneSoft Solutions expressed confidence in their projected numbers for 2024, while acknowledging timing uncertainties.
Bearish Highlights
- Operating expenses increased due to higher salaries, marketing expenses, and professional fees.
- Delays in closing deals from the previous year were acknowledged, though the company remains optimistic about their potential.
Bullish Highlights
- OneSoft Solutions has a strong financial position with sufficient cash to finance its operations and has a high percentage of annual recurring revenue.
- The company sees global opportunities for expansion and has gained traction with major customers.
Misses
- No specific misses were reported during the earnings call.
Q&A Highlights
- The company discussed demonstrating ROI to clients, stating that a greater than 20% ROI makes it a no-brainer for clients to adopt their services.
- They may raise prices in relation to the amount of change needed to encourage client adoption.
- In South America, a performance bond for a potential client is indicative of the region and related to government-owned operators, not expected in the US market.
OneSoft Solutions' financial conference call highlighted their robust fiscal year performance, with significant growth in revenue and improvements in EBITDA and cash reserves. The company's strategy includes a strong focus on customer acquisition, module development, and international expansion, particularly in the EMEA market. Their participation in industry events and the development of new functionality modules are part of their efforts to optimize operations and maintain customer retention. With a solid financial foundation, OneSoft Solutions is poised for continued success in the competitive SaaS market for the oil and gas pipeline industry. The company is scheduled to provide its next update in May after publishing its Q1 2024 results.
Full transcript - None (OSSIF) Q4 2023:
Operator: Good morning, and thank you for joining us for OneSoft Solutions Financial Conference Call to discuss its financial results for the Fiscal Year Ended December 31, 2023. On the call today, we have OneSoft's CEO, Dwayne Kushniruk; CFO, Paul Johnston; and President and COO, Brandon Taylor. This call is being recorded. Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For caveats about forward-looking statements and risk factors, please see OneSoft MD&A for the year ended December 31, 2023, which can be accessed on the company's profile at SEDAR and the company's website. I will now turn the call over to OneSoft's CEO, Dwayne Kushniruk.
Dwayne Kushniruk: Good morning, and welcome to everyone on the call. I have a few remarks before Paul Johnston reviews financial information followed by Brandon Taylor, who will discuss operational highlights during fiscal 2023, and then we'll wrap up the call by addressing investor questions. This is our third financial results conference call and we are assuming that most attendees today are familiar with the company. However, for those who want more detail regarding our history and progress to date, please view our Q2 2023 conference call, the link for which is accessible on the OneSoft website. Click on the Investor heading then on AGM and Financial Info, then Q2 earnings call, as shown in this slide. I want to start by summarizing OneSoft's technology, solutions and position in the current marketplace. OneSoft develops and market SaaS solutions that ingest, align and analyze big data using machine learning, data science and cloud computing to increase operational efficiencies and reduce oil and gas pipeline failures through better data management. We have now compiled what we believe may be the largest data lake of pipeline, operational and integrity management data that includes data collected by pipeline operators over the past few decades. Our data lake contains detailed information associated with about 150,000 miles of pipelines operated by 15 of our major customers who manage 20 pipeline operations. Our solution has been strongly validated by many of the most progressive North American and global pipeline companies, including two of the industry's five super majors. Our customers have typically undergone extensive one to three year validation projects before committing to multiyear subscriptions to use our CIM data platform and their experience has helped us to gain traction to become the next generation de facto standard cloud solution for oil and gas pipeline operations. We have customers in the United States, Canada and Australia and are pursuing sales opportunities in several regions globally, including South America, EMEA and Asia. Our solutions assist oil and gas pipeline operators to optimize integrity management of their pipeline assets and to automate many of the functions that they must carry out to manage and maintain regulatory compliance in operating their businesses and assets, to increase operating efficiencies and safety, and to reduce operating costs and incidence of pipeline failures. OneSoft has first mover advantage and a significant competitive moat regarding our technology and solutions in that we are the first company worldwide to have developed and commercialized a broaden cloud solution that uses machine learning and data science to analyze big data, which assists oil and gas operators to achieve their objective of zero pipeline failures. Regarding competition for our solutions today, this is mostly legacy systems and processes that essentially depend on Excel spreadsheets to retain and analyze data. Our biggest sales challenge today is the reluctance for change management, which is typically disruptive as legacy integrity and data management systems and processes that have been used for decades are replaced with modern machine learning and data science applications. From management's perspective, fiscal 2023 progressed very nicely in accordance with our objectives and expectations. So we met the guidance we published in January of 2023. Revenue exceeded $10 million, representing 50% year-over-year revenue growth for the second consecutive year. Adjusted EBITDA and non-GAAP measure that we define as earnings before interest, tax, stock-based comp, depreciation and amortization improved by $1.9 million year-over-year from a loss of $2 million in fiscal 2022 to a near breakeven loss of $111,000 in fiscal 2023. We also saw a significant $1.7 million swing in cash and cash equivalents year-over-year, wherein cash increased by $0.5 million in fiscal 2023 compared to the decrease of $1.2 million in 2022. From a corporate perspective, we took steps to implement succession plans for the Board of Directors as we disclosed last year by adding a new independent director. We continue to present at various online and in-person shareholder events to promote our company and progress. And we also explored alternatives to progress value creation for shareholders including potential scenarios to accelerate business development and revenue growth through both organic and M&A strategies. We are pleased that OneSoft was recognized by the TSX Venture Exchange as one of the top 10 performers driving growth across the technology center or sector in 2023. OSS share price increased by about 72% from December '22 to December '23. This chart shows the evolution of data miles being ingested into the company's CIM platform, which is key to understanding the company's revenue growth under its SaaS recurring revenue business model. The first line in the table shows the aggregate miles of pipeline operated by our customers who have entered into SaaS agreements. The second line in the table and the top blue line in the graph shows the piggable miles for which customers will ingest data into CIM. The third line in the table, the bottom green line in the graph shows the piggable miles for which data has been ingested into CIM and generated revenues. The fourth line in the table shows the percentage of data miles for which any revenue was generated. And this also provides a glimpse into revenue that we expect will occur in future periods. The fifth line in the table shows the estimated CIM SaaS revenue based on a per data mile subscription basis. These figures exclude service and other revenue. We anticipate that our annualized data mile revenue, which started at about $100 per data mile in 2017 will continue to increase as we add more SaaS modules that our customers require to optimize their operations. The difference between the blue and green lines represent the future revenue opportunity from current SaaS contracts that is expected to occur as more data is loaded into CIM by customers. To put OneSoft's market share and opportunities into perspective, 260,000 miles operated by our customers represents about 9% of the total oil and gas pipelines in the USA today and 135,000 SaaS subscription miles represent about 21% of the piggable miles in the USA today. I also want to note that the U.S. oil and gas pipeline infrastructure represents approximately 60% of these assets that exist globally, and it is our belief that CIM has global opportunity. I will now pass the call to Paul Johnston, OneSoft's CFO, to review the company's Q4 and fiscal 2023 financial information. Paul?
Paul Johnston: Thank you, Dwayne. I am Paul Johnston, and I'm OneSoft's CFO. I will present the financial results for Q4 and the fiscal year ended December 31, 2023. All figures reported today are in Canadian dollars. I wish to highlight the progress OneSoft has made in growing revenues over the past 7.5 years. This chart illustrates revenue increasing sequentially quarter-over-quarter. We're extremely proud that our sim solution and IM Operations have produced a compound annual growth rate of 43.5% over the last 7.5 years and by 51% in fiscal '23 over fiscal '22. The majority of our revenue is annual recurring revenue or ARR. In the last two years, ARR has been 79% and 83% of total revenue. This is due to our customers signing multiyear contracts with us, which generally have terms three years or longer and due to near zero churn in our customer base. In Q4 2023, revenue was $2.9 million, and it increased by $732,000 or 33.4% over Q4 2022. The addition of new CIM customers and by existing customers expanding their use of CIM drove $670,000 of the increase. IM Operations revenue also grew, increasing by $54,000. Gross profit increased by $694,000 or 44%. The increase was due to the higher sales volume, which generated $523,000 of additional gross profit, a moderation in direct costs provided a further $171,000 of gross profit and allowed the gross margin to increase to 77% from 71%. Operating expenses, net of cost capitalized increased by $140,000. The company has increased the number of staff since last year and wage increases have been selectively granted. Marketing expenses increased $70,000 quarter-over-quarter. General and administrative costs were unchanged from Q4 last year. Software development costs declined in the quarter due to staff being highly engaged with functionality requirements requested by existing customers and the implementation of CIM with a large new customer. Despite this, further progress was made on our risk, crack management, vending strain and external corrosion CIM modules. Other expenses increased $205,000. In September, the company awarded 2,729 million restricted share units to selected staff to ensure staff retention and further link employee productivity and innovation to shareholder value. This grant added $210,000 in additional stock-based compensation costs and was the largest single driver causing other expenses to rise. Due to the much higher sales revenue, the gross profit increase of $694,000 and more moderate increases in expenses and other expense, the company reduced its quarterly loss by $349,000 from $624,000 in Q4 2022 to $275,000 in Q4 2023. I now direct my remarks to the financial results for the year ended December 31, 2023. Revenue for the year increased by 51% or $3.5 million from $6.9 million last year to $10.4 million this year. The addition of new customers and greater use of CIM by existing customers generated $2.4 million of the increase. Revenue from the IM Operations increased by $785,000. As it was acquired on June 30, 2022, resulting in six months of revenue being included last year and 12 months of revenue this year. More favorable foreign exchange rates added another $320,000. Gross profit increased by 60% to $7.8 million from $4.9 million this period last year, driven by the higher sales volume and proportionally reduced direct costs. The gross margin rose to 75% of sales from 71% last year. Operating expenses increased by $954,000 or 13.5%. Salaries and employee benefits were higher due to an increase in staff complement, salary increases and higher accruals for year-end incentives. Marketing expenses increased due to more production trials and benefit analysis being conducted and higher sales, travel expense promoting our products to potential customers. Higher accruals for professional fees for the annual audit and related issues caused G&A expenses to rise. Expenses capitalized as software development decreased by $168,000 in 2023 as staff were engaged developing software enhancements for our existing customers, implementing a large new customer and that two new products having completed their development in earlier periods. Other expenses increased by $367,000 or 45%. The aforementioned grant of restricted share units and other grants caused stock compensation to increase by $310,000. This was the largest contributor to expense increase in this group. The net loss decreased by 54% to $1.4 million from $3 million last year. The higher sales revenue and gross profit were the primary factors causing the reduction in the net loss. On this slide, we're showing our adjusted EBITDA. Many people like to use adjusted EBITDA as a proxy for our company's ability to generate cash. In Q4 2023, the company generated positive EBITDA of $162,700 as compared to negative EBITDA in the comparative period of $744,000. In fiscal 2023, the company's negative EBITDA was $111,000, an improvement of $1.847 billion from the negative EBITDA in 2022 of $1,959,000. More on cash flow a little later in this presentation. Looking at our statement of financial position. Cash was $462,000 higher this year than last year. Trade accounts receivable continue to be collected promptly. Prepaid expenses, which are primarily for marketing purposes in 2024 also rose slightly. The company's only debt was the acquisition price payable of $235,000 as at year-end. This will be paid in two equal installments on June 2024 and June 2025. Working capital at year-end was $1,522,000 versus $1,429,000 as at December 31, 2022. The company believes its cash of $4.9 million and expected future cash receipts are sufficient to finance company operations, and there will be no need to incur additional financing unless a special situation, such as an acquisition or merger opportunity were to arise. This page is a summarization of the company's cash flow in 2023 and 2022. We first point out the large amount of non-cash expenses recorded in both years and you can read the composition of those values. On the next line, the company generated cash from its operating assets and liability. In 2023, it increased the cash it had invested in accounts receivable and prepaid expenses, and it also increased the balances of or borrowings from its accounts payable and deferred revenue. In 2023, these four items combined to generate cash of $514,000. The cash generated from operating activities is the sum of these items. In fiscal 2023, cash from operating activities was positive $538,000, an improvement from fiscal 2022 of $1.4 million. Next, we review investing activities. In fiscal 2023, investing activities consumed cash of $420,000 primarily consisting of $223,000 being invested into new software functionality and $188,000 in payments to reduce the debt owed on the acquisition of IM Operations. In 2023, financing activities generated $338,000. This was due to employees exercising stock options to acquire 711,000 shares of the company. In total, the company generated cash flow of $455,000 in fiscal 2023. This was in sharp contrast to fiscal 2022 when the company consumed $1.2 million, an improvement in cash generation of $1.6 million. We now move to reviewing the guidance we provided for our company in 2023. We presented guidance in January 2023, that revenue of $10.1 million would be realized in 2023. That value was exceeded in fiscal 2023, in which $10,392,000 of revenue was recorded. The guidance value for the net loss for 2023 was $1,297,000. The company's net loss in 2023 was actually $1,367,000, which we would suggest is very close to the 2023 guidance value. Lastly, the guidance value for adjusted EBITDA was a loss of $28,000. The actual result was a loss of $111,000, which while more than predicted, is a value we believe is reasonably close to the guidance value. We would also point out that cash at the end of 2023 was $4,854,000 which exceeded the 2023 guidance value for cash of $4.40 million. Looking ahead to 2024, guidance is the recording of $15 million to $16 million in revenue, a net loss of $435,000 to $178,000 and adjusted EBITDA of positive $1,650,000 to $1,900,000. We look forward to reporting on our progress on achieving those values in our first quarter reports for 2024, which will be released in May 2024. Please refer to our fiscal 2023 financial statements, management discussion and analysis, and annual information form published on SEDAR+ for more information. This concludes my review of the financial results. I will now turn the meeting over to Brandon Taylor, President and COO of OneSoft for operational remarks.
Brandon Taylor: Thanks, Paul. Welcome, everyone. Thanks for taking the time. Let's give everyone a general update on operations. Fiscal 2023 was another good year for OneSoft and we feel the business is executing well against our objectives. This slide, Dwayne showed previously and discussed, but I'd like to go into in a little more detail with one of the key metrics we consider to measure progress is the number of pipelines under subscription. As a reminder, the U.S. has about 2.9 million miles of oil and gas pipelines, of which about 642,000 are piggable, meaning that they can accommodate those in-line inspection tools that collect large amounts of data points that provide some clue to the integrity of the pipeline. We now have over 135,000, 21% of the piggable miles in the U.S. under multiyear subscriptions, wherein that pig data is ingested and managed by our CIM platform. And again, CIM stands for Cognitive Integrity Management. Now these piggable miles represent the foundational data set that was initially developed and we built in CIM and which resulted in the addition of our very first customers. We expected the miles to be higher at the end of the year, but some of the deals that we expected to close last year have been delayed. In 2023, we added another reporting metric, and that's the number of pipeline miles operated by our customers in aggregate. Now this figure increased by 95,000 miles during 2023 to 261,000 at the year-end and that's up 57%. This increase came from the addition of a large customer and through acquisitions, this is an important point of other pipeline operators that our current customers made during 2023. So our customers then took and onboarded those miles into their version of CIM. 261,000 miles represent about 9.7%. We estimated 2.7 miles of all the oil and gas pipelines in the U.S. and consideration of that total rather than just a piggable miles is important because the new modules that we're in process of developing in private previews and commercializing, including internal and external corrosion, risk, crack and geohazard strain, that increases our TAM just beyond the piggable miles to more segments of that 2.7 million miles of pipeline assets in the U.S. And more globally, we also signed a multiyear agreement with a multinational pipeline and energy company with over 70,000 miles of liquid and gas pipelines situated throughout Canada and the U.S. of which approximately 25% is under SaaS subscription. Our average annualized revenue generated per mile bottom line, over the nine months was consistent in approximately $136 up significantly from the $100 per data mile we started in 2017 and as we build new modules and add them, we anticipate this number to continue to increase into the future. On the next slide, I'd like to everyone -- will cover some of the fine points here, but to review our fiscal 2020 (ph) operational update section we published in the MD&A for more information and there's a lot of detail in there, but want to highlight kind of what these points in this presentation point. So in October, the company hosted its first annual user group event at the Microsoft (NASDAQ:MSFT) Technology Center in Houston. This was our first inaugural event. Based on customer feedback, management believes that customers are highly referenceable and that peer-to-peer positive comments in the pipeline integrity community are highly supportive of once off reputation and business. We believe there's a very good probability that our customer retention will continue to be near 100% unless the OneBridge customers acquired by another pipeline operator who mandates adoption of its own integrity management processes. As of the date of this report, we know of no customer that intends to stop using our solutions. We are optimistic that new functionality modules that integrate with CIM, including internal corrosion, external corrosion, craft management, probabilistic risk management and geohazard strain management will be embraced by current and future customers. Certain customers have already added internal corrosion to their annual SaaS renewal purchase orders and others have engaged as private premium users of the modules still under development. Our optimism is bolstered by expression of interest from customers and from the formalized product steering committee that we initiated in October, Easter Group event comprised and this committee is comprised of senior industry personnel or typically the VP of Director at Integrity level. Control basically associated budget within integrity management within these customers. We are pleased with the continued evolution of our internal operation -- operational processes that occurred during fiscal '23, including those that we really optimize efficiencies pertaining to sales and marketing, client support, product development and financial and corporate objectives. Sales and marketing, customer support materials and processes have been organized to document and share that knowledge as we grow improve operational and cost efficiency. Our sales team has never been busier on new leads. New marketing software was implemented in '23 to capture data that fits our employees to understand and serve our stakeholders, including metrics regarding website visits, unique contacts, log views, e-mail outreach, data downloads, the track for visitors who view white paper and informational videos posted on our website. The company sales, development and customer support teams were reorganized in fiscal 2023 to support additional marketing sales tactics in fiscal '24 using new and existing success plan, our customer success plans and strategic prospect playbooks. So generally, the company attended several key oil and gas industry trade shows, we do that year-over-year. We exhibit at these events during the ones we exhibited at during 2023 included PPIM, the Pipeline Picking and Integrity Management Conference in Houston. American Gas Association, the AGA Conference and biannual exposition and then the pipeline technology conference in Berlin, which we're repeating in the Annual Bank Pipeline conference. We participated in industry educational events when the company personnel presented white paper, our data science team, and our client services team and product management, create and write papers that we present at these conferences on the learnings that we learned through the data that's in our platform. Additionally, OneBridge hosted its first annual user group conference, which I just talked about and the Microsoft team helped that really focused. We're anticipating and probably double the size of that this coming fiscal year. OneBridge benefits from being kind of a managed partner at Microsoft, which facilitates collaboration with the oil -- Microsoft Oil and Gas sells spill team to pursue joint sales opportunities on our platform that basically drives the Microsoft Azure cloud platform and adoption and consumption. Use of CIM platform by customers and revenues increased essentially in accordance with management's expectations during fiscal '23. Most importantly, OneBridge onboarded five additional pipeline operators during fiscal '23 who became CIM customers due to the direct sales efforts or after being acquired by our existing CIM customers, some customers expanded their use of CIM platform to include internal corrosion and other new functionality modules, a trend we believe will generate additional revenue, as stated later, in future periods. At December and year-end, the company's development team, give some stats consists of 21 employees and seven person offshore team at the end of the fiscal year. This team released six major CIM platform updates during the year that evolved all of our product lines, internal corrosion, external corrosion, crack, risk and geo-hazards, involve various data science and machine learning projects and assisted customer service and implementation teams to onboard new pipeline operators. In '23, this team also addressed 222 user stories. These were basically discrete components of work related to the solution across all of our modules, 180 bugs, 2,500 commits from customers and upgraded the CIM platform to the latest version of .NET, which is the latest standard six on the platform. The company's client services team addressed seven key projects during fiscal '23, primarily involving six customers and five core platform implementations, collectively involving 15 divisional operators and more than 70 pipeline systems. Remembering that our customers will typically load their entire pipeline system. So that 700 of those pipeline systems within our solution. The projects just to give you a sense, included work associated with integrity management compliance, GIS or the Geographical Information System integration to their existing GIS system, loading more of 3,700 new IOI assessment. These are these in-line inspection tool runs, the pig runs and 67 million new anomalies in the CIM, migrating data from legacy systems, integrating with various customer software applications and training. One customer specifically presented an atypical challenge requiring more than 18,000 miles of pipeline to be adjusted at CIM going live with the platform within a six month period, which was essentially completed in early 2024. They shut off their legacy system in December and then went live in 2024 with our solution. And that involves customizing various integrations to other in-house or internal system -- what they call system of records between our solution and their system of records. What really we're learning as we go through these is that we're getting better and faster onboarding of customers, which has been an ongoing goal for management as objectives within the operational side of the business. The company's employee roster continue to increase with 20 new hires completed during the past 20 months, and employee retention remains very high. Development staff trained in new Microsoft technologies and systems during fiscal '23, and this together with the new customer additions result in the company earning the Microsoft solutions partner designation of digital and app innovation. Microsoft Partner slated in different designations that allows us or provide us access to Microsoft's accelerated support discounted for free or free and then we get a bunch of internal right, user rights across a whole bunch of Microsoft products include teams as their whole office 365, Azure credits, etc. The company is super proud that in fiscal '23, we were recertified for the second year in a row, by an independent out on our SOC2 Type 2 audit. It was performed by a third-party CPA firm because our solution store customer data in the cloud, specifically in a lot of cases, national infrastructure, our management believes it's mandatory to demonstrate its commitment to security by seeking the SOC2 Type 2 certification and provides assurances to company stakeholders or information security measures can withstand the challenging requirements of today's cloud computing environments. The next slide, I want to talk about is, we've published this quite a few years ago. We've now spent time on our TAM estimates. We updated it in 2023, and we based this on -- and this is ever evolving data within the industry, pipeline operators sell assets, buy new assets, to deactivate assets. All of that happens through time. These numbers are based on FEMSA 2022 published data and information was researched to compile to assist us to determine kind of our go-forward strategies. If you look at the table below, we resorted it and priority based on our solutions that we've released into market and have greater intel and knowledge of kind of where we believe customer adoption is going to come from. For example, we have very good insights using our core CIM and we're starting to build our intelligence. So rent of internal corrosion that went out that has been publicly generally available and crack just got released. So we still have these flags as developed early even though we have specifically started gathering ROI-type variables and cost drivers at operators as we start getting adoption with customers, we'll continue to learn more, we'll keep evolving our ROI models and basically do that as we go down this list. Now I caution attendees that these TAM figures are not meant to project company revenues, rather they represent our estimates of 100% of the potential market opportunities for various SaaS products and modules listed, and we continue to learn more as we engage with our customers on where their priorities are related to budget and the problems that we're trying to solve for them. So with all TAM estimates, this is kind of a point time estimate. And while we learn much since we published those years ago, we'll continue to learn more as we release solutions into each of these. And really, what we'll focus on specifically is the applicable milage. This is an applicable mileage column in the rates. So those two will keep monitoring with the objective and the hope that as we get more learnings and we understand more white space out there that we can increase both of those through the solutions that we release into the market. The last slide, I'll go over here is OneSoft's AI and ML road map. We've showed this in our last quarterly update. I just wanted to reiterate some thoughts this is continuing to increase the interest of all stakeholders. We continue to evolve our ML capabilities as part of our technologies. We've done service projects for customers where we're actually using ML models against data that we have to help our customers. We believe that OneSoft has one of, if not the largest collection of industry data that will support AI in the future. Continue to expand our types of data that we bring into the platform. This coupled with the capability of our CIM platform to ingest and align that vendor agnostic data sets, it's really regardless of who collects that data, gives us a unique advantage to prevail in what we believe will become an upcoming AI technology rates for industry at some point in the future. What OneSoft has already done in this regard is pretty unique and our customers continue to work very closely with us to share data that we can use to extract new learnings. We call that shared learning and best practices with everyone who uses our solution. I'd like to thank you for attending today's webinar, and I'll now hand it back to Dwayne to wrap up the meeting.
Dwayne Kushniruk: Okay. Thanks, Brandon. So looking ahead, we believe that OneSoft is very well positioned for continued success with really no boulders on the hill that are evident today. We have a strong balance sheet and all the cash we need to execute our business plans as currently envisioned, and no debt other than the small amount that arose from the acquisition we did in mid-2022. We believe we have the leading solution in the market. Hallmark Fortune 50, 100 and 500 customers who have strongly validated it, and a strong pipeline of potential new customers who we believe will adopt our solution in future periods. So with this, I'd like to thank everyone for taking the time to tune in today and invite anyone with questions to raise them now or by e-mail at your convenience. I'll now pass the call back to the operator to start the Q&A session.
Operator: Thank you. [Operator Instructions] I would now turn the call over to Sean Peasgood, who will moderate the Q&A session.
Sean Peasgood: Thank you. Thanks, everyone for submitting questions throughout the call. As per all of our calls, we have lots of questions here to get through. If we don't get to them, we'll get back to you, and we would encourage people to reach back out to the company if you don't get the answers that you're looking for given the length of the call today just because it was our annual results. So the first question, you mentioned that 19% of this year's expected revenue was from new logos. Can you discuss any potential upside to this number? And then further, how would you characterize the size of your sales funnel right now? I've been adding other questions to this. So as well, do you anticipate signing a contract with an international pipeline company this year? So a couple of questions in there.
Dwayne Kushniruk: Maybe I'll start out, Brandon, and then pass it over to you. When we put our guidance out, we published that based on the information -- the best information we have regarding who we think is going to sign a plan when we get -- when we expect to get these deals closed and so on. And obviously, not all of that is in our control. But I think we tend to -- we're certainly not overstating. I think we tend to be fairly conservative in how we plan our business. So we've got good visibility into the potential customers who we think are going to come on board and Brandon, maybe you want to talk a little bit more about the project that we did in H2 of 2023 to get our arms around this.
Brandon Taylor: Yeah. Sure. So we've spent -- we did a deep dive, a pretty comprehensive review of the market in general to help kind of drive our TAM table and then more importantly, put in kind of a rolling three year framework to where in '24, it's more lead an opportunity kind of generated because we're in deals as you move out in time, those become less clear on when on the timing. We have some visibility into because we're talking to a lot of pipeline operators on kind of where they are in cycles and budgets and things like that. But we spent a lot of time looking at the U.S. market, the market assessment and went deal by deal through that entire 200 miles -- on the 642,000 miles all the way down to operator level. So we spent a lot of time on that and a side that drove kind of our guidance number in '24 kind of on the opportunity. We feel confident on that number and then really what we never know is the timing of these. I mean, as we mentioned in the presentation, there were deals that we expected to close in last year and those just get to the end of the process and just really out of our control, you can come down to one person just time from one person kind of thing. So that's where we really have no control and visibility on when those -- I don't think we've lost those deals. They've just been delayed. So we believe that that's going to happen, and there will be upside on those. We are seeing really good adoption on our new modules. So again, that typically is a timing. In this industry, you're new to it, there's different budget cycles through it, and they're very budget and big corporations. So they'll put it in the budget and when it can happen, it can happen. So you could do all the work and then you got to wait until the budget cycle hits in certain cases. So I think that really, when you look out into the future, we're using more of our historical the time that we started in 2017 to now, year-over-year, this 50% kind of growth, this is holding, and we have the back drop of deals to support that. We just got to execute that. Sean, as far as the question on how is our backlog look? It's just probably strongest, as it's been with probably a more defined process behind it. We have a very definitive or sales team now is in place. So feeling really good about that execution and the consistency across the group and where we're kind of headed from a process. We've spent a lot of time on our ROI calculator. So really trying to show that there is an industry, a little bit of a tightening from an OpEx expenditure perspective. So you look at different things like CapEx, things like that. So we're really focused on that ROI. And we knew that, that would be the case as we move kind of into the next CASM piece, which is this early majority. So we're really focused on kind of that pragmatic return on investment, cost savings, those kind of models, and we're always being pretty innovative in how we go approach and attack and monetize that market.
Dwayne Kushniruk: Sean, I don't know there were a lot of questions in there. So I don't know if we got them all.
Sean Peasgood: Regarding the international opportunities, we are working with international deals right now. And Brandon, maybe you just want to talk a little bit about opening up EMEA.
Dwayne Kushniruk: Yes. So we do anticipate closing international deals this year. So those are in motion. We also last year participated in the Pipeline Technology conferences in Berlin, but similar to the U.S. conference of PPIN, all the pipeline operators comp. There's about 250,000 miles in EMEA. And really, the same scenario exists there as it does in the U.S. and that their legacy solutions, no cloud solutions. So we have plans to open up that market in earnest this year, put people on the ground and start working at. That will be a partner-led initiative. So we -- this is the early days for that initiative for us, meaning that we'll start building in '24. We have international clients as it is. So first objective would be to make sure that those clients that are U.S. based, but have pipelines around the world are using CIM around the world. So make sure that happens and we use those as beachheads to leverage into new client adoption as we go. That conference is actually next week. So we'll be on ground and starting that initiative as we speak with hopes that we can start getting deals into the pipe in Q2 and then budget cycles will happen in Q3. So maybe in 2025, as we go through that cycle, we can start be in a position where we can start onboarding customers out of EMEA.
Sean Peasgood: Okay. Great. Next question is about piggable versus non-piggable. How much of the total customer miles today is piggable? Are miles under contract only payable at this point? And will you see any non-piggable starting to come under contract this year or next?
Dwayne Kushniruk: So on that table, if you look at the non-piggable the total miles is the operated by customers line. That's the first line. The miles in the subscription is the piggable miles. So core CIM when you're talking in-line inspection, are you talking about pigs. That's mostly the core CIM workflow, which tools am I going to run, analyze it, to create digs (ph) related to that analytics, that is that under subscription line, right? We are already seeing some of the operated miles that are non-piggable come into under subscription on purchase orders as we launch new modules specifically internal corrosion. So in that case, there's piggable pipe or non-piggable pipe out there where they're injecting chemicals. They are running cleaning tools to clean the pipe, sampling, those types of data sets are coming in that are related to non-piggable. So really, the focus initially is on core CIM, which is really highly centric around the in-line inspection, internal corrosion now starts opening up the non-piggable pipe. And so we actually have clients that have onboarded internal corrosion and we're seeing, as we start getting into new customers, there's a tendency to add to the purchase order as we go, even though it might be a future phase of implementation after core CIM. So that's our kind of leg in to starting the non-piggable and then external corrosion really opens that up because -- that's all -- most of that is non-piggable from the perspective they're doing cathodic protection and just different surveys on the ground because they can't pig the pipe. So that's when you open up at 2.7 million miles. So we anticipate we're a private preview on that with multiple customers, and we'll start releasing that functionality in the latter part of probably Q3 is when we'll start moving different data sets in the CIM through that workflow. I know it's confusing on what's piggable, what's not piggable, etc.
Sean Peasgood: No, that was helpful. That's good. I think people just want to understand if those are starting to come online this year. So next one, given the large difference between the ROI that CIM users are getting compared to alternatives and given your pricing power, how do you think about pricing? How do you think about your pricing power? Can we expect future price increases beyond the innovation and inflation pricing escalators?
Dwayne Kushniruk: So pricing is always a challenge from the perspective of -- we believe, and I think most investors believe, right, that we could charge more, customers are really the true test of that, right? So we have been in deals where we've been priced out, they can't afford it in the current budget. You remember, most of these operators are running Microsoft Excel. So it's not so much price and value as it is cost savings as a component of that, hence, why we focused on that. The metric that we're -- and I think I touched on this in the last quarter is modified internal rate of return. We're calculating that during our benefit analysis, along with net present value and internal rate of return. So if you look at those numbers, that's really what is kind of helping us gauge on where we are because our number one -- in parallel to this is why aren't people why aren't we getting more customers stopping? And our belief is most of that is around change management. In fact, if you talk to most operators who are not OneBridge OneSoft customers, they'll know who we are. They know they want it. It's just that how can they do it? It's changed, right? That's really kind of the thing because you got to remember in this industry is when they make a change like this is going to be a long-term change because they're changing all their documentation internally, how they're audited, all those reports that come out now are going to come out of our solutions. So it's a big change for the organization. They build their whole integrity program around CIM. So as they do that, they want to make sure that once they make that change that they're going to do that. So the question is how can they do it? One of the things that we're -- that we do through this ROI show them that not only are you not -- there's got to be some element, I guess the easiest way to say this would be if they're spending X for us to come in and charge Y, which is same as X, there's no incentive for them to do change. none. So you have to give them some kind of variability to say, okay, management has to force the change because of the ROI that's going to hit the balance sheet and the bottom line. Hence, why we'll keep measuring that when that number is greater than 20%, ARR is greater than becomes really a no brainer to change. We look at that, say, if it's 40, then we're not charging enough. And so we adapt accordingly to that. So the question is, will we raise prices, yes. In relation to how much change, so we don't -- we can get the deal and move on. We are still in the business of adding logos as our core objective here, meaning we want 2.7 million miles, 80% gorilla, so we can really do the data science analytics and really start changing industry and become that leader.
Sean Peasgood: Great. Look, we're running out of time here. So I'm going to ask one last one and then I think you have to answer it fairly quickly, and then we'll have to get back to people. You mentioned the performance bond for a potential client in South America in the MD&A. Is this the first time some collateral has been asked of the company? Is this indicative to the region? Just trying to figure out if this is something that's going to continue, maybe address that?
Dwayne Kushniruk: Yes. So that's -- we believe that's indicative to the region. That's not ever happened in the U.S. We don't anticipate that ever going to happen. Most South American and LatAm operators are government-owned. So it's that kind of government bureaucracy on -- from the perspective of as we do -- it's very formalized RFP, can't communicate, you got to go through a system. That's just one of the typical processes that we see in that region on these performance bonds, not only like a bid bond to actually say, "Hey, are you really going to bid on this? And then two, is if you get it, you got to do performance. So that's -- we believe that's indicative to the region at this point.
Sean Peasgood: Okay. Great. The first thing we're going to will answer any of the remaining questions by e-mail. We have everyone's e-mail attached to the questions that have been asked today. I would like to thank everybody again for submitting questions. If you think of any others, after the call or we've left anything unanswered, please feel free to reach out to us using the contact information on the screen in front of you, and we'll get back to you as soon as we can. I'll now pass the call back to management for closing remarks.
Dwayne Kushniruk: Well, I think we're done. Thanks, everyone, for taking the time to attend today and for following our progress. We look forward to these calls and updates, and we'll have our next one near the end of May after we publish our Q1 '24 results, -- so with that, I'll turn this back to the operator.
Operator: Thank you. This concludes OneSoft Solutions conference call. We thank you for joining us. Have a nice day.
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