Ann: FY24 Half Year Results Presentation, page-27

Looking into more details at the cash flow statement for H1 24.
Obviously, there is a strong improvement with a free cash flow of 3.6 m$ vs - 3.4 m$ for H1 23.

However, it is tough to have a clear view on this given 2 elements :
- cash flow from operation of only 3.4 m$ vs statutory EBITDA of 10.9 m$,
- Capex of virtually 0 vs 4.7 m$ during H1 23.
So it is worth going into more details into these figures to better understand the underlying trends.

1/ Cash flow from operation
Looking at the period FY 21 to FY 23, there was a high level of EBITDA conversion into cash flow from operation (at least 90 % every year).

2/ Capex
The Capex was almost 0 during H1 24 (like depreciation ?). This was due to the fact that IRI has stopped capitalising some development costs.
Historically, Capex was very low excluding capitalised development costs.

3/ R and D
Historically, IRI had a high level of R&D/ sales : 24 % in FY 21, 36 % in FY 22 and 34 % in FY 23.
During H1 24, the company has largely reduced its R&D to only 16 % of sales vs 31 % for H1 23.
It looked logical as the company decided to reduce its costs basis due to the regular erosion of their main product (Collaborate). Going forward, I expect the company to increase again its R&D, in particular if there is an improvement for Collaborate sales.

In FY 25, I estimate that IRI could have a cash flow from operation of around 22 m$ before tax (in line with its EBITDA), like what they did in FY 21.
If we apply a normal tax rate*, I expect IRI to have a cash flow from operation (after tax) of around 15 m$, which is also estimated to be their free cash flow FY 25, after capex, lease and net interest received.
Based on these figures, IRI continues to look quite cheap for a software company, with a free cash flow yield of 12.9 % (even after the stock just doubled).

* tax rate was only 7 % during H1 24