Initial thoughts is that this is a pretty disapointing half for IRI and I'm not totally sure what to make of it really.

If the turnaround is coming then it is a lot slower than I expected and it suggests that their product mix is not as critical as previously thought. Licence fees were up 5% (17.9M), while maintenance fees were down 24% (7.8M) which suggests non-renewal from existing customers.

The transistion to SaaS is also slower (518K, up 314% but from a very low base) than I had hoped to see if existing customers were hungry for the product. They added 23 new customers for the period, maybe these are smaller companies so slower revenue increase?

Revenue in the Americas down 24%. They had some commentary on addressing this, but it does remind me of a few years ago when the Europe segment was underperforming and personel were changed to address it. The reoccurence of this problem suggests that the buisness operations are not as easy to maintain as I had previously considered and possibly are more dependant on key personel or face to face contact to maintain customer relationships. Employee turnover was identified as a risk as part of there transistion strategy, but this wasn't elaborated. There was some positive comemtary regarded H2 but no solid guidance was given, my read is that they are hoping for some bigger renewals as the FY closes but don't want to promise anything.

Total revenue of 32.2 (down 5%)

TCV- 31.7M (up 8%)

NPAT- 1.7M but this would have been a net loss if it weren't for a 0.8M currency gain and forgiveness on a 1.4M US paycheck protection program loam which is now classed as grant income.

Overall, I am disapointed and glad that I waited for the half result to assess before buying IRI. I think this will now keep drifting lower, but it is starting to get very cheap if the turnaround gains momentum in H2 and builds into FY23. However I am going to wait for the turnaround to be clear before I try and catch this knife.

It looks like the bad 2021 result and the messy way they released there profit downgrades seems to have pushed IRI into the naughty corner and no one wants to play with it. I have been in and out of IRI for many years and it seems to go through these periods of overexcitement and over pessimism, the post COVID highs of >$4 were very optimistic but the sell down to $1.30 currently seems pretty overdone and has sparked my interest.

From reading there last financial report sales recovered well in the 2nd half , which supports the idea that contracts were not renewed due to COVID uncertainty rather than fundamental problems with IRI technology solutions remaining relevant. I am expecting revenue to continue increasing back to pre-COVID levels or close to it in the current year, and I think this one could surprise the market and be back around $2-2.50 pretty quickly if it does.

What I like-

High quality company with high ROE (apart from last year)

technology embedded into the operations of many large global companies and its not clear that they want to change service providers. Their software on payments and systems helps companies keep there operations going and finds and fixes problems. My perception is that there software solutions are reliable and high quality.

Usually a high proportion of reoccurring revenue, but last year showed that this is not as sticky as previously thought.

Revenue is in US dollars so gets a favourable currency kick, the flip side hurt them last year making the results worse than under constant currency terms. I’m not expecting much benefit this year but if the US dollar increases we get a free kick.

What I don’t like-

Ownership by management is relatively low but they have been buying some recently

Founder (retired from business a few years ago) still owns a large number of shares and does periodically sell a large quantity which spooks the punters

have gone through a bit of management change over the last 2-3 years but I think the current CEO is quality.

I am unaware of what competitors are doing but I think the low customer churn suggests IRI is not operated in a crowded space.