Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue increased by 8%, with 99% of it being recurring.
- Net profit after tax rose by 32% to $13 million.
- Strong balance sheet with no debt and $70 million in cash.
- Dividend increased by 5% for the full year.
- Successful renewal of major contracts with significant price increases.
Negative Points
- Expected customer churn in the e-commerce business, impacting the first half of FY25.
- Challenges in protecting IP and data in the Chinese market.
- Potential revenue impact from competitors undercutting prices in the e-commerce sector.
- Ongoing need for significant investment in product development and cybersecurity.
- Dependence on currency fluctuations due to a large portion of revenue being generated outside Australia.
Q & A Highlights
Q: Can you talk to geographic expansion opportunities? Do you drive further into Latin America in FY25? And can you talk to the opportunities in China, please?
A: Yes. We have good momentum in Mexico and plan to expand further into Latin America, including Brazil and Peru. We have completed 17 new DMS integrations in Mexico. For China, we are cautious about protecting our IP and data. We are meeting Chinese OEMs in other regions like Mexico and India, which helps us grow our business without directly operating in Mainland China.
Q: Can you talk to your sales pipeline, what you're seeing in terms of conversations/time to revenue generation, any major larger than usual EPC contracts up for renewal in FY25, either within your portfolio or competitors?
A: We have renewed major contracts with significant price increases. We are currently building innovative features requested by clients, such as daily updates of catalogs and data. We expect increased revenues in the second half of FY25 once these features are delivered.
Q: Can you give us a sense for the headwind in revenue terms from the customer loss and what sort of percentage price increases are you getting in this straight away or over three years?
A: Major contracts renewed for another three to five years have seen price increases between 5% and 17%. We are adapting to partner requests and building towards these requirements to maintain scalability and strong partnerships.
Q: Can you please elaborate on the customer churn event in the first half FY25, please? What are the reasons for churn, price and/or functionality?
A: We expect potential churn due to price negotiations in our e-commerce business in the Americas. We are prepared to walk away if the price is too low, maintaining our premium price strategy. The churn is not confirmed yet, and we are monitoring the situation closely.
Q: Can you please comment on how you are balancing customer retention and achieving required returns, particularly in SimplePart?
A: We are developing against a signed backlog of new contracts in the US, Mexico, Canada, and Europe. We believe we will finish implementation by the end of the first half, bringing new contracts into revenue. We are maintaining our premium price strategy despite competitive undercutting.
Q: When do you expect Superservice payment functionality as being in market? How do you see this driving growth in this underpenetrated market, i.e., Superservice?
A: Superservice payment functionality is crucial for an end-to-end solution, especially in the Americas. We are currently implementing this feature, with prototypes already in some US dealerships. This will provide a competitive edge globally and drive growth.
Q: When do you expect new EMEA leadership to accelerate the top line there? Are you already down for a preferred candidate?
A: We are very close to appointing a new Head of Region for EMEA. We expect to finalize this within the next four to six weeks, with the new leader starting by December.
Q: Can you talk to us about DMS integration? How meaningful is this towards accelerating growth? Did this generate incremental sales in the second half of 2024, or is this an FY 2025 story?
A: DMS integration is an ongoing effort crucial for our ecosystem. We have significantly increased our integration capabilities, achieving more integrations this year than ever before. This will continue to drive growth in FY25 and beyond.
Q: Are there any more major DMS providers on the cards for FY25 in North America?
A: We currently have around 50% coverage and are in deep discussions with other major providers. We expect to finalize these agreements soon, which will further enhance our market presence.
Q: How should we think about the CapEx and R&D investment in FY 2025 versus FY 2024?
A: We expect CapEx to remain relatively the same or increase slightly in FY25. We are investing in further product features and capabilities, which will drive CapEx up slightly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
