Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record group sales of $35.3 million, up 14% from the previous year.
- Revenue within guidance at $30.2 million, reflecting a 6% increase.
- Positive EBITDA in the second half of FY24, indicating a successful foundational transformation.
- Strong gross margin maintained at approximately 60%.
- Solid cash position and successful capital raise of $4.3 million earlier in the year.
Negative Points
- Gross margin slightly lower than the previous year due to revenue mix.
- Impairment charge of $1.5 million on the Illuminate segment due to underperformance.
- Revenue in the Detect segment was down, impacting overall gross margin.
- Seasonality affects revenue, with Q1 traditionally being slower due to the Northern summer.
- Illuminate segment had a flat year, requiring rebuilding of key customers and technology.
Q & A Highlights
Q: When do we anticipate contracted revenue from the Telstra contract? Is there an estimate for the dollar amount on the first booking? Is the agreement for Telstra's own infrastructure protection use case, or are they selling it to third-party customers using AVA Technology?
A: We have seen the first revenue in July from Telstra, which was a small project. We forecast between $4 million to $5 million in this financial year from Telstra and related adjacencies. Currently, the majority of the Telstra business cases are primarily for Telstra's own use, but we are also working on innovation platforms with Telstra for future capabilities.
Q: How long does it take to go from early stage to high probability for sales pipeline opportunities?
A: It typically takes between 3 to 12 months, depending on the size and complexity of the deal. Larger deals may take longer, especially if they involve government tenders. Smaller opportunities, especially those with trusted partners, can move faster.
Q: How should we think about seasonality in the business and the first half to second half split in FY25?
A: Traditionally, Q1 is slower due to the Northern summer, and Q3 is slower due to the Southern Hemisphere's January holidays. Typically, H1 is smaller than H2. However, building a backlog can help smooth out these seasonal variations.
Q: Are the adjacencies in the Access division sufficient to make it profitable, and will Access and Illuminate become EPS accretive to the group?
A: Access was profitable this year, driven by new products and strong results in Australia and the UK. Illuminate was flat but is showing positive signs with a backlog for the first time. We expect Illuminate to reach breakeven or better this year.
Q: Are the Dormakaba distribution channels for Access on a more smooth ordering pattern now?
A: Yes, in Australia and the UK, we are seeing a steady monthly order to cash flow. The US market is newer and took a large stocking position last year, so it will take some time to see the next reordering process.
Q: What is the Board's approach to future dividend payments?
A: The Board has a policy of paying out not less than 35% of EBITDA. We do not see any need to raise capital at this time and are comfortable with our cash flow to pay dividends out of EBITDA going forward.
Q: How much more do we need to invest in technology and sales this year?
A: No further significant investments are needed in the commercial team. On the technology side, we will focus on developmental expansion of existing platforms rather than new investments. Overall, investment in technology will be slightly smaller this year.
Q: Will you start reporting the win rate for the sales pipeline?
A: Yes, we already track this internally and will discuss with the Board about reporting win rates going forward.
Q: Is there any update on the outstanding India licensing contract agreement?
A: The licensing agreement continues, and we are in the process of delivering additional licenses. Some systems are still being deployed, and we are working on another order for more licenses, expected to conclude late in the first half of the new financial year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
