Acusensus Limited (ACE) Earnings Call Transcript & Summary

Good morning, and welcome to Acusensus FY '26 Results Briefing. From the company today, we have the Founder and CEO, Alexander Jan; and the company's CFO, Anita Chow. Before I hand over to Alex to go through the presentation up on your screen. [Operator Instructions] But with that, Alex, please go ahead.

Thanks very much, Simon, and thank you, everybody, for attending this webinar today. So we're going to take you through the FY '26 results, a bit of an overview and a highlight. Anita will take you through the numbers behind the story, and then we'll finish up on the outlook and then go to a Q&A session. It really has been very much a record year for us. We've had sort of record everything, $27 million of revenue growth. EBITDA was above our guidance. Very pleasingly, we had a very strong growth in our international business. It's now up to 27% of group revenue. We're sitting in a very strong balance sheet position with $26 million of cash and also a completely undrawn debt facility now that's worth up to $25 million, including the bank guarantee facility through Citibank. So really indicating the maturity that the business is now at. What I'm most excited about, though, is where we sit for financial year '27 and beyond. And for the first year, we believe that we'll exceed $100 million of revenue. That's a real milestone for the business. And most importantly, $97 million of that is already contracted. That does assume that the Transport for New South Wales mobile speed camera program extension comes through for another 6 months. Looking at Forsite, we had some great news overnight with Transport Scotland releasing publicly that they were going to take Forsite through a number of sites across their road network in the coming months. And so you'll be able to find that coverage even on the BBC, for example. We've had several new market segments opened up by our research and development team, and I'll go into that in a bit more detail later. But when we look beyond financial year '27, and just a reminder that the nature of our business is government and processes can take a long time, but they do deliver very long-term business and they're very good counterparties. We have really long-term locked-in ARR. We can see on what we have now in the financial year '28 should already look very good compared to '27. And we're not putting our feet up. We're really focused on converting for the future. We've got the strongest pipeline of potential work that we've ever had. We are really in a position of strength for the future. We're focused on winning the new contracts and delivering on a medium-term vision, which we -- which we're putting pen to paper on for the first time to state that we believe that we're very well placed to take this business to $100 million per annum in Australia and also in international in the years ahead. There's been lots of activity over the last 12 months. We've had wins, expansions, upgrades and extensions. The most notable wins were in Connecticut with the 5-year automated work zone speed enforcement program, the recent win in Kentucky with the statewide work zone speed enforcement program. We had the win in West Australia for fixed enforcement sites through the state. Then that was very quickly upgraded and expanded to have more sites under that contract. We also had both the West Australia and Queensland trailer-based contracts expanded. the speed program in Queensland, the West Australia trailer program doubled in size in number of units. We had upgrades in the ACT in the New South Wales, so seatbelt module added to the ACT. We had, for the first time, our first customer use bidirectional trailer-based enforcement for mobile phone and seatbelt enforcement with New South Wales. I believe that's another world first for us. And then we had extensions in the ACT in New South Wales and in Queensland. And when we look at that impact on total contract value, we've had a 31% uplift in our total contract value won since inception. And so sitting on the most amount of future work to be delivered that we've ever had. We've got $220 million of locked-in work to still deliver. Internationally, we grew that business 27%. That's up from just 7% a year ago. So we had really strong good growth in our New Zealand and U.S. operations and also some growth in our U.K. operation. Our business is based on changing behaviors and saving lives, and we actually have to put units out into the field to affect that behavior change. Pleasingly, 47% uplift in the number of units out in the field. Then when we look at Australia, we've retained all of our customers and the majority of them have actually grown and expanded their contracts with us just in this last financial year. Looking at the headline financials. Revenue was up 45% to $86 million. Gross profit was up 36% to $36 million. Adjusted EBITDA was up 49% to $8.5 million and our cash position has improved to $26 million and no debt. I'm now going to take you through our 3 growth engines segment by segment. All of the segments grew strongly this year. We expect all the segments to grow again next year. We've built our position in Australia really strongly over the last 7 years. I say we really are the market leader in this market. We have more trailer-based enforcement than anybody else. We've won the majority of contracts in this decade of the ones that are in our space that we go for. We supply 5 major jurisdictions. We've had all the contracts through this year that we're approaching their end dates have their contracts extended. So the ACT, the first tranche of the Queensland program, the New South Wales mobile speed camera program. As I mentioned just before, we had 75% of Australian contracts were expanded in some way. And we still see quite a lot more opportunities still to come in Australia, both from the existing customers that you see on this slide, but also from customers that we don't yet have such as Victoria, for example. To take you through some of the details of the Australian segment. Revenue grew 14% to $63 million. The [indiscernible] segment is a mature and profitable one. It has 34% EBITDA margins. And of course, this is where we aspire to take the other segments of the business as well. The details here, significant expansion in West Australia with that new $20 million fixed site enforcement camera contract and a doubling of the fleet of trailers. We saw the doubling of the fleet of Queensland speed trailers, the ACT enabled seatbelt enforcement. And I should pause and mention that the ACT does remain in a tender process for multifunction enforcement cameras, and we do remain in that tender process at the moment. In New South Wales, we have the uplift of that program to include bidirectional enforcement by trailer. As I said, I think that's the first time that, that's been done anywhere. It's slightly harder to do than it sounds. And then also in New South Wales, we had our mobile speed camera program buried to add an extra year to that contract in the form of two 6-month options, of which one of those 2 options has been exercised so far. I'd also really like to point out and highlight the deployment in West Australia of the multifunction trailers saw Australia's first live enforcement of transportable average speed. And that's something that I think all of the other jurisdictions in Australia will be monitoring closely. It can really help to change behavior on rural and regional roads across these stretches of the road network. West Australia is the first time that average speeds via transportable units has been done and is enforcing live. I think that's something that other states will adopt over time. We've always had that goal to have Acusensus be a predominantly international company. And it's been fascinating to watch how the international revenue curve has been tracking the Australian revenue curve. It does take time to educate the market to do that early sales and business development. And we've now seen that this year 4 of revenue in the international segment has been really a breakout year with a significant uplift in revenue, and that very much matched what happens in Australia, where we had year 4 being a real breakout year in revenue too. So we remain very focused on continuing to grow that international part of Acusensus. And I think really key to the significant part of that growth aspiration will be the story of the United States. And in the U.S., we're actively developing 4 key markets. And together, those markets are worth at least USD 1.5 billion per annum. Our entry point was commercial motor vehicle enforcement. We've been growing our customer base year after year, and we have several more customers that have submitted for funding who are also waiting to adopt Acusensus real-time heavy vehicle enforcement. And that's something that all 50 states, 50 state police agencies can do with our technology. The next market segment is the work zone enforcement. And this is a real specialty area for us with the technology that we've developed. These are state-level deals. We have the real-time enforcement deals with Arkansas and Kentucky. We have our first automated work zone speed enforcement deal with Connecticut. And we expect more and more states to come to market at a rate of at least one per annum to adopt statewide work zone enforcement. The majority of traffic enforcement in the United States that happens at the community level with cities and with counties. And that's a traditional intersection enforcement, red light and speed. We are now in multiple tender processes for the first time this year. And it's just, I believe, a matter of time before we start picking up and winning community level enforcement deals. The fourth segment is where we've always tried to get to as a company, bringing our technology into the United States, and that's automated mobile phone enforcement. And that's a market that really should rival intersection enforcement in a given state over time. And we still remain confident that it will be a matter of when rather than if a state legislates to enable automated distracted driving enforcement. And I think I'm really proud of how we've grown our U.S. team and the capabilities of that team now to be able to play in all these segments simultaneously and give us a real chance of winning in them. I just went through all the different segments. On this slide, I'll probably just focus on the work zone enforcement, which is where we've made quite significant progress through the last year or 2. Our first program was with Arkansas, and that's for real-time speed enforcement several years ago, where we displaced a competitor who wasn't able to get the technology to work. So we've been able to steadily supply Arkansas with real-time work zone speed enforcement -- and Kentucky then watched what was happening in Arkansas and really modeled their program. They had -- they passed legislation that was almost exactly the same as Arkansas's legislation. They ran a pilot [indiscernible] through the year. They ran a competitive tender. And now we have our program with them that with the option periods will go for 5 years and really has an opportunity to expand. The Arkansas program this year from the start of this year, enabled the enforcement of mobile phones and seatbelts. And that's a real milestone moment for enforcement in the United States. It's the first time the state-level agency has enforced by camera mobile phones and seatbelt offenses. And of course, that then clears the way for other states and other agencies to copy that and to not have to be the very first one to do it. Meanwhile, we won that deal with Connecticut, a 5-year deal for automated Wace enforcement. That has tremendous learnings for us in being our first sizable automated enforcement deal, and it puts us in a much better position as we now tender for more state-level automated deals and also community level automated deals. International as a whole grew very strongly. Revenue was up more than 400% to $23 million. International became EBITDA positive for the first time, had a $5 million swing, delivering a $3 million adjusted EBITDA for the year. New Zealand was fully mobilized. And pleasingly, we've seen offense rates halved, which means that drivers are getting the message and starting to change their behavior. I went in some detail about the U.S. just before. We've had some really good progress there with a strong pipeline and a good team in place. The U.K. business picked up in the second half of the year, and we now are active with several customers in the U.K. Pleasingly, we had Devon and Cornwall renewed again being really the only ongoing enforcement program for anybody in the U.K. And Transport Scotland is a really well-sized project with good prospects to move to enforcement in the future. We're continuing to conduct pilot activities across their road network at the moment and through this next half. We're very much an engineering-led company. We really are innovators in the road safety and traffic enforcement space. We were the first to market for phone enforcement for seatbelt enforcement, but we don't want to just stop there. So first and foremost, our technology is here to make the roads safer. And then the flow-on effect of that is revenue opportunity. I'll just talk to 3 of the things that we've developed and released through the year. Bidirectional enforcement just further raises that bar to make it the new flagship product for everybody else to try and copy as they do. We only have it deployed through one customer at the moment being New South Wales, but that presents an opportunity for us to take that technology into more customers. On the intersection enforcement side, this is the first time that we are supplying intersection or red light enforcement in addition to our other suite of products such as speed, mobile phone, seatbelt enforcement. I think we've done this in a very innovative way is that we have a truly single pole solution that has very low capital expenditure. So we're not wasting money sinking money into concrete and conduiting and pits and all that like most red light enforcement installations. Of more significance to us, though, is that being single pole, we can put it on a trailer or a redeployable unit and move these enforcement systems around, which may be a novel way to approach the market. We have a dedicated AI team that's been continuously improving our core competencies of detecting mobile phone and seatbelt offenses and also other competencies within the business. I'm pleased to say that the performance that we get, you can't just get that by any kind of an off-the-shelf model. It takes some quite significant data and training and specialization to get the kinds of performance that we have. In the last few months, the Victorian Auditor General released their report into how well the program was going in Victoria, which is the program that we did not supply in Australia. And that gave us an opportunity to directly compare it to our other programs. And so when you look at the last reported amount of mobile phone offenses issued in West Australia versus the last reported in Victoria, we have 6x more offenses issued per month, and yet we have less trailers active in West Australia than Victoria has. And then when you look at the human review load, we're reviewing just a fraction of referrals from the camera systems with humans in West Australia compared with the review load that's been experienced by our competitor in Victoria. And that's really important for numerous reasons. It's important for quality and accuracy. It's important for cost, but most importantly, for privacy. That means that really with the Acusensus system that if a human sees that image, there's a very high chance that, that image contains an offense in it. Turning to Forsite. Just a brief recap for those who haven't followed the story too much to date. Forsite is a road worker protection technology. Roadside work is one of the most dangerous occupations in the nation. Forsite provides a system that detects when danger from vehicles, general public that those vehicles might be about to hit a worker and provides a customized individual alert to the worker that they are in harm's way, giving them the precious seconds that they need to get out of the way. It also then provides a layer of data and insight about each work site to make it safer and more efficient over time. We only launched this product about 9 or 10 months ago. We have seen revenue grow up to $400,000 for the year. I think more importantly, the customers that we're getting are signing on with us for the long term, and we actually have 2x that in total contract value remaining with the customers that we've got. And I think that really demonstrates the appetite of our customers to commit to this. The way that this is going to go is that customers will pilot this technology. We'll learn all about it. We also will improve it alongside them. And then at a certain point in time, I think we'll see a customer or more customers go into much larger scale adoption. And that's when the revenue for this business segment is really going to grow. In the meantime, we're getting this technology adopted across more and more customers. We have more and more people joining for pilots each month. We brought forward the internationalization of Forsite because of the demand that we saw in Western Europe and in the U.K. And now just overnight, we've seen Transport Scotland really publicly commit to deploying and using this Forsite protection technology, which is really pleasing to see. I'm going to hand you over to Anita, who's going to take you through the numbers behind this story.

Thanks, Alex. I'll take a run through the financial year '26 numbers and then hand back to you for the outlook. Some context on the trajectory first. Revenue has compounded at 69% a year since FY '21, and it's flowed through. Gross profit has compounded at 60% and adjusted EBITDA has moved from a $2 million loss in FY '21 to $8.5 million today. The pattern this year is that the growth is broadening. Australia has kept growing and international has scaled up alongside it, and it's increasingly converting to improved EBITDA performance. As Alex mentioned earlier, FY '26 was a record on all 3. Revenue $86.2 million, gross profit $36.2 million and adjusted EBITDA at $8.5 million. The step-up is a direct read-through from the recent contract wins and expansions and sets us up well for the years ahead. Okay. Let's dive a little deeper into the profit and loss for FY '26. Revenue grew 45% to $86.2 million. This was driven by new contract wins in Australia as well as international, but also expanded scope from existing customers, predominantly in Australia and then indexation. I will touch upon this further in the next slide. Gross profit rose 36% to $36.2 million. Margins did moderate to 80 basis points to 42%, but this is predominantly a mix effect as international grew faster and carries a higher share of speed enforcement revenue, which has lower margins. Adjusted EBITDA was up 49% and operating leverage is visible. D&A rose 61%, reflecting the capital deployed into fixed assets for new and expanded contracts, combined with new car and property leases. The statutory result was a loss of $24.3 million, but this was driven predominantly by the $16 million litigation settlement as well as $2.7 million related legal fees. These costs are nonrecurring in nature. Okay. Let's dig a bit deeper into the $26.8 million of revenue growth. If you look at it by segment, you can see that Australia added $7.8 million, which is up 14% and then international added $18.7 million, which is over 400%. International now contributes $22.9 million or 27% of group revenues, up from 7% a year ago. This is a real testament to the strength of our international expansion strategy. And then if you look at it from a customer perspective, new contracts drove majority of the win -- majority of increase, $23.6 million with New Zealand, Mobile Speed, Connecticut and WA accounting for roughly 93% of this increase. Existing contract expansions such as additional units for both the Queensland programs and ACP Pion seat added $3.6 million. It's important to keep in mind that the majority of our revenue is contracted and recurring in nature. And then in relation to the revenue growth, it converted into a 49% lift in adjusted EBITDA from $5.7 million to $8.5 million. Australia added $1.8 million, delivering $21.6 million EBITDA at 34.4% margin. The biggest swing was international, as Alex mentioned earlier, moving from a $1.6 million loss to $3 million of profit at 13% margin. And this was even after additional investments in sales in the U.S. Forsite ran a $2.3 million loss as we invested to grow that business, and we can see that the positive -- our outlook is positive. Shared costs increased in dollar terms, but it fell from 19% to 16% of revenue. This is our key indicator of operational leverage. This slide provides the segment details behind the revenue and EBITDA bridges I just presented. You can see both enforcement engines are continuing to grow. Australia lifted revenue to $62.8 million and international to $22.9 million. And together, they added $26.6 million of revenue and $6.4 million of adjusted EBITDA, while shared costs fell 340 basis points as a share of revenue. The simplest way to read the group is that we have an established Australian business, which is still growing and generating cash, which is funding a scaling international business, which now has positive EBITDA and a strategic investment in Forsite, which we've chosen to carry. Now to the balance sheet. The balance sheet positions us well for the pipeline ahead. A few things I want to call out. We closed the year with $26.2 million of cash, including term deposits. This includes -- and we also have a $5 million Citibank facility, which remains fully undrawn with an accordion for a further $10 million. Plant and equipment increased $8.8 million, net of depreciation, and this is mainly for trailers and cameras for new expanded and future contracts with $3.3 million still work in progress. Contract assets rose $2.8 million, mainly on mobilization costs for Connecticut, New Zealand and Western Australia. Receivables and payables both grew broadly in line with the business growth. Turning to the cash flow bridge. Operating cash flow, excluding litigation settlement, was $3 million. This was down on the prior year's $8.3 million, and the key driver of this is actually working capital. Inventory levels have increased and this year's -- the contract assets from mobilizing new programs did not have the same extent in mobilization payments from customers. The $6 million litigation settlement payment is shown separately. On investing, we spent $16.5 million on plant equipment. Around 65% of that is for trailers and 15% for motor vehicles and motor vehicle cameras. These were mainly for Connecticut, New Zealand and the 2 Queensland programs. Most of our CapEx is for revenue growth that we've seen in FY '26, but also to support the revenue growth in FY '27. Less than 10% of this CapEx was spent on maintenance. The December equity raise contributed $28.5 million net of expenses. So to close, the equity raise and cash on the balance sheet went into revenue-generating assets to be used for long-term contracts. We start financial year '27 with $26.2 million of cash and undrawn debt facility and $97 million of revenue already contracted. I'll now hand back to Alex for the outlook.

Sounds good. Thanks, Vita. So we're pretty confident to be delivering over $100 million of revenue in financial year '27. And with that revenue growth, we do expect EBITDA to increase in '27. Most importantly, though, we want to win new contracts. So we've got a strong pipeline, the strongest that we've ever had, and we want to convert that. With Forsite, we're going into our second year and it's scaling further, still with another $800,000 of contracted value remaining before any new wins that we get. We've had continuing investment in research and development, and we'll be continuing to bring new products into the market that could be used both with our existing client base and to get new clients as well. The U.S.A. though, is a key engine for FY '27 and for beyond. We're going to continue to invest and support in the team there. We see it as a really great team. And we have that early effect that goes into education, logging and further market opening that we hope will then see us convert across those 3 or 4 different U.S. market segments. And so all up for '27, as I said, $97 million of revenue already contracted. We're forecasting to grow revenue by around 20%, somewhere between $100 million and $106 million. And with that, I might hand you back to Simon, who will conduct us through the Q&A. Thank you for your attention so far.

We have Jasper Struwig at Canaccord.

Well done on the result today. It's really good to see the numbers. Just a couple of questions on the international business. It's good to see that it's actually swung into EBITDA profitability over FY '26. Could you just give a quick comment on the U.S. contribution of that? I'd imagine it was still negative.

Yes. Majority of that increase was driven by New Zealand.

Right. And then I guess just sort of continuing into FY '27, would you expect the U.S. to sort of still be an EBITDA headwind? Or could you sort of expect this to sort of shift into profitability based on the contracts you've already signed? Just sort of trying to understand, I guess, the level of investment going into that part of the business?

Yes. So from an investment perspective, as Alex mentioned earlier, we are continuing to invest in sales in the U.S. So we have ramped up the sales team in the second half of FY '26, which will then impact FY '27. So in terms of FY '27, it will still be negative. But in terms of FY '28, we believe that it will then turn positive. Alex, do you want to anything else?

I think you've said that really well.

Perfect. And then just last question. I believe it is on Slide 5. You sort of mentioned that you're pretty well placed to pass $100 million in revenue in each of Australia and the international business over the medium term. Could you potentially just to the extent that you can comment on the actual time frame of that given, I guess, consensus sort of has you sort of, I guess, less than $130 million out to FY '30 pretty much?

Yes. I don't think right now, I'll be making a rug for my own back by putting a specific date on that. It will take several years. I think there is just very strong growth opportunity in both of the segments, though. And so either segment could get there in a shorter time frame or a longer time frame, really will depend what kind of deals we're able to secure and win in either market actually.

James Filius from Morgans...

I just wanted to unpack obviously, gross margins for the full year have pulled back 280-odd basis points. But half-on-half, they actually stepped up 230-odd basis points. So I guess the exit rate sort of about 43% gross margins. Is that a reasonable starting point to assume that carries forward into FY '27? Or do we expect much movement, I guess, off that base into '27?

No, I think that's a good base in terms of going into FY '27. So I guess you want to go into the detail of that. So we've had benefits in both Australia and international. Australia is mainly due to, for example, some of our programs adding additional features to it. So for example, ACT turning on seatbelt and New South Wales turning on switching to a bidirectional, which has improved margins and then some of the contracts have increased in scale, which has been driving some of the margin improvement. And then also from -- in terms of international, it's predominantly driven by New Zealand, where the contracts, the second half actually ramped up a lot more, and we were actually benefiting from higher margins.

Understood.

That's really good answer. Just I might add also programs like West Australia, where we get to double the number of trailers there and add fixed sites really provide an opportunity to reduce costs per unit and improve margins. And you see some of that as well, I think.

Understood. And I guess, you called out that shared costs across the group as a percentage of revenues declined, but there's been a slight step-up in, I guess, the shared costs across the group year-on-year. As we look forward to '27, how much extra, I guess, investment and development are you looking to put into the business in the year ahead? And how should we think about maybe both in real terms, but also as a percentage of revenue?

So in terms of investments, mostly investments you're actually going to see in the segments. investments in Forsite will appear in the Forsite segment, investments in growing the U.S. business will appear in the U.S. segment. So those won't really sit into the shared cost segment. I think something that didn't really come through the deck that maybe you could share some foreign exchange. foreign exchange in our share costs this year as well.

Yes. So from an FX perspective, you're probably aware that the tangle strengthened, which has impacted the international currencies. So in the shared cost, there was $500,000 of adverse FX impact. But I guess to go back to your original question in terms of shared costs in terms of going to the future, we do expect that percentage to continue to decline as the business gets larger and benefits from it. And I guess, as Alex talked about earlier, most of the investment to support the growth in the business, particularly U.S. and Forsite, you'll see in the segments, not in the shared segment.

All right. And then just one more for me. With Forsite, pleasing to see a few extra names on the list of customers. Obviously, you mentioned that you've pulled forward, I guess, the international expansion. Scotland came out overnight talking about the product. But can you maybe unpack the broader international demand that you're seeing that's caused that pull forward?

Yes. So the story behind this, James, was at the Intertrackic conference earlier this year in March this year, we did demonstrate Forsite to a targeted list of potential clients or customers that might be interested in that Western European region. And we got just much higher interest actually than we were expecting from such an early foray into the market. So that then led us to actually put somebody on permanently in the U.K. Also had to move forward some costs for us. There's obviously various EU regulations and compliance and some changes to the product that we had to make. So that will all sit into part of the reason for the EBITDA loss in the Forsite product line. And the particular customers, I won't name them publicly until they've gone publicly -- until they've gone public themselves. But we have advanced 4 specific customers across Scotland, England and Netherlands to the point where I would expect all of those to be in pilot with us before the end of the calendar year.

[indiscernible] submitted questions. Alex, is it possible to give some more insight into the tender book in terms of size, jurisdiction and timing?