Acusensus Limited (ACE) Earnings Call Transcript & Summary

Good morning, and welcome to Acusensus March Investor Update Webinar. Following the release of the March quarterly that came down to the ASX yesterday following ASX release. The company is not mandatory required to release quarterly or Appendix 4Cs anymore. So just noting that. From the company today, we have Alexander Yan, the company's CEO and Managing Director and Founder and the company's CFO, Anita Chow. [Operator Instructions] But with that, Alex, I'll hand it over to you. Thank you.

Thank you, Simon, and thanks, everybody, for attending this webinar on the third quarter of the financial year. What I might do is just go through a little bit of the state of play for us over the last few months in geographically Australia, U.K, U.S. New Zealand through some of the product initiatives and developments and then pretty much go straight to questions and our answers to them. So this quarter was always going to be a delivery quarter for us, very much focused on mobilizing and executing some really big new contracts that we had won through the previous quarter or the previous half year. Most notably, the very significant contract in New Zealand and a very huge amount of mobilization activity through the quarter. West Australia went live through the quarter. And then we also have certain extra systems going into Queensland and that's in amongst the sort of continued pace of development offshore, in particular, with the U.S. with several new customers there. So I'll go to Australia first, we are really, really pleased to be awarded a new 5-year tender or 5-year contract in New South Wales. So that's obviously the very first program that we ever delivered was the [indiscernible] in with the New South Wales and now through a competitive tender process, we've secured another 5-year contract as a base period, and then there's a number of option 1 plus 1 year renewal options there. So it's exceptionally pleasing for us to continue having that very deep and ongoing partnership with Transport for New South Wales. West Australia, the initial contracts that we have for West Australia was for 6 trailers. We now have all those 6 trailers in the region. We have a fantastic team that's been set up there led by manager Mark and we have premises and the last of those trails is going through the testing processes and the capability to both multifunction enforcement trials will be progressively activate as the government of West Australia is ready for them. We previously announced quite a substantial expansion to our Queenland contract and that mobile phone contract was $27 million expansion, if memory serves correctly and that will be rolled out progressively over -- we announced an 18-month period. So the first few systems in that 18 month rollout have been deployed now. Now I might turn offshore. So in the U.K., we have still our ongoing [indiscernible] program with Demon Cornwall and that provides a strong reference point across to -- of course, across the other counties to examine, okay there's a enforce camera program that has benefits in terms of changing behaviors. Over time, we'll see how that saves lives and saves crashes and injuries. And that also provides reference to the other counties as to how these programs can be funded. Going from the first program on to the second or third program we've seen from Australia from the U.S. dose take time as much as we internally would like it to happen faster. We're still working through with multiple other counties to see how we can progress on the ongoing program. So no new ones have been announced in the U.K. during the quarter. In the U.S. stronger progress. Obviously, we've been in the market in the U.S. for a longer period of time. We're pleased to welcome contracts with Colorado and Nebraska. We are also pleased to be doing work with the government in Texas as well. So 3 new contracts there. And we've previously announced that 2 states have been given funding through the high priority grant. So one of those 2 was in the 3 that I mentioned, but the other one, we are still progressing to finalize a contract with them. So actually, we can complete that through the next quarter. On the topic of the United States, I think it's worth mentioning or going through some -- where as our supply chain, where is our funding coming through, obviously, with the new federal government in place. So as far as we're aware, we have little to no tariff exposure. We already manufactured trailers in the United States. We have quite an assembly process in the United States, strong made in USA component already. We also, as a business, have a very low exposure to China through our supply chain, while at the lowest level you get components that are coming from China. Our major suppliers, mostly European. There's some U.S suppliers and some Japanese also some Taiwan suppliers, but very little directly from China. And also, I would looking at the changes through the U.S. To date, we've seen no changes to any of the funding pools that we're utilizing or our clients are really utilizing to engage us. So far, we appear to be in quite a good position with our business in the United States. I look at New Zealand, I've been really, really proud of how our team has executed and delievered that and also been fantastic to see the great relationship that we're developing with NZTA. So we have a number of vehicles already fully assembled in country being tested routinely on the road. We've got premises across multiple cities. We've got our full leadership team in place. We've got a number of great staff members joining the team there. So for us, we've mobilized it exactly to schedule to plan, which is always very pleasing. And so now it's a matter of working through with FDA when these assets will actually start being turned on and deployed. And so that will be a matter of government policy as to when enforcement activities actually commence. But from our side, we very much got all the things in place [indiscernible]. The new initiatives and product development that's coming through. Obviously, we have quite an extensive R&D program that is happening here in our Melbourne headquarters leading our R&D, probably the one I really want to touch on through the quarter that I was most pleased by was our development in AI in particular on seatbelt enforcements. So our systems, we had a really spectacular increase in our AI performance and being able to recognize the number of people who are not compliant in wearing seatbelt and doing that with extremely low false positive rates. So I think we're really starting to see some of the benefits of engaging is leading our AI team that we engaged through the last year, and then we've be building out our AI team further. So I think that's seeing some really good results. On our road worker safety initiative, that's also progressing to plan where we are testing, I guess, you'd call it the beta test phase of having the devices out there with crews, roadwork crews principally F Hogan that we've previously announced and so testing out and proving the product for both detecting general public cars coming into a work site and the danger of those and workers to those, but also in more complex fashion detecting the [indiscernible] machinery within the roadworks and workers to that danger. So we still expect that product to be released in the second half of the year. And what we've now done is sign on another couple of partners in the pilot process pilots in the partner is paying us for that. And that's to get a broader depth through that beta test phase. So we're testing the adjacent applications of roadside systems. So for example, the breakdown of the road and vehicle comes our kit on the vehicle and protect the operator who's assisting that break and then also, we're now engaged directly with traffic management. So previously with Tier 1 road constructor is responsible for the entire site and now also with traffic management company. And in due course, we'll release the names of those 2 pilot partners. On our team side, so we welcome Duncan Murcott as Chief Customer Officer. So basically, Duncan is in charge of sales on a global basis for Acusensus. And he's really brought fresh ideas and is going through and reviewing our sales processes, particularly internationally and looking at the U.K. and the U.S. and what can we do to accelerate our rate of progress in those offshore markets. The financials, the revenue is well up compared to 1 year ago, incrementally up compared to the previous quarter. And I think we'll see the next quarter and the quarters after that seeing more of the stronger revenue growth as a result of programs like West Australia, Queensland and New Zealand and new ones in the U.S. coming in and actually contributing revenue from next quarter onwards. On the cash side, I think, obviously, we have no debt and a very strong balance sheet, more than $25 million of cash or roughly $25 million in the bank, including term deposits. So just commenting that there are a number of one-off movements in cash this quarter. So you can't necessarily extrapolate this quarter to following quarters. Those one-off movements were tax. So we had to pay $1 million of tax in Australia. There's also the timing variations that we had discussed previously when we released last quarter's releases. So we had supplier payments that went into January that would ordinarily have been paid in December. So the December quarter was a bit better than the January quarter was a bit worse. And then, of course, there's been a lot of build activity in mobilizing those in particular 3 new contracts that I mentioned. I probably stop there and go to Q&A unless you think I've missed anything critical.

Perfect. Thanks, Alex. I've got a few questions that have been submitted. You mentioned 6 U.S. jurisdictions are now active. Could you clarify how many of these are short-term pilots versus multiyear revenue contracts and how that mix is expected to shift over the next 6 to 12 months?

Yes. So when I say that we've moved from 3 to 6, I'm really focusing on the enforcing states. So where we have general state police enforcing normally for commercial motor vehicles, trucks, mobile phone and seatbelt. Those are contracts that are typically multiyear contracts, but they only renewed for 1 year at a time. So 1 plus 1 plus 1. To date, we've seen all of those being renewed each time that they're up. Obviously, we haven't had too many up for renewal so far North Carolina. And we've mentioned in this update that Arkansas have renewed as well. And at the moment, we'd be expecting the other ones that we have to also be renewed.

Just a continue on question there with regards to Nebraska, Colorado and Texas. I think there might be new regions for Acusensus. Could give us an indication of the value of those contracts and how many trailers are actually being deployed?

Yes. In each case, they're relatively small-scale contracts. So you're looking at 1 to 2 trailers in each case. So they are identified with the exception of Nebraska, our first engagement in the state outside of very small-scale demonstrations or pilots.

Got a question from Hugh Robertson at Morgans.

Look, congratulations, I thought it was a great set of numbers. So well done, continues to -- if I go to your to the -- have you actually landed on the name for the product with regard to safety product because I think you had various names in the past. Have you landed on a final name?

We do have a name, but we haven't done a commercial release yet of the product line. So we intend to release the name at the same time that we are broadly commercially releasing it. Yes. So we'll keep it to be names for now.

To be name. Well, it's good to see that you're in -- you haven't changed. So from there, just have you got any sense of the total addressable market for that product?

Yes, we do have quite an extensive business case in place. And so we do have a sense of where we would like to grow the product line. Obviously, we need to prove to ourselves that what we're planning is correct and our assumptions are correct. But for us, I would maintain that I think that there is more potential in this product line than we have currently on our enforcement camera line.

Right. So if I was going to ask a direct question pre the election. If I was going to ask the direct question, what do you think is the size of the total addressable market? Just -- I'm not holding it to it. Nobody is holding it to it. But that's, I suppose, my thesis is what you've done with cameras and of driving is fantastic. But it just seems to me that this product and on the assumption it works, and obviously, there are lots of caveats and so on. But any idea of the actual size? Or are you going to let on -- or have I just got to make it up?

Generally, as you know, over a long period of time with me, I'm very reluctant to get ahead of my skis. What I will do to give you something is maybe give an order of magnitude. So when we're looking at -- I might do more of a serviceable obtainable market than a total addressable market. I mean if we don't a total addressable market, it will go into the billions. But serviceable obtainable markets are things that we have in our plan to win, let's say. So I go by orders of magnitude, it's certainly more than $1 million per annum. It's more than $10 million per annum. It could well be $100 million per annum. And at the moment, we're not planning on reaching $1 billion per annum. So I've given you $100 million as an order of magnitude.

We'll just go to a couple of questions. With New Zealand enforcement vehicles now operational and the team mobilized, can you give more specific clarity on timing or remaining hurdles for executing the full service delivery statement of work? Is there any risk of slippage into FY '27? Or is early FY '26 still a confident expectation?

The way we're going with this is very much more of a matter for the government. I guess what we're saying is that we are ready. So we have our teams and our cars in place and established. So we're ready to activate when the government is ready. So it will be up to them as to how many cars are activated and when. As we said, the full agreements are executed, but a number of works have been done over the mobilization contract that we already have. And we are fully confident that full contract will be executed. Again, the time frame for that was within FY '25, so to execute that this financial year and for services really to be commencing -- reframe substantial services to be commencing in early FY '26.

And just a follow-up to that question. Have you received any money from the NZ RTA for the build-out of the contract so far?

Yes, we have.

Yes. I guess you mentioned the mobilization payment.

Progressive. So we haven't received $5 million. That's -- we progress over this financial year.

Perfect. And just a question around the AI improvements. The reduced false positives, does that reduce the verification cost of having a staff have to check the enforcement photos or are the benefits mainly a client potentially gets more enforcement notices?

It's both of those. So there's less review labor involved, higher confidence on each thing that is referred and there's higher accuracy overall. And so I guess when we're looking at our team, we're continuing to expand and add more programs across multiple states and across the world. And so when these AI efficiencies come in, it enables us to not have to add as much headcount in the future. The principal benefit that we might see over time on the financials.

And can you provide any updated results on the impaired driving pilot in Devon and Cornwall?

There's nothing published from that. So it remains a research and development project for us and one that we personally would like to see released into the world as one of the major killers, one of the fatal 5. So we continue to receive attention, but there's nothing that I can comment on with respect to it, I'm sorry.

And just last question. How much of your time is spent expanding on existing contracts versus winning new contracts? Just trying to understand how much growth you think you can obtain from your existing customers?

I'll try and answer from that perspective and maybe try and answer it another way. So from a time perspective, every customer that we get or certainly every major customer will have dedicated program managers or account managers. And so they, for us report through the customer engagement team, so ultimately through to the Chief Customer Officer. And so they're responsible for ensuring that our programs are delivered well to contracts that we are pleasing our government partner. But then also as a course of routine business, that person will be responsible for seeing if there is more that we can be doing. So it's a little bit hard to answer, I guess, from a time perspective that you've got those program managers and then we also have the broader customer engagement of sales team, which are hunting for new business and with dedicated sales managers and tender support behind that. A different way to look at it might be on how much business we're winning is new business and how much we're getting from renewals. And I think half year numbers, you broke that down a little bit.

Yes. In relation to the renewals and the...

That's in the half year presentation.

Yes.

Perfect. And just a final question from Ross Barrows at Wilsons. Can you please comment on the new opportunities you might be seeing in Europe over the next 12 to 18 months?

Yes. So Mainland Europe, it is an area that Duncan, our new CCO is reviewing our strategy towards. We have continued to keep our finger on the pulse in a number of different countries. We're probably not at the stage where I could pick out individual countries and comment on them.

Perfect. That concludes the Q&A segment. Alex, I might just hand it back to you for closing remarks.

Yes. And thank you, everybody, for your support and your interest in the company. I think for me, it's another great quarter in terms of just continued growth and success across key growth pillars and in delivering existing programs. So I'm deterred in saying the future looks bright for Acusensus.

Great, Thanks.