Advanced Braking Technology Limited (ABV) Earnings Call Transcript & Summary

Hi, everyone. Thank you so much for joining us today. My name is Jo from Advanced Braking Technology. I'll be assisting Andrew Booth and Angela Godbeer on our webinar today. Just a couple of housekeeping items. Your cameras and mics have been disabled, but you can submit any questions via the Q&A function. Once Andrew has finished the presentation, there will be a Q&A session at the end, and he will answer any questions that have been submitted. So we'll begin shortly. We're just waiting for a couple of more people to join. Thank you.

Okay. So let's get started. Hello, and welcome to the ABT Q3 results webinar. My name is Andrew Booth. I'm the CEO of Advanced Braking Technology and delighted to present to you our latest results and strategic update. I'm going to highlight ABT's progress and our future direction. We've achieved significant milestones this year with more to come. And this webinar will give you a comprehensive overview of our performance, some of the strategic initiatives that we have in training and our future road map outlook. So let's get started. I'm going to start with what I refer to as our North Star statement. ABT is on a strategic road map for growth. At ABT, we've set ourselves a goal to realize a $100 million market cap by the end of FY '29. And in FY '25, we are 1 year into this 5-year plan, and we are making really good progress. So let's go into our road map in a little more detail. We're doing this via 3 key strategies: we are leveraging our blue-chip customer base for international growth; we're expanding the application of our ABT brake IP into a broader range of vehicles and increasingly doing so throughout this year; and in FY '25, we're integrating technology to enhance ABT product capability on a road map to autonomy. And I'm going to talk about this repeatedly throughout this presentation today. I hope you find it interesting, and I think it's quite a compelling story for us. So let's start with point number one, leveraging our blue-chip customer base for international growth. I'm going to talk about the global footprint. ABT has a strong strategic existing relationship with a range of blue-chip customers who have global operations. And this means leveraging those relationships to get ABT products into these expanding and high-potential international markets. ABT has a strong sales force and support for these key markets. And in South Africa for existence, ABT now has its own sales team, building trust and deepening local customer relationships with both our partners in that market as well as with key existing and potentially new mining customers. ABT is very focused on global standards and certifications and ensuring that its products meet international safety and regulatory standards in all of our key markets. And we're prioritizing markets with the highest potential and leveraging existing customer relationships in our domestic market of Australia, increasingly activating those country -- new country deployments in international markets. Number two is all about expanding the application of our ABT brake IP into a broader range of vehicles. This is all about diversification of our product portfolio. ABT continues to invest in R&D to adapt its brake systems for use in various vehicle types, which include commercial vehicles, specialized ancillary equipment and EV converted light vehicles. And I'll talk a little more about this in some detail over the next few slides. ABT has a focus on modular design and customization. ABT modular brake system designs can be adapted to different vehicle platforms, reducing both development time and R&D development costs. Increasingly, we're collaborating with vehicle manufacturers and OEMs. ABT is continuing to actively collaborate with vehicle manufacturers to integrate brake safety systems for high-risk heavy industrial applications. And in FY '25, we're strategically focusing on aftermarket expansion. ABT is not just supplying spare parts. We're building strong customer relationships via aftersales service and support on site as well as remotely with our customers, strengthening our brand trust through enhanced customer engagement. And number three is all about integrating technology to enhance ABT product capability on our road map to autonomy. Collision avoidance integration is where ABT is really strategically focusing. ABT is integrating its Failsafe brake systems with collision avoidance. This includes radar, LiDAR and cameras to provide autonomous braking interoperability in the future. Our electronic brake control systems allow us to enhance our technology to enable responsive brake and control, which is crucial for autonomous driving. We have redundancy and failsafe systems. Our failsafe mechanisms ensure reliable operation for autonomous braking. And being based in WA, we're continuing to increase our partnerships and engagement with technology companies, collaborating technology partners to increase the speed of ABT's technology advancement. For those of you that have read our annual report in the last 2 years, you'll be familiar with our strategic road map. ABT's 2029 strategic horizon illustrates the themes over a median 5-year time band. Number one is all about foundations, and this is all about positioning ourselves for future scale. Number two horizon covers technology innovation and investment, and this is to complement and extend the life of ABT's intellectual property in failsafe braking. And the number three horizon is all about scale, scaling into high-potential international markets as well as complementary industrial sectors outside of the mining sector. FY '25 continues progression in deepening our market share across a global customer base paralleled to strengthening our foundations to support growth. Our strategic focus and investment in industrial safety technology remains a key development target, and the combination of these 3 horizons support ABT's continued journey of growth and scale. We will continue to allocate resources towards the creation and the enhancement of new technologies, products and processes through research and development. And we will continue to invest in R&D that's important for the company to remain competitive, to foster innovation and to drive long-term growth. And now I'm going to hand over to Angela Godbeer, ABT's CFO, to take us through the latest financial results.

Thank you, Andrew. I'm going to reflect on our half 1 results that were audited. We can see that from FY '24 to FY '25, we had revenue growth of 22%. The half year results were achieved through well-planned execution of our strategic road map, including sustained revenue and NPAT growth. ABT's half year revenue of $8.7 million increased by 22% on the prior year, which reflects our focus on the execution of our customer engagement in key domestic and international markets. Our sustained normalized profitability growth continues to foundation the business for future ongoing scale. The net assets have increased by 5%, and increases in inventory holdings have been the main contributors to the increase in the net assets. Holding the right inventory mix ensures that our monthly sales targets can be achieved. Our cash balance decreased slightly, 2% on prior year balance, and that's reflective of the growth the organization is experiencing. I'll move on to the product sales by quarter. This really shows us that an average product sale has consistently increased year-on-year, reflecting steady and sustained growth. In FY '25, our Q3 results have increased by 31.2% from the prior comparable period. This is as a result of successful expansion into new sectors, a strong foundation built on core principles of quality, reliability and customer-focused outcomes. We proudly released our FY '25 Q3 results to the market yesterday, and this highlighted the results of the dedication of our team and the strength of our strategic initiatives. The increases in sales have been driven by solid foundations that were laid in prior periods and including strategic investments, operational improvements and strong customer relationships. We continue to manage our cost base and investments into our people to ensure sustained profitability has achieved. We look forward to the next quarter and releasing those results to the market. Thank you.

Thanks, Angela. For those of you that are new to ABT and these webinars, I'm just going to talk a bit about -- a little bit about our company, our team, our customers and our products. But first, let's just talk about and look at safety. Safety comes first in everything that we do at ABT. Our mission is to design, engineer and manufacture the world's leading vehicle safety systems and technology used in heavy industrial applications. At ABT, we have 25 years of failsafe braking experience in the mining sector. Innovating safety brake solutions backed by more than 25 years of expertise is reflected in our brand strength, our increasingly global footprint and the strong relationships that we have with our customer base. And we're 100% Australian designed and manufactured, designed and developed and tested all in Australia, in the most rugged mining conditions and, as a result, one of the most advanced mining sectors in the world. Our proprietary intellectual property in sealed wet Failsafe brake technology is absolutely designed for high-risk environments, and we're a leading brand across the underground mining sector with product expansion plans to take us to the surface. ABT brakes have a proven reputation for unmatched safety, heightened productivity and durability in the most challenging environments worldwide. 50% of our revenue is now derived from overseas. Last year, that percentage was 40%. Our key markets for export now are North America, Canada being our largest export market; Europe; North and Southeast Asia; South Africa; the South American market; and we've even got brakes operating in the Antarctic. Canada remains our largest export market with lower exposure to U.S. tariffs implications that are currently impacting U.S. exports. I just want to highlight our revenue -- our recurring revenue model. Like in OEM, ABT offers high recurring revenue in high-margin spare parts and consumables. This revenue trails the initial sale of the brake system over the life of vehicle, which is typically 4 to 5 years. As ABT continues to grow our installed base of brake systems in operation, the spare parts and consumables revenue grows commensurately, yielding strong gross margins. ABT has a corporate development formula with the strategic vision that is supported by a strong and aligned corporate culture. A cleanly defined corporate culture strategy outlines the what, the goals, the objectives and the direction for growth. A strong corporate culture provides the how, the shared values, the behaviors and the mindset that enable the organization to achieve our strategic goals. When strategy and culture are aligned, employees understand not only what they need to do but also the why, which is so important in how their contributions fit into the bigger picture. I want to introduce our executive team. Over the last 3.5 years, I've had the opportunity to handpick a highly talented and capable leadership team. And I think this reflects ABT's increasing ability to attract talent from mining and other diversified manufacturing sectors. This team is foundationing the business for growth and has the prerequisite skills and experience to grow the business both organically and inorganically. I think you probably all know about my background. I've got a sort of a 20-year diversified leadership experience across Australia and Asia in both corporate and multinational companies. Angela Godbeer, who you've heard from earlier today, has significant experience in ASX-listed manufacturing environments, operating both here in Australia as well as experience in offshore markets. Our new Sales and Marketing Director, Tim Stanton-Cook, has over 15 years of experience in mining and resources sector and has successfully built an aftermarket division at Schenk and has extensive experience from Rio Tinto. Cale Ginbey, our Head of Operations and Engineering, has more than 16 years of experience in the METS sector, including BHP, Rio and again at Schenk Australia. I want to talk a little bit about navigating global volatility because I think it's quite a topical subject today as we ride the storms of global economic conditions. And I'll just sort of talk about how we're factoring this into our risks and our strategy moving forward at ABT. ABT has geographic diversification, and this offsets downturns in one region with -- whilst continuing demand in others. We also have commodity diversification. We're not just strongly focused on gold, but we're also focusing on rare earths, energy minerals and other hard rock commodities, which effectively places us in a less vulnerable to price fluctuations in any single commodity. And I think nickel was a good example of this last year when Nickel West shut down their operations as a result of the Indonesian market dynamic. ABT has very strong customer diversification, and this is serving a wide range of mining companies globally from large multinationals to smaller operations in local market. And this reduces our reliance on any single customer. ABT also has strong recurring revenue. And this is all about aftermarket services, spare parts, maintenance and repairs, providing a more stable and predictable revenue stream compared to new equipment sales, which can fluctuate with economic cycles. We have globally patented intellectual property. Our proprietary technology patents and unique designs create a competitive edge that's hard for competitors to replicate, and this allows ABT to maintain strong pricing power and market share even in global economic downturns. We have a very strong brand now in the mining sector. And a strong brand built on quality, reliability and service, fosters customer trust and loyalty. And this makes customers less likely to switch to cheaper alternatives during economic downturns as they prioritize the dependability on long-term cost effectiveness. And safety is first and foremost for ABT and also first and foremost for mining operations. Mining operations and operators prioritize safety and the demand for reliable safety equipment and technology, and this tends to remain relatively stable even during economic downturns. And ABT is very proud about our positive return on investment. This is all about solutions, the improved mine productivity and efficiency and is often seen as essential investments to reducing operating costs and maintaining profitability, making them less susceptible to CAS. Resource demands -- so we're unapologetic about our exposure to the resources industry. And this long-term demand for minerals and metals is driven by infrastructure development, urbanization and the transition to renewable energy, providing a degree of stability in the mining sector and for ABT revenue moving forward. And we are continuing to diversify our products and services. ABT's growth road map focuses the business on continuing to offer diversifying products and aftermarket services to our global customer base. We're continuing to adapt and innovate to stay ahead of market changes and maintain a strong competitive advantage, weathering the storms of global economic volatility. And I think it's a good segue into where we're based. And this is all about being in Western Australia. I just want to touch on the importance of a mining-focused original equipment manufacturer and OEM to have such deep roots in the great state of Western Australia. WA thrives on being a global hub for energy and mining innovation. The resources sector in this state represents 1/3 of the state's domestic gross product. And WA is home to a skilled workforce with the requisite knowledge and experience in mining equipment and technology. WA's net sector is a global resources technology hub, and there is 1,702 specialized METS companies registered in the state. WA-based METS companies are held in high regard internationally for being technology leading and able to operate in the world's harshest and most remote conditions. ABT's headquarters in Wangara is located in the northern region of Perth. And up here in Wangara, we're surrounded by highly regarded, mining-focused technology and equipment businesses. And this offers ABT an abundance of potential partners, partnerships, joint ventures and investment opportunities in the future. And as I said before, ABT is also demonstrating the ability to attract industry-leading workforce talent and experience in mining equipment and technology. Okay. Let's have a look at our customers and our products. We're very proud of our customer base, a customer base of global mining and mining services operators, ABT solutions, Failsafe brake systems for leading mine and mining services companies globally. We have strong relationships in our home market of Australia, and that's strengthening and deepening those market relationships domestically into offshore markets. This is a graphic of our brake system. So under the BrakeSAFE Wheel End and the BrakeSAFE Driveline logos, ABT's brake system across those 2 types is, first and foremost, Failsafe. This is about a system where energy is on to keep the brake off. And when energy is off, or in other words, when all those fails, the brake is on. It's hydraulic release and spring actuator. And as I said before, when all else fails, the brake engages. And this prevents, importantly, unintended vehicle movements in high-risk environments. It's a fluid-based wet brake, which provides optimal thermal performance where overheating and brake fail is common in steep inclines and declines underground. And we offer superior maintenance and service cycles, which increases fleet uptime and offers our customers a positive return on investment in CapEx through superior maintenance regime through the life of the brake. And it's 100% sealed. This is keeping external contaminants out. And also interestingly, it keeps harmful brake dust particulates in. And this is where -- important where clean air quality is absolutely critical in mining operations. ABT has 2 types of brake systems. One is a Wheel End. And the other one, the other type, is a Driveline. You can see this on this graphic on this slide. The Wheel End brake replaces the original open brakes on the vehicle and replaces it with a BrakeSAFE sealed system. Our light fleet Wheel End range now includes BrakeSAFE for not just Land Cruiser but now also for the popular Toyota Hilux. And in the middle column, we have a Driveline brake range of similar design but mounted onto the drive shaft of the vehicle. And as you can see, the systems are solution for a growing array of vehicle types. On the third column, which I'll talk a little bit about over the next few slides, we have collision avoidance capability that we're building as our next innovation technology horizon. The Driveline range is excitingly diversifying solutions for ancillary mining equipment fleets. And currently, ABT is validating a brake for a popular OEM brand of telehandler used in mine sites in North Asia. We have an increasing compliance requirement for brake operators globally. This growing compliance in part is driving demand for failsafe solutions on fleets operating in mine sites around the world. ABT brakes are designed to comply with not just Australian standards but also increasingly international standards. You can see here the SABS 1589. It's the South African Bureau of Standards emphasizing commitment to safety and reliability and mine applications in the South African market. And you can see there on the right-hand side the MSHA standard. We're conforming to these standards, which is underscoring our dedication to global safety norms. I'm just going to talk a little bit about our brand architecture. I haven't shown this before to our audiences on this webinar. So on the left-hand side, we have our BrakeSAFE range. First and foremost, sorry, our brand architecture starts with our ABT logo and brand. And then all of our failsafe, sealed, integrated systems reside under this BrakeSAFE brand. And so just a little bit more detail here. We've got the Driveline SIBS brand, and we've got the Wheel End SIBS -- BrakeSAFE brand. All of these systems are failsafe. They all are wet, sealed, integrated brake system. It's, again, 100% sealed. On the right-hand side there, you can see the BrakeiQ autonomous braking logo. And this is providing for autonomous braking with collision avoidance capability Level 9, and that is very much a very strong future direction for our innovation development. And a new autonomous brake range under the BrakeiQ brand provides ABT with autonomous braking, which is interoperable with collision avoidance Level 9 technology, and I'll talk a little bit more about what that means shortly. Technology is absolutely on the forefront of our innovation focus moving forward. ABT's strategic innovation focus on technology offers significant growth opportunity via increasing applications as a leading safety OEM brand in the mining and other parallel heavy industrial segments. Technology innovation in mining is absolutely key around both collision avoidance and autonomous safety. And that's because each year, between 30% and 40% of mining industry deaths are attributable to failures of vehicle interaction controls, and these make up -- about half of these involved pedestrians. ABT is focused on developing interoperable brake systems with collision avoidance Level 9 technology, and this is in the instance where the brake will override the driver, where the driver fails to act. Importantly, this is a dynamic that's moving very rapidly in South Africa. To address this in South Africa, the local mine safety regulator has issued a new mandate in 2025, requiring all mine operators to use Level 9 collision avoidance for all vehicles. And in response to this, and in line with enhancing safety in mining operations, ABT has launched the BrakeiQ system, an autonomous braking system, which interoperates with collision avoidance Level 9 capability. So let's have a little look at what BrakeiQ actually does. BrakeiQ is a vehicle intervention controller designed to integrate with existing PDS, or proximity detection systems, operating in mine sites and on mine vehicles. The brake system automatically slows down and stops vehicles upon detecting potential collisions, enhancing safety in high-risk environments. It uses an electric motor to automatically activate the brake pedal when the vehicle enters an identified risk scenario, and it simulates a human input for what becomes an autonomous brake activation. I'm just going to play you a little video of a demonstration of BrakeiQ. So what we're going to see here is, in the large window on this right-hand side, the driver with his foot firmly on the accelerator, and as the vehicle is approaching an obstacle, you'll see the BrakeiQ autonomous brake activate even when the driver remains certainly planted on the accelerator in this instance. You can see here the driver retains his foot on the accelerator, and the machine is approaching the obstacle, and the BrakeiQ system automatically deploys and overrides that driver in this emergency situation. BrakeiQ is currently compatible with an array of Caterpillar models. However, we have a plan to expand this to other OEMs and models in the future. So this Caterpillar range currently includes wheel loaders, earthmoving compactors and wheel dozers. And Caterpillar, as we all know, is one of the leading brands with a dominant market share of yellow equipment operating in surface operations around the world. BrakeiQ is a solution specifically for slow-moving vehicles. And these vehicles have the highest frequency and the highest risk to potential accidents. These machines are crucial for our customers due to their poor -- these machines are crucial for our customers due to their poor visibility and frequent directional changes. And this is where BrakeiQ really comes to us for and adds a great deal of value in improving safety operations in mining. So in summary, the brake is an automatic brake with CAS Level 9 compliance. It allows seamless integration, allowing operators to avoid implementing permanent modifications to vehicles and provides them with a certified braking system. Maintaining the integrity of the original brake system is absolutely key for BrakeiQ, providing a reliable and adaptable braking control. And it's got a wide application now and into the future, where it will apply to a range of vehicle machine types with some mounting design alterations for that adaptation. I just want to talk a little bit about our growth horizon moving forward and just mindful of time. So we're just over the half-hour mark. So we're on track. ABT's FY '25 growth strategy in summary focuses engagement with ABT's international customer base. We're providing product innovation and technology advancement to our customers, both existing and future, in both Australia and prioritized markets offshore. Our sealed integrated brake system product development supports an increasingly diversified range of vehicle applications in mining. And our supply chain expansion supports both a step change in both growth and scale in F '25 and beyond. So ABT highlights are as follows. We've got valuable intellectual property that has global patent protection. We have a blue-chip customer base, which we're extremely proud of, a very loyal and valuable customer base with global operations, which we're increasingly deploying our brakes into. And that provides us with international market expansion opportunities for the next 4 to 5 years as we estimate that we've got relatively low market share of the failsafe market in light vehicles and ancillary fleets and a low level of competition in this space. The greatest level of competition comes in no brakes at all. So this educational marketing piece around the importance of failsafe braking that's complying with international standards of safety is extremely important moving forward. We have a technology road map that complements and extends the life of our intellectual property. ABT is sustaining profitability over the last few years, and we'll continue to provide our shareholders with assurance around the sustainable profit management and strong financial management. And we've got strong foundations to scale. And I think we're doing this with a very focused supply chain strategy that provides for decreasing concentration risk on a small level of suppliers, increasingly diversifying our supplier base to provide us with production capability as well as innovation capability moving forward, both here in Australia and increasingly looking at offshore lower-cost sources of production and supply. And so in short and in summary, ABT is solutioning today for mines of the future. And we're very proud of the results that we posted year-to-date. We're also extremely grateful for the support that we have from our loyal customers as well as the support of our strategic partners and our very, very loyal shareholder base, which we hope we're going to increase over the next few periods of continued financial growth. So thank you for attending the webinar today. This is the first of what we'll continue to run on a quarterly basis. And I'll now throw to Angela to see whether we've got some Q&A.

We do. So thank you to those that have already provided some questions. I'll read those out. The first one comes from [ Chris ]. Are you able to provide a range of what you expect R&D incentive income to be for FY '25?

So actually, that's a very interesting question, [ Chris ], because what's relevant and topical about R&D for ABT this year is, to date, we've been a sub-$20 million revenue business. And if you're sub-$20 million in Australia, you receive that R&D income as other revenue. However, if you go over that $20 million, you exceed that $20 million revenue mark, that other revenue transfers into tax imputations, tax credit imputations, in the future. So that being said, our R&D investments and our R&D submission remains on par with previous years. ABT is adapting this model where we're planning to transition from R&D being other revenue into a tax imputation credit and without compromising our R&D road map moving forward. R&D varies according to the level of engagement and the type of innovation that we're developing with our customers and our partners. So in FY '25, for instance, we've received a good level of innovation funding from customers and OEM partners. And this does vary the level of R&D claim that we'll put through the ATO this year. However, we are expecting that it will be, on average, a very healthy R&D year for ABT, albeit with some supplementary funding that we've been able to access from customers and OEM partners.

Great. Thank you. A question from [ Andy ]. Well done on an amazing quarter. Really pleased. Are you finding revenue growth is coming mainly from current customers buying more brakes or parts and adapting BrakeiQ or onboarding and selling to new customers? What does the sales pipeline look like? Any guidance?

Okay. Good question, [ Andy ]. It's a bit of both. So it's really all of the above in that ABT has a very strong customer base of multinational mining companies. And increasingly now, we are activating offshore points of those international operations around the world in prioritized markets. So that's increasing our installed base of existing customers. Further to that, we're focusing and prioritizing key markets of South Africa, Indonesia, Mongolia and North America being Canada for new customers and a new installed base of mine operations in those priority offshore markets. But that's not to say that we're ignoring our domestic market of Australia. So ABT is focusing very heavily at the moment on the Goldfields region of Western Australia, where we've got Tier 1 operators that are increasingly looking for technology and safety solutions for both underground and aboveground mining operations. BrakeiQ has an extremely exciting future for ABT. We're currently in a building phase of validating the brake system for a range of proximity detection technology systems and prioritizing the Australian market and the South African market where there is a mandate in 2025 for Level 9 capability for all operators. So that provides you with some key sort of insights into some of the markets that we're focusing on, both domestically and offshore, and demonstrates to you that we're increasing our application of our existing SIBS brakes into a broader range of vehicles and increasing our installed base across existing customer relationships in their offshore operations as well as winning new customers in these prioritized developing markets.

A follow-up question from [ Chris ] with regards to that. Why don't the OEMs release Level 9 CAS?