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

Good morning, and welcome to Advanced Braking Technologies Investor Webinar to discuss the company's FY '26 Results. Presenting today will be CEO and Managing Director, Andrew Booth; and CFO, Angela Godbeer. We will be going through the presentation released this morning on the ASX. [Operator Instructions] I'll now hand over to Andrew.

Thanks, [ Ben ], and good morning. Thanks for joining us. This is ABT's FY '26 results, and it's been a record year. I'm Andrew Booth, the CEO and Managing Director, and I'm joined by ABT's CFO, Angela Godbeer. Together, we're going to walk you through the highlights, the numbers and where we're heading next in FY '27 and beyond. Some quick housekeeping. The standard disclaimer. Everything today is general information and forward-looking statements carrying the usual risks. I'll leave it on the screen just for a moment, and then we'll move on. And to kick off, I'm going to cover off ABT's purpose in one line, ABT makes safety critical technology that protects people and assets. We are all about improving the operating performance needs of our customers. We're Australian owned. We are a multi-award-winning OEM. And our products are built for the toughest operating environments on earth. That focus is what drives everything that we're going to show you today. ABT in a glance. This slide encapsulates the ABT business and our investment and the competitive strengths. There are 6 things to keep in mind about our business model and the environment that we operate within. We have a 25-year technology -- proven technology platform, a large and diversifying addressable market, and we have a blue-chip customer base who put simply cannot compromise on safety. On the second line, add to that, a capital-light business model, a strong balance sheet and long-term demand for safer autonomous operations within the mining industry globally. That's the ABT investment case in a snapshot. But put simply, these 6 strengths really reinforce each other, I think. The technology platform and our IP win blue-chip customers all around the world. Those relationships open new commodities and new geographies for ABT. And ABT's capital-light model means that growth converts into cash rather than consuming it. It also means we're not reliant on any single customer, any single commodity or any single region, and we can fund our expansion from our own balance sheet. And that demand drivers -- those demand drivers are structural. They're not cyclical. Mine safety regulation is tightening and the industry is moving towards automation. We're going to talk about that a bit more in the next few slides. But in a nutshell, that's our long runway for what we do, and it's what gives us confidence in what is sustainable earnings growth. ABT has strong recurring revenue and a blue-chip international customer base. The quality of our revenue matters as much as the quality of our growth. We now sell in 22 countries with near even domestic international split and 45% of our revenue is recurring revenue in high-margin aftermarket business, a much more resilient revenue base than what we had a few years ago. Around 70% of our revenue is protected by patented or proprietary technology. And ABT is selling to 60%, a minimum of 60% of the top 20 global mining companies in play today. So once again, welcome to the ABT results webinar. Here's how we're going to run through today. We're going to cover off FY '26 highlights, and then I'm going to hand over to Angela to cover our financials in more detail. We're going to cover off our business overview, and that's going to include an autonomous technology and safety road map. And finally, we're going to look into our growth and our outlook in 2027 and beyond. We'll take questions at the end, which you can submit through the Zoom platform. Let's begin with the highlights. So part 1, FY '26 highlights into this next slide. And I think this slide is a really powerful one. FY '26 is our best financial year yet. Revenue up 23% to $23.5 million, driven by our SIBS FailSafe demand, our international expansion, and as I said before, our aftermarket revenue growth. We have gross margin that has lifted from 48% to 49.3%, and we have an underlying EBITDA, which rose 38% to $2.2 million. Our cash almost doubled to $5.6 million, and our working capital is up 37%. I think the key point here is that the growth is high quality and self-funded. Our revenue, which is up 23% with stronger margins and a solid cash conversion means that we fund expansion and new product innovation ourselves. Strong operating cash flow of $2.9 million shows that our earnings are real, and that gives us the flexibility to invest in expansionary inventory, international expansion and new products like BrakeiQ and SIBSiQ. This is product innovation that will define our future, and it brings to life the T in ABT. FY '26 was a year of disciplined execution against the strategy that we set out to accomplish. We expanded our global reach into North America, Africa, Asia and the Middle East, plus we broke new ground into Ghana and Zimbabwe, and we had a deployment with Rio Tinto in Mongolia. We also had strong complementary domestic wins as well at MMG's Dugald River and the Gold Fields in WA. We deepened recurring revenue with the refurbishment program, and that really enhanced and enhances our future recurring revenue in aftermarket. We advanced BrakeiQ and SIBSiQ development. And overall, we strengthened the platform that underlies all of it. Strategic account management, engineering, procurement and supply chain foundations that will scale this company into the future for many years to come. One important update since the year-end was that BrakeiQ achieved independent ISO certification through the University of Pretoria. That's a major step towards CAS Level 9 interoperability, and that's an area that I'll cover off in a bit more detail in our technology section. This is independent validation of autonomous intervention capability. And what it does is that it confirms that we work with third-party proximity detection system OEMs and it opens doors with standards conscious miners all around the world. For example, WorkSafe WA and other regulators are tightening the rules on vehicle interactions, and that's driving demand for what ABT does. Part 2 is our financial performance in detail. And for this part, I'm going to hand over to our CFO, Angela Godbeer, to take us through the highlight results.

Thank you, Andrew, and welcome, everybody. It's lovely to have you with us today. Our key message for FY '26 is that we delivered not only record revenue but meaningful improvement in our underlying economics of the business. Our revenue increased by almost 23%, while our underlying operating performance increased by 63%. This is the operating leverage that we have been working to build. As the business grows, we have maintained disciplined cost control and our reported NPAT increased by almost 17%, while our earnings per share increased by 15%. The important takeaway is the quality of the results. ABT is generating more revenue, converting a greater portion of that revenue into underlying operating performance and delivering increased value to our shareholders. That improvement is not only the result of a single exceptional period, but it sits within a consistent multiyear growth trend. This chart shows us the consistency of ABT's growth trajectory. Our revenue has increased year-on-year, and we represent that with a 4-year compound annual growth rate of around 20.6%. It's important to note that for both new brake sales and for aftermarket, they both grew during the period. New brake sales grew by nearly 20% and aftermarket by nearly 26%. The new brake sales expand our installed base, and that installed base then supports the ongoing demand for our aftermarket requirements. This is a valuable life cycle relationship with our customers and it supports more than just a recurring and resilient revenue profile. The strength of that operating performance is almost clearly demonstrated by the cash generated during the period. Our cash generation was one of our standout features for FY '26. Net cash generated from operating activities increased to $2.9 million compared to $620,000 that we had in FY '25. ABT finished with cash of $5.6 million. And as we said, that's almost double the prior year. It's important for 2 reasons. Firstly, it demonstrates that improvement in underlying performance is converting into cash, but it also gives ABT the ability and the capacity to continue investing in inventory, international expansion and product development from internally generated funds. For investors, the message of growth and strengthening our financial position rather than placing pressure on it. The cash generation has translated directly into a stronger and more flexible balance sheet. We ended FY '26 with an almost debt-free balance sheet and net assets of $13.2 million, an increase of 23.5% on our prior year. This increases in current assets -- sorry, this increases our current assets to $15 million and means that we are able to cover more of our current liabilities by more than 4x. This also provides ABT with both resilience and strategic flexibility. We can continue supporting our working capital requirements and also progress our next-generation technologies from a position of financial strength. In closing, I'd just like to say that ABT has delivered sustained top line growth. We've improved our operating leverage, we've converted that performance into cash, and we've strengthened its debt-free balance sheet. The financial performance is what allowed us to pursue the growth opportunities outlined later in the presentation while also maintaining financial discipline. Thank you, and I'll hand back to Andrew for the business overview section.

Thanks, Angela. So we're just going to cover off our business -- ABT's business overview and look into the business itself, and we'll start with the map. So this map on the slide shows ABT's footprint and it's continuing to widen. From our head office here in WA to distributors and strategic partners across North and South America, Europe, Asia, Africa and Oceania. Roughly half of our sales are now international and they are strongly recurring. And once we win our first site in a new market, that reference site often and typically leads to further orders across that customer's other operations as well as their surrounding peers in that region. This international diversification protects ABT from any single market downturn or any single commodity cycle. This is our product family illustrated across all solutions with one safety parallel. So what I'm showing you here is our product portfolio and brands. The BrakeSAFE range features ABT's world-renowned SIBS technology. These are solutions for light vehicles and trucks as part of a mine safe, mine-spec upfit. Driveline and Wheel End variants both give supplementary braking if the service brakes fail, and these include solutions across Landcruiser and popular Hilux platforms. And then there is our autonomous braking range of products. This is our future. SIBSiQ takes that proven technology into light vehicle autonomous braking and intervention. And BrakeiQ is autonomous braking for heavy yellow equipment, both on the surface as well as underground. This is plug and play into existing fleets built to ISO 21815 and EMESRT Level 9 principles. These are some principles that I'll cover off in the next couple of slides. But the point here is that ABT is moving from stopping vehicles to now preventing incidents with autonomous capability. This slide is simply about the diversified vehicle fleets that we're solutioning for with the same core technology just with more applications. We're across Landcruiser, Hilux and Ranger platforms with our BrakeSAFE, Wheel End SIBS range. And we're covering light through the heavy trucks and ancillary machinery with our BrakeSAFE Driveline SIBS range. Every new vehicle we qualify expands the market without reinventing the product. And just on this slide, you've got the solid vehicle icons, which represent current products as well as then those hollow vehicle icons. These are shaded areas of what is now in development and for future release in the next 12 to 18 months. I'm going to talk a bit about now autonomous technology and safety and why CAS Level 9 matters. A bit of context on CAS Level 9. It is the highest safety tier defined by EMESRT and EMESRT is the global mining safety body. The key shift here in the industry is that we're going from systems that warn the operator to systems that actually act autonomously. And that's the transition that the global mining industry and other heavy industries are making today. The same challenge is shown in this illustration in the field. Warnings depend on a human reacting in time. And in these scenarios, there often isn't time. That's the gap that active intervention closes and ABT has a solution for both ends of the fleet now. BrakeiQ handles the yellow -- heavy yellow equipment. That's autonomous braking that takes the machine to a controlled stock when the proximity detection calls for it. It's plug and play, as I said, with existing fleets, and it's built to ISO 21815 and EMESRT Level 9 standards. SIBSiQ does the same job, but for light vehicles. This is proportional braking and throttle override for vehicles such as Hilux, Landcruiser and Isuzu platforms. It interfaces again with ISO 21815 PDS and meeting MOSH TMLP CAS9 requirements. What we're doing here is we're building on our proven SIBS braking technology so that operators get intervention rather than just getting an alarm. And it's a compliance pathway across the entire mixed fleet operating either on the surface or underground. I'll go a little more into detail around our exciting SIBSiQ launch. This is autonomous braking solution, as I said, for light vehicles. It's the same intervention and override philosophy that we're using for BrakeiQ. However, it's applied to our light vehicle fleets that are fitted already with our BrakeSAFE SIBS systems. It complements our BrakeSAFE SIBS braking systems. It delivers autonomous proportional braking. That's throttle override as well as bringing the vehicle to a controlled stop. It interfaces with over CAN to any 21815 ISO proximity detection system, which makes it standards ready and meets the CAS9 requirements that we're seeing all around the world. Importantly, it's a retrofit upgrade. It applies to the Hilux and Landcruiser and the Isuzu Wheel End SIBS already in service today as well as future wheel end systems that we'll continue to deploy. That's an installed base that ABT can go back to. And commercially for ABT, it opens up markets like South Africa, where fleets are operating under CAS9 mandate with a pathway to every ISO 21815 proximity detection system OEM in the market. We're currently at pre-feasibility testing on this product, and that's now complete, and we're ready for commercialization in FY '27. I'm going to now talk a little bit about and delineate between SIBSiQ and BrakeiQ. So how does BrakeiQ actually work? It turns a CAS9 signal into a safe controlled stop. BrakeiQ is an in-cab pedal system. It's an electronic motor that depresses the brake pedal and simulates the human foot rather than cutting into the hydraulic lines of a brake system on a yellow equipment machine. It sits plug and play with any CAS or PDS sensor that has ISO 21815 interoperability, and it plug and plays into the vehicle's brake system. BIQ is a fast to deploy system that is economic for operators. In that, they can convert the mature yellow machine into a CAS-compliant capable solution. And it will deliver to mixed fleets of OEM machines. It's a real challenge for mining operators to deploy technology like this across mixed fleets and aging fleets. And BrakeiQ is a really smart solution that we believe is going to have really strong resonance in the market moving forward. So now we're into the section of growth and outlook. I'm just going to show you a chart that's not new. We've published this road map in a number of annual reports in the last few years. And what this road map shows is that it illustrates us across 3 horizons. Horizon 1 was all about the foundations. It was driving SIBS penetration and strengthening the business for future scale. Horizon 2 is where we are now. It's focusing on investment and innovation, autonomous safety, sustainability and inorganic growth. We're already well progressed into it. BrakeiQ and SIBSiQ are in development and interoperability systems with collision avoidance braking that's well underway, and we remain open to partnerships that complement this strategy. And Horizon 3 is all about the scale and the diversification that we'll see from this innovation, new vehicle categories, manufacturing closer to customers and sectors beyond just mining. With mandated CAS markets, we see meaningful upside for F '27 and beyond into F '28. That chart underneath shows the market that we've -- that's been backing that execution. Market capitalization has grown from around $13.3 million at the end of FY '22 to about $43.8 million today. That's more than threefold the increase in the last 4 years. And finally, we're going to focus on the year ahead. I'm going to briefly highlight our 5 priorities for FY '27. First of all, we want to deepen our presence in established mining markets while selectively expanding into priority international regions. Second, we're going to scale our operating platform. That's all about having stronger supplier resilience, cost competitiveness and organizational capability. Third, we want to grow our life cycle revenue through aftermarket parts, service and support and the refurbishment program. And fourth, we want to commercialize BrakeiQ and continue advancing SIBSiQ in FY '27. And lastly, we want to pursue growth that's strategic and opportunistic that complements our offering and builds on our shareholder value. That's clear, focused and achievable into the future. To close, we entered FY '27 operationally and financially stronger than we've ever been before. We're realistic about the environment, the global conditions, the supply chains and the customer time lines will all play a part in our future success. But the long-term drivers of mine safety and automation, we believe, are compelling, and they underpin the demand for what we're doing. Our focus is simple. We want to build on F '26 and deliver sustainable earnings growth into F '27 and beyond. So that's it for the presentation. I'm going to hand back to Ben for some Q&A.

[Operator Instructions] I have -- a bunch of questions have come through. So I'll kick off with the first question here just regarding, you mentioned margin discipline. What's actually driving the improvement?

So I guess with gross margins of 48%, growing to 49.3%, that's sort of being driven by a blend of pricing discipline, product mix, the contribution of our aftermarket, and really, I guess, good disciplined management of our expense to revenue. That's improved sort of to 92.9% roughly. Angela, is there any further?

No, I was going to say the same. It's a combination of our pricing, our mix and the aftermarket.

Thank you. Just whilst we're on the aftermarket, we have a question here saying, when you say aftermarket sales, can you explain -- please explain specifically what that is? Do aftermarket versus new brake sales have different customers, growth drivers or margins?

So yes, sure. So in year 0, we sell a new brake. And then for the life of that brake in the field, in operation, we enjoy the benefit of an aftermarket life cycle revenue that trails the sale of that new brake from years 1 through years 4 or 5, depending on the life of that brake in operation. So it's very much about having life of cycle relationships with those customers that buy the brakes, deploy them in their fleets and then require the service and support in spare parts and consumables through the life of that brake. So it's no different to any other original equipment manufacturer model. And today, it makes up 50% of our revenue, and we're continuing to focus on growing that through more proactive disciplined management of that life cycle relationship with customers wherever they may be around the world.

Thank you. Just a couple of questions here from Nick Maxwell from PAC Partners. Can you provide some details on BrakeiQ and SIBSiQ? And when you believe these will start contributing to revenue?

Yes. Thanks, Nick. Both of these products are ready to go. We are working on some opportunities at the moment to get some pilot deployments with customers in a number of different regions. And BrakeiQ solutions for both underground and surface fleets. And we've got a good expanding pipeline of opportunities in both underground and surface. So yes, look, we are excited to expect that we'll realize revenue in FY '27 on BrakeiQ. SIBSiQ similarly will start with a customer trial on site, and it will be an existing customer that's well versed with the benefits of our SIBS BrakeSAFE products in operation that will then be upgraded and complemented by autonomous CAS9 safety capability.

Thank you, Andrew. Also, from Nick. With the Grasberg mine coming back online in the near term, what are your expectations around being able to sell into this mine, given it has previously -- been previously flagged as a mine you were working with pre-disaster?

Yes. So that's a really good question. And Indonesia is a market that is strategically very important to ABT. We're staying very close to Grasberg and Freeport. We were on site there only a few weeks ago. They are expecting that, that operation will come back on stream in the second half of this financial year. There's a lot of opportunity for us to continue to expand our BrakeSAFE product solution on that site. It's a very large site, and we see it as a very opportune region for us and a very important strategic blue-chip customer in Freeport.

Also, from Nick. Can you talk to revenue and customer concentration given there was a jump in the largest customer?

Yes. Our customer diversification is, I believe, a very strong and expanding spread of customers. And I think that, as I said before, it's really supported and founded by the fact that we're growing internationally. We're growing in Australia in our home market, but we're really expanding in strategic markets like the continent of Africa, both South Africa and Sub-Saharan African markets, really strong opportunities coming out of markets like Ghana and Zimbabwe. We're really focusing on Southeast Asia, as I said before, with Grasberg as well as North Asia with Rio Tinto at Oyu Tolgoi in Mongolia. North America grew exponentially in FY '26. And we expect that those really strong commodity gold prices will continue to drive expansionary growth in North America in FY '27. And I think what that does is continue to deconcentrate any concentration risk that we would have had on our single market sort of 4 or 5 years ago, which was Australia, but also continues to expand the spread of these blue-chip customers that are increasingly demanding safety solutions and technology safety solutions in autonomous that ABT is innovating.

Thank you, Andrew. A question here is, what is the targeted gross margin profile for the BrakeiQ? And looking ahead for FY '27, are we expecting BrakeiQ to transition into meaningful revenue?

Yes. So look, I think BrakeiQ represents a technology product, and typically, technology products enjoy strong margins. We expect margins -- gross margins north of 50% to up to 55%. And look, we have strong ambitions for BrakeiQ. It is deployed in Australia with a Tier 1 mining company. And that demonstrates to us and the market that it's a proven product. The one sort of hurdle with BrakeiQ at the moment, I think, is that proximity detection system capability moving from Level 7 to Level 9 is a big step. Undoubtedly, the market is going to get there. However, the take-up and the adoption and the enhancement of that technology to move to Level 9 because that's essentially moving from a warning to an autonomous override is -- that's what BrakeiQ is really relying on. And look, we have very strong foresight that CAS9 is absolutely the future. The market just needs to play a little bit of catch-up in the proximity detection system technology to be able to enable BrakeiQ to operate in the field.