EPX Limited (EPX) Earnings Call Transcript & Summary

Welcome, everybody, shareholders, and those of you that are interested in our emerging story at EPX, present to you over the next 20 minutes or so the financial results of 2026. There is Q&A line open, if anybody has a question as we go through the presentation, and we'll try to get through and answer the questions as openly and as honestly as we can at the end of the session. So just going through the next 2 or 3 slides. And again, for those of you that do know us, the presentation is on our website and has been released to the ASX. So if you've got that in front of you. Who is EPX? And for a lot of you that have logged in and do know us, we started off some years ago being quite a narrowly focused company really looking at energy optimization and our core claim to fame has always been around reducing energy costs. The last few years, we have gone on a bit of an acquisition spree to improve not only the functionality in our business and our solution set, but also to broaden the contestable market within which we play, and I'll come to a bit of that later on in our presentation this afternoon. If we look over to the next slide, our company has really kept to its 3 core elements, number one of which is owning our proprietary technology, whilst it does sometimes come with a bit of tech debt, as I'm told, fundamentally for us and particularly in a world of AI. And again, I'll touch a bit on that later on. Owning your own hardware and the ability to be able to capture granular data the way your customers want it within the vacuum-sealed environment is a really critical element of our business and something that we focus a lot on. In addition to which our technology has time after time proven that it can deliver returns to our customers and, in particular, cost savings to our customers in the order of over 20%, 21% on average across our customers' portfolios. Unlike a lot of our competitor set in the market, we go to the ugly part of the building, which is right down in the bowels of the building. We play at the metering element of the building, which is now coming back into real focus for a lot of our customers because that's where the accuracy of data really starts. Once it's in the BMS and for those organizations that tap just into the BMS, then the level of accuracy of that data as it's been shown time and time again, is very low. And so therefore, the ability to make real detailed insights and make decisions in a very timely manner becomes very complicated because you just can't trust the data. And that's something, I think, that we do really, really well. And over the last few years, we've really focused on getting ourselves a bit better known in the marketplace. We've won a couple of awards, which is always really, really great for our staff and our customers as well, but also our accreditations, both in Australia and the U.K. to be able to play in a lot of environments outside of the core commercial office environment, which a lot of our competitors simply just don't have the accreditations to play. And we also have those accreditations in the UAE market as well, which again is something we hold quite deep. If we move over to the next slide, one of the things that we continually track with our customers and we continue to measure is the impact we have on society. I know a lot of the sustainability buzzwords are moving in a different direction, particularly in the last few years. But ultimately, we believe that and in particular, our customers believe that their ability to influence and have a small impact on a healthier world, which is one of our core value sets as a business is really important. And in the last 12 months alone, over 22,000 items that converted into savings were identified by our relevant systems. We delivered in the order of over $21 million of direct savings for our customers. We saved over 270,000 tonnes of CO2, which is also starting to become an interesting measure for us, particularly in a world where carbon credits are now starting to be valued. If that was to be valued today, just in Australia alone, that would be north of $8 million to $9 million of carbon credit equivalents that our customers would have to be able to trade. So again, we feel that what we do as a business can make and does make a small difference in a healthier world. If we flip over to the Board. I guess the chief call out for me on the Board is, number one, we've got a really well-functioning and cohesive Board. They always challenge me very heavily. Number two, it is independent of management, which again is a critical element for us. And number three for me is we do have the relevant skills around the Board, not only in Australia, but with our European Director, where now over 50% of our business is domiciled in the U.K. and Europe. So it's always good to have a director on the ground over there that's in market. If we flip over a summary of financial results. Patrick will take you through the detail of those in a moment. But I guess for me and my reflection of the last 12 months, it was a financial year of 2 halves. To be fair, we had a slow start to the first half of the year, new ACV coming in predominantly was around a new contract we won in the Middle East, in the UAE, being our first ever health care customer in PureHealth, which is a fantastic customer domiciled in the UAE for 10 hospitals. This was then tempered a little with, and as we disclosed in the half year results, slow-paying debtors coming out of the U.K., which was a bit of a setback for us in the half year results and in the UAE, which those of you that have followed the business for some time know that, that's been a market we've been trying to clean up with historical old debtors. But we ended the first half with some good momentum. We pitched for TAFE New South Wales. We retendered for GWR, and we started to install the Rafed hospital contract. We also closed quite successfully the acquisition of Wattwatchers, which we purchased out of administration, which again has added some real strength, particularly in our metering hardware, where we now have a completely wireless meter that can be connected with as short a time frame as 90 minutes. Coming into the second half of the year, Wattwatchers, to be fair, did consume a fair bit of time, probably a bit more than I had anticipated, and it consumed a bit more cost, having never acquired a business out of a DOCA process before. We've now started to see the settling of the customers. We had to renegotiate a lot of contracts with our manufacturer, with service and suppliers and including and re-enlivening quite a few contracts with customers because no contracts were brought across. We also felt a little bit the impact clearly of what unfolded in the Middle East with our UAE business, which slowed down a little bit of the rapid installation. Coming to the back end of the second half of FY '26, we got some momentum back in the business. We won a TAFE contract, which for us was the largest single Australian contract won for some time for over 150 sites for TAFE New South Wales. GWR in the U.K. confirmed not only the renewal of the contract for another 2 plus 2 years, but an uplift in ARR for that contract. The Rafed site started to be implemented again post April. And we had us joining our team was a brand-new Head of Technology and Product who we've now settled in through the acquisition of Wattwatchers. I guess the key metrics in front of you show a fair few ticks. So from my perspective, our ARR has grown by 13% for the year. Our sites have grown by over 50% for the year. And our efficiency metrics, which I'll come back to a bit later in the presentation, we were able to maintain our operating cost base and improve that. But some of our efficiency metrics like our ARR per FTE has grown by 17% for the year. I guess the one that I failed on was and kicked myself a bit on is the EBITDA number. That was something that, to be honest with our shareholders, was not something that I had planned. It was outside what I had committed to the Board. There's good reasons for it, some of which I've explained earlier, but it's something that is front of mind to deliver for FY '27, and that is an EBITDA positive run rate business, and that's where this business should be now given the type of revenue we have coming through our annual recurring revenue streams. If I turn to the next slide, I won't go through that. There's a fair bit of my commentary in those slides. The one thing I will pull out is revenue from our various markets. As shareholders will know that we did restructure our sales team in Europe. We had restructured our sales team over here in Australia probably 12 months earlier, it was easier to do. Europe and the UAE was a little more complex, which we've now done. Some green shoots are coming through. Revenue in the Southern Hemisphere, as we now call Australia and New Zealand, was up 18%, excluding the Wattwatchers acquisition. If we include Wattwatchers, it was up 60%, but that was through an acquisition. The Northern Hemisphere for the FY '26 year, revenue only grew 2%. And so I guess, from my perspective, that is where our focus is now. We've been able to do it over here in the Southern Hemisphere. And to be honest, going forward, the type of revenue growth we've seen here in Australia is what we're targeting for the European and U.K. markets. If I take you to the next slide, as I said, site numbers, which is something that we're very conscious in growing, we think there is a bit of a land grab opportunity emerging in our market, and I'll take you to our market in a moment. For me, a plus 50% increase in the number of sites we oversee now globally with a cost base that really didn't grow much at all, an operating cost base and our efficiency metrics being where they are is a job well done, I've got to say, to our CFO and our finance team. And it's something I think that we had committed to shareholders, and that is to be able to grow the business without putting on too much overhead, additional overhead. And I think we're starting to show that. Our next task is now to close that revenue gap and make sure that our statutory revenue is reflective of where our ARR is sitting. In terms of the market we now play in over the page, I've had various questions over the years around what is our market. And for those of you that have followed us since IPO and maybe just after, we played in a very narrow market, largely being a subset of the BMS market, which was valued at anywhere between $6 billion to $8 billion. And you can see it on sort of the far left-hand side of the diagram in front of you, the commercial real estate market. It's around a $60 billion to $70 billion market. It's really commanded by 3 to 5 very large players like the Schneiders and Johnson Controls. And a subset of that market is the energy management efficiency market, which we played in, which was about a $6 billion to $8 billion market. The last 18 months with the acquisition of Coda and the recent acquisition of Wattwatchers, in our view, we've been able to expand our contestable market to move into not only the industrial space, i.e., what we call the non-BMS space, which very few of our competitors can do, but we've also been able to move into the industrial infrastructure market around critical infrastructure, given the ability now with our Coda platform and our Wattwatchers meters to really play in a market where critical infrastructure provision of information and constant always-on energy is fundamental to their business operations. And that's really been able to allow us to expand what we believe is now our real contestable market out from $6 billion to about $250 billion. And that market, we believe, is growing very nicely given the 3 drivers that we see really around capital pressures and the yield argument, particularly given in what's likely to be a growing interest rate environment and an environment where cost pressures, particularly energy, which is the primary input for a lot of this critical infrastructure will continue, in my view, and I've been consistent on this for a while to continue to grow even where we are from where we are today. I think the third element for us, which we love playing in is the compliance space because we put a lot of time and effort with our customers in getting our data accurate, both accurate at timing intervals, but also accurate at a global level across their portfolios. And that data accuracy for us is something that's sort of coring our DNA within the business. So we see our contestable market continuing to grow. We do see the impact of AI coming into that market, particularly from an analytics perspective. But I guess if we go to the next page, our solution sets are not just about analyzing data. And to us, we win tenders, we retain customers, we renew contracts because we can bring the elements of the cost side of the equation, where can you save money, how can you -- does your building perform better, risk, particularly around cyber risk and vacuum sealing a lot of our customer data within their building environment, and that includes their tenancy information and the ability to stand by our detailed reconciled numbers when it comes to compliance. And so for us, data is fundamentally important, but turning it into something that's measurable, which our customers do every day around ROI and improving asset performance from within the building is critical. And we believe that's where we sit best as EPX and our solution set that we now have available to us, which is in front of you, allows us to target most things in both a BMS and a non-BMS environment for our customers across their broad portfolios. So commercial, office, retail, hospitality, industrial. And for us, that is fundamental in our business to be able to service any of their buildings wherever they are. The value we bring to our customers is on the following page. I won't go through that, but these are some of the things that resonate very clearly with our customers and where we believe we bring quite a lot of value to them, which is why we continue to maintain net churn rates in the order of 5% to 7%, and that was again reaffirmed in our FY '26 result. I might pause there from my side and hand over to Patrick now to take you through a little bit more detailed financial results.

Thank you, John. Good afternoon, everyone. Patrick Harsas here, EPX CFO. So welcome. Our annual contract value increased 12% over the prior year through the introduction of new customers, PureHealth, Brookfield and TAFE New South Wales, adding to our numbers as well as existing customer growth through FirstGroup and GWR, which is using the EDGE platform, which is part of the 2024 acquisition of Coda technology platform. That's a good result. And importantly, as John mentioned earlier, what we saw is good expansion domestically through Charter Hall and TAFE just mentioned and of course, Pradella, a good result. Moving across to the FY '26 profit and loss. Next page. Gross profit sits at 90% on total revenue was $16.1 million, still very high, which is a great outcome. Clearly, that incorporates, as I'll get to a little bit later, project revenue, which includes the sale of meters from the newly acquired Wattwatchers. Employee expenses increased as the business absorbed 5 FTEs coming across from the Wattwatchers acquisition and the continued and planned investment in growth through adding FTEs in sales, marketing and product, which ultimately builds the ACV pipeline and ultimately statutory revenue. The underlying EBITDA loss was $1.4 million and of course, reflects this investment in the pipeline of some $700,000, with further savings offset by continued focus on spend and cost efficiency. Over the page to operating revenue. The operating revenue increased 7% and now doubled since FY '22 and is now sitting at $15.8 million for the FY '26 year. Recurring revenue was up 3% as commissioning of the UAE PureHealth contract was delayed, again, as John mentioned earlier, due to conflicts in the region in the Middle East. But now that is all sort of underway, commissioning was started to finalize in April and is now finished. The second half saw new revenue start to hit our operating revenue from TAFE, Great Western Railway and the realignment of the Wattwatchers customers. So this now provides a platform for the FY '27 result. Clearly, the timing of when revenue comes in to EPX in the second half can only add a certain amount to that financial year, but it's very important setting the platform for the next 3 years in revenue. Just turning to operating costs. Underlying people costs were up 6% due to the planned investment in growth functions, which ultimately, again, as I mentioned before, will increase recurring revenue going forward. Underlying operating expenses, so things such as IT, marketing, insurance and other costs and also rent, of course, has held steady from the prior year. In fact, it went down slightly. Again, cost control and really focusing on the efficiency of our spend has shown reduction despite the inflationary pressures of the wider economy. And in fact, our operating cost level is sitting at the same position as it was in FY '22 and FY '21 now. So again, that's a sign as we try to get that scale growth come through that we hold these costs steady and hopefully, it all flows through to the bottom line. Over the next page, the Wattwatchers acquisition. Now before I hand over back to John to discuss the Wattwatchers acquisition, I just want to give my perspective as CFO. This business was acquired back in late December 2025 out of the DOCA process. Clearly been in administration, quite often, businesses in administration have been there for a reason. And it required some good processes to be in place and procedures, quite a bit [indiscernible] and a firm hand to actually make sure that the discipline was there to get the gains that we can see in that business and move it towards EBITDA positive. Some key changes that we had to do with making sure that the devices that the customers are using reconcile to our customer list. So that means we get completeness of revenue and also cost recovery from various SIM and communication costs. We instill timely customer payment requirements and the customers are now well aware that if their bills aren't paid on time, then services can be suspended or [indiscernible] immediately . And then the important one is also realigning supply lines to grow revenue. That's quite a bit of work because sometimes those customers that were part of the administration process and did have to take a little bit of a haircut on that process, and therefore, we had to sort of rebuild the trust and of course, make sure we could set that platform for FY '27 going forward. So with that, I'll hand it back to John to discuss Wattwatchers.

Thank you, Patrick. I guess shareholders in particular, but a lot of the learnings, I guess, of what we found is on the slide there, and I won't call that out again. But -- and that is something that, from my perspective, the operating cost base that we inherited from that was slightly larger than we had anticipated. So the loss arising from this business in FY '26 was more than budget and that clearly impacted the cleanup and -- but it also clearly impacted our cash position, which is something that Patrick will talk through in the next slide. I guess if we look forward though, the acquisition metrics and the strategic rationale for the acquisition, in my view, still stand quite firm. We've seen a margin reset in the business, again, from the good work of the finance team and instilling some good process within the Wattwatchers business. And that's now at least up to around 55%. We think there's a bit more to be extracted from that process because we find that the Wattwatchers meters actually quite well regarded in the marketplace. What we've also done is we've narrowed the customer base. So for us, the retail elements of the Wattwatchers business, which slowly extracted ourselves from. It's -- we're not really a retail business. We're very firmly a commercial business. And we've narrowed down to about 15 to 20 what we call strategic customers, which is how we're re-enlivening revenue. At 30 June, we re-enlivened $1.1 million of recurring revenue and about $300,000 to $400,000 of what we call meter sales. So we had a $1.5 million ACV recorded in our half year -- in our full year result, 30 June. As we're approaching the end of September, that recurring revenue is up from $1.1 million to around $1.6 million to about $1.6 million, $1.7 million plus the metering revenue which we get recurringly from our commercial customers is starting to put us very firmly in that minimum $2 million range, which we had anticipated and indicated to the market we are targeting to achieve. So the revenue is being re-enlivened, the margins are improving. We've got a very clear trajectory and a view around where the EBITDA is for this business, and we're very close. And I do believe the acquisition metrics at 0.4 or less depending on how you want to calculate the acquisition metrics has been a really good acquisition. One of the things, though, that we have found that we didn't expect on the upside, which is really interesting for us is -- and I do make reference of it in the slide in front of you is market entry into some interesting markets that we think clearly are going to grow over the next few years. Being the EV market, what we have is a customer within the Wattwatchers portfolio, which we now also do for the GWR rail business is monitor electric vehicle charging stations, which we think is a very interesting emerging business. I wouldn't yet sing very loudly from the rooftops that it's going to be a ripper of a new revenue stream, but we do think it's a revenue stream that we can come to rely on in future years given where we think the EV market is going to go. Telecommunication is a bit of a surprise. We do monitor some telecom centers/wouldn't call them data centers, but they are telecom centers. And we monitor those for quite a large U.K. entity, which we're in discussion on. Again, this is sort of a pipe type opportunity for us as a business. But it was a market exposure we didn't appreciate when we were doing the diligence on the Wattwatchers business. So from my perspective, the Wattwatchers acquisition, while it's been a little painful from a timing perspective on the last 6 months, we believe will be a really good EBIT positive contributor to the business in FY '27. I'll hand back to Patrick.

Just over to operating cash flow. The operating cash flow in FY '26 was not where we would want it to be clearly, but it's impacted by UAE collections that we mentioned in the first half that also continued to largely into the second half. That said, collections have increased post year-end with some $400,000 collected in July and August, and we're continuing to make improvements there. We also were impacted by the conversion of ACV into ARR. So that's the billing revenue, the timing of that. And of course, PureHealth, which was won back in September, really with the delays in the UAE again meant that we were -- didn't start billing until April or May of this current calendar year. So that clearly impacts the revenue that comes in into this financial year, benefits next financial year, of course, but really impacts the current numbers. We also had to invest $700,000 to integrate and invest in the Wattwatchers supply chain, clearly more than what we thought, but it was clearly necessary to make those changes, and we will see greater improvements going forward into the next financial year. EPX also invested $1.3 million to install new ARR under the EDGE platform. So that, again, sets up revenue and operating cash flow platform for FY '27. So that CapEx is really to install new revenue, not to maintain existing revenue. So it doesn't impact free cash flow. But it does set up again the revenue platform for the next 3 to 5 years depending on the term of the contract. And then finally, I'd like to raise the point that clearly, is that during the period, EPX took out a $3 million debt facility. At the end of the calendar -- sorry, financial year, $1.6 million have been drawn down. And the purpose of that is really to fund growth and working capital as we continue to grow and invest in our ACV. Thank you. John, back to you.