Gentrack Group Limited (GTK) Earnings Call Transcript & Summary

Good day, and welcome to the Gentrack Results Announcement 2022 Conference Call. This call is being recorded. At this time, I would like to turn the conference over to Gary Miles, Chief Executive Officer. Please go ahead, sir.

Great. Thanks very much. Welcome all to our FY 2022 results. John and I are here in Melbourne. I came in from London via Singapore, where we were able to meet some of our new and existing customers as we expand into that region. We'll talk more about that today. Here in Australia, I think I'm meeting 11 of our 25 customers, Chief Executives and business owners. So it's a pretty exciting time, and I look forward to meeting many of our shareholders current and potential over the coming days. So let's get started. Let's jump into the financial highlights. So first of all, we had a good year. Revenues were up approximately 20%. This was underpinned by strong growth in the utilities business of approximately 22% to $108 million from $89 million. The Veovo business posted at 8% growth. I would like to remind everyone that pre-pandemic, this was a Rule of 40 business, our airports business, and we're very bullish about that, and we will highlight some of that further on today. Our ARR continues to rise. Our EBITDA, we posted $8.1 million of EBITDA. This is consistent with our forecast that we would continue to invest in our technology. We successfully did this. We launched our G2 platform, which is a modernization of our technology stack in September of this year, which we funded out of operating business. And finally, the business is, I think, really in a strong position to prove that we can deliver well. And when we deliver well, that means we can invoice well and we collect cash. We have a cash-generating business. Cash is up to $27.4 million. So I think overall, the performance was very strong, and we're moving from strength-to-strength. Now I'm going to ask James Williamson, our General Manager of our airports' business to join us. We're actually putting airports in front of the utilities business update today because we're highlighting the airports business as the airport industry turns back on and kind of unleash its pent-up IT demand. I also think that it is -- the airport business could be better understood by our shareholder base because we see real value there, and we're not sure that it's fully recognized. So with that in mind, let me hand over to James to give us an update. Please James.

Thanks, Gary. Good morning, everyone. For the next few slides, I'll be giving that market update on the Veovo business. So as you can see from this slide, Veovo has an enviable global customer base. Our technology supports more than 120 airports with customers in 28 countries across 5 continents. For our airport customers, our products are often mission or business-critical, and that means providing capabilities such as flight management, how they manage their resources such as gates and checking desks, how they build their airline customers and how they effectively use their resources to manage and optimize passenger flow. We do have some customers outside of the airport space where our passenger flow solutions are also used to support ski resorts, theme parks, rail and metro customers as well as roads, but the majority of our revenues do come from airports. Next slide, please. Now as Gary already mentioned, COVID hit our industries particularly hard. And as you can see from this chart, I'm really pleased to say that the recovery has exceeded our expectations. I'm sure many of you will have either flown or tried to fly in the last few months, and you'll have seen that travel is really back with a vengeance. In many places, we've actually seen passenger demand has outstripped the ability of airports and airlines to meet that demand and turn back on the capacity that they switched off during the pandemic. This has generally driven higher load factors for airlines and higher ticket prices. And that in turn is going to drive aviation back to profitability. But most importantly for us, it's also driving back airports to investment as they look for the technology that is going to deliver the capacity that allows them to operate, but at a lower cost than pre-pandemic. They've also lost a lot of experience during the pandemic. And so the industry is looking to accelerate next-generation capabilities that really replace human experience with greater automation, better decision support tools and better optimization tools. Next slide, please. So what's Veovo's runway to growth? We entered the pandemic in a strong position. As Gary said, we were a Rule of 40 company in 2019. Our technology is largely business critical. And this means we've had very low customer attrition and strong ARR retention. During the pandemic, we really doubled down on our customer relationships, and we've also accelerated our tech investment. We knew that the capabilities that support greater efficiency and reduced cost of airports in the recovery we're going to be absolutely key and this also includes the move to technologies that support the cloud and SaaS. The strategy has already started to be reflected in our results during 2022. We won our first major contract driven by AI machine learning for Avinor, who operate nearly all Norway's airports. We've completed the transition of SaaS for all our passenger movement customers. We also signed our first major managed service deal for a Tier 1 airport. Finally, another highlight was delivering a world-leading sustainability initiative for Swedavia who operate the 10 largest airports in Sweden. This leaves us, I think, in a really strong position to capitalize on what is clearly pent-up demand. We've got upgrades planned and expansion plans with all our Tier 1 and Tier 2 customers during 2023. And we're also seeing our pipeline of new potential customers strengthen. In fact, over the last few months, we've seen a significant number of new tenders come in and more than we've seen in the previous last 2 years. In short, I think we enter 2023, not just full of optimism, but actually with real confidence for the coming year and beyond. Back to you, Gary.

Thanks, James. Let's move to the utilities. We will come back and as -- we're separating out the utilities and Veovo business targets, and we'll come to that later. So this is clear for all. On the utility side and the business as a whole, so I joined 2 years ago to October of this past month. So we set out in June and our strategy days of 2021, 3-year strategy, where we were going to focus on our core technology, on our core geographies and getting back to growth. I'm pleased to say we've achieved it. We did what we said we were going to do. I think we've really built a very, very strong base, and I'm confident. So I'm just going to run through a few of the things. So we created a customer-centric organization. We reset contracts that needed to be reset. I've been able to assemble a really world-class management team. We know how to operate. We work well together. We managed the time zones super effectively, which is not trivial. The company has always had a strong delivery DNA. We've strengthened it. And then, in 2021, we established our idea of a trilogy stack, which is Salesforce, AWS and Gentrack, hand-in-hand. We began building that, accelerating the build of that stack. In FY '22, we released it, we call it G2, we released in September, as I mentioned before. I think besides the growth and strengthening our customer relationships, the #1 thing that we achieved in FY '22 is that we -- we have an enormous amount of confidence in the business. We put forward our 50 in 15 plan, which is to grow to 50 million meter points in 15 countries as the next step in our global positioning. We invested a lot in our people. We're scaling up India staffing it up, strengthening it in all of our systems so that we have a well-oiled machine, and we can scale it globally. So if you go to the next slide, I think some of the market feedback and response to our strategy has come through in the last year. These are some of the announcements. I'll highlight a couple of them. Mercury bought Trustpower's business in New Zealand, where we're headquartered. It's now the largest retailer in the country. They had our technology stack and one of the older, more traditional stacks. They have chosen to modernize on Gentrack's technology and to transform their business and integrate it and meet their KPIs as they've committed to the market. So we are a strong partner to help them do, that. We closed some new business in Singapore. Singapore is a launch pad for us in Asia. If you have strong references in Singapore and Australia, they go a long way across Asia. And so, we've proven that we can win business there. In general, we're winning more deals, and we're delivering more with our customers. Our customers are leaning in to us to bring the innovation they need. As an example, we moved 95% of our customers in the U.K. into the cloud this past year. So this is -- I think from this perspective, we're going from strength-to-strength. On the partner front, we took the year to further solidify our partner relations because going global requires a strong and effective partner strategy. Today, we announced a relationship with Merkle, which is a 15,000-person strong sales force organization to go help modernize the energy and water industry. We have strong customers together. We recently announced an agreement with Tata, TCS, to build a go-to-market solution and Center of Excellence to modernize globally the energy and water utilities. This is a major program with a 600,000 strong partner that we can grow our business together. The relationship with Salesforce is absolutely critical, the trust, the co-working, the co-selling, building demos together, seeing customers together, Salesforce is a sales machine. They know how to sell. They know how to articulate value. And I think that what's important for them is they have a billing partner that can deliver and that they can trust that will help them continue to build their brand in the utility space. And they're increasingly realizing that Gentrack is the partner to do this globally with. So we're pretty excited about what we've achieved. So let's move to the next slide and talk about what we have planned. So I'd like to take this as a moment, and you'll see it in the numbers as we did come out with our 3-year targets in FY '21 to grow our business in the core because I believe that regional players are not going to be able to capitalize on the global opportunity that this industry brings, which there'll probably be 3 or 4 players in our space globally that will dominate and modernize the utilities, energy and water customers. So we're planning to go global, and we want to accelerate this. We're doing it this year. So we're resetting from our 3-year strategy that was only in our core markets to go global. So first of all, we need to make our numbers in our core and continue to grow it. So I'll talk about that in the left column. We have a lot of new wins. We need to implement them and bring that revenue across the line across Australia, New Zealand, the U.K. and our other countries in which we operate. We have a great opportunity to modernize our entire base from Velocity version 3 and 4 and Junifer onto G2 to sell cloud services and put them on our highway of innovation and all the upsells associated with it. We are going after the Tier 1s and Tier 2s. We have Tier 1 and Tier 2 customers today. We are in play with all the major Tier 1s and Tier 2s that have deals in play in our core markets. We're talking to the decision makers, and we're in there to win. Lastly, I'd like to say that we're bullish on water. We think the water opportunity in the U.K. for regulated B2C water is material. We work with 6 of the water 12 -- top 12 water companies in Australia. We'd like to win more of that, and we see the water opportunities, globally is exciting. Now about our global expansion, we did tell our shareholders and potential shareholders that before we went global, we would come with a plan. We have a plan. It represents spending about $3 million of incremental money annually on sales and marketing, at least in the next 2 years. So we're not going out and opening offices in 10 countries. It doesn't make sense. We've done this before. We know how to do this. I've done it in prior businesses -- so a number of the management team members. So we're going to use Singapore as a base for Asia and the U.K. as a base for EMEA. We are -- we've already reassigned experienced leaders, for example, the person that led our European business, which was our largest growth -- largest revenue business is relocated to Singapore to open up Asia. And we've got a new general manager in Europe that's super strong that we've elevated internally. So we're repositioning people towards and leaders towards our growth objectives. It's just one example. Our partnerships are viable alternatives for SAP and Oracle I think, very, very attractive ones. And then we're amplifying our global brand awareness. To go global, once again, I think this is a huge prize to go after. So my closing slide, the last slide is a little bit busy, but I'm going to talk through it. So on the left is the size of the prize. Gartner has come out and said that the legacy providers will shed 25% of their meter points to be recontracted to new age suppliers. That's the first step. That's about 400 million meter points. It's probably more than $1 billion of annual ARR that it represents. The question is which challenge or new age companies can go deliver this? And it's not a trivial thing to go modernize this many, that represents probably about 200 utility companies. So we think we have a good hand that can do this. So if you look at the right side, first of all, our technology supports energy and water, B2C and B2B. Many of our customers only do -- and many of our competitors only do B2C energy. So we're well positioned there. Secondly, we have proven that we can work in 15 regulatory environments in 6 countries. It's easier to go from 6 countries to 15 countries than to go from 2 to 4. Because we know how to do it, we've done it before, we know how to stand up teams and deliver. Our delivery capability is by far the best in the market. I can say it without any hesitation. This is a very dangerous game for utilities to migrate to a new stack. They need to have a strong partner that they can depend on and they can depend on us. And lastly, I think from the brand, our brand is rising. We're getting more and more visibility -- of deals. Our deal flow is improving. So I feel very, very bullish when I look at it vis-a-vis our competitors. Just as a reference, there were couple competitors that were on a couple years ago -- or a year ago when I started that really kind of fallen off the radar screen. So I think our position is getting stronger and stronger here, and I'm very confident and bullish about the future. So with that in mind, let me turn over to John, who's going to take us through more details on the financial results. Thank you.

So looking at the group results for the year, a very strong revenue result with revenue up 19.5% over the prior year. And that's being driven by strong growth at both our utilities business and our Veovo business. Our cost base includes a one-off step-up in our strategic R&D spend and our sales and marketing. And as a result, EBITDA was $8.1 million for the year. So our planned investment was funded by our earnings in the year. I look then at our utilities business and, what's happened there with revenue. So the utilities revenue is up by almost 22%. Now in the presentation, I've split out the revenue from Bulb -- one of the U.K. insolvencies, and this shows the strong growth in the rest of the customer base. In fact, our underlying growth of that customer base is 24%. Uncertainty over those exits remains, but we're expecting the Bulb of the U.K. insolvencies revenue to drop off over 2 years evenly over financial year '23 and financial year '24. That means a $13 million reduction a loss in financial year '23. But going the other way, from booked customer wins and transformations that will that grow our existing customers where -- we're expecting an increase in financial year '23 recurring revenues by $16 million. But putting those together and combining that with our remaining pipeline, it gives us a lot of confidence in meeting our financial year '23 guidance that to increase our financial year '22 number of $108 million by high single-digit millions for the utilities' business. Looking a little further at utilities revenue, we can see that revenue grew in all of our regions. We're growing in the U.K., in Australia and in New Zealand and Singapore. In the U.K., we're expecting to see continued growth and future opportunities, in particular, in B2B Energy and in B2C Water. The Australian business actually grew by 28% into our next year '22 over the prior year, and we're targeting to continue in Australia with double-digit growth. Whilst in New Zealand, we expect that the booked wins to-date will actually make that the fastest-growing region in financial year '23. Now as in prior presentations, we also disclosed our revenue by customer, our top 10 customers, and we also show how our revenue split by the segments that we operate in. But turning now to Veovo, revenue at Veovo is up by 8% total revenue, so the Veovo business has returned to growth. Our recurring revenues are actually up by 9.2%. In fact, our recurring revenues have grown consistently throughout the aviation downturn. And that illustrates the strength of the underlying business here. In terms of our cost base, that's grown alongside business growth. But there's also been a one-off step-up in our strategic R&D spend, and that's ring-fenced spend in developing our next-generation platform, G2, which we launched in September. In financial year '22, that spend hasn't contributed to revenue in the year will contribute to revenue in years to come. I think, I'd also like to highlight here that we've got good customer contracts in place with indexation in them. And that will allow us to withstand margin -- pressure that we might see from inflation. In terms of our cash flow, the strong business growth has allowed us to invest in our people and our products and remain a cash-generative business across the year. Our cash flow was up $1.4 million in the year, and we ended up September with $27.4 million of cash on the balance sheet -- which we believe is a really strong result. So what does that mean in terms of our outlook, for the group as a whole, we now expect to achieve our previous financial year '24 revenue target of $130 million in financial year '23. So that's a year early. Our financial year '24 revenue guidance is upgraded to $150 million. In financial year '23, we expect that the growth in our utilities business will be in the high single-digit millions over the outturn in financial year '22. And as a result, the total group revenue, including Veovo is expected to be in excess of $130 million. Looking at the 2 parts of the business separately, in utilities, from financial year '25, we're expecting that the full impact of those customer insolvencies will be behind us. So that year-on-year drop that we have seen will be behind us. The underlying growth in our core markets as well as expanding into new markets means that we're targeting our utilities revenue CAGR to be in the high-teens percentage from financial year '25 onwards. Our planned investment in global expansion means that we're now targeting our utilities EBITDA to reach 12% to 17% in financial year '24. And then it will grow to be within the 15% to 20% range for financial year '25 onwards. At Veovo, we're targeting this business to grow on average by 15% CAGR across the next 5 years. And we're expecting our Veovo EBITDA to be within a 15% to 20% range across that. So looking further at those new targets and how they compare to the old. Our utility in utilities, our new targets are including both stronger, growth in our core markets because of the momentum that we've got in the pipeline we're seeing as well as expansion into new markets. Actually, our old targets have not factored in growth outside of our core. We're planning to invest around about 3% of our utilities revenue to expand into Asia and into EMEA. So our financial year '24 EBITDA target is now in that 12% to 17% range. The stronger growth we expect will come with a higher proportion of implementation revenues means our recurring revenues are targeted to be 70% to 75% of the target. At Veovo, our old targets assume very limited growth in that business. But the recovery that we're seeing in the aviation market and our position to benefit from that really increases our confidence here. And hence, we've increased our targets. So for the group as a whole, it means we've updated our financial year '24 guidance for revenue to $150 million. So that takes us to the Q&A part of the call. We're going to take questions from the audio conference first, and then we're going to move across to the webcast questions. So operator, can you please -- open the line and thanks all.

[Operator Instructions] The first question comes from Joshua Dale with Craigs Investment Partners.

First of all, I just want to say well done on positioning the business with a very strong outlook. It's great to see. Just the first question I have, you didn't provide EBITDA guidance for FY '23. I'm conscious you expect revenue above $130 million and your cost base at the second half run rate is about $125 million annualized. So it looks like EBITDA might land at perhaps mid- to high single-digits or even low teens for FY '23. Is that how we should be thinking about it?

So, I mean you're right. So we haven't provided EBITDA guidance for financial year '23. So we're clearly expecting to increase our revenue and increase our cost at a slower rate to get to that margin improvement financial year '24. But we're not going to break it down at this stage into financial year '23 guidance.

Okay, sure that's okay. So second question and supplier of last resort process and with Bulb on top of that, can you run through why it takes so long for revenues to roll off? Just conscious you're still expecting revenues from insolvent customers in FY '24. And I'm also conscious that Octopus appears to be the last better for Bulb. And surely, they'd be interested in rolling off your team as fast as possible. Can you just provide a bit more detail around that?

Sure Josh, I can take that. This is Gary. Look, we -- there's a few administrators in the U.K. that unfortunately, we've gotten to be -- we know them pretty well because of, I think, there's government problem with the price cap. And we're able to manage down with the administrator a smooth transition for the U.K. customer base on the B2C side, whenever there's need to be a supplier of last resort. And we're able to get revenues in that transition. This takes time. Bulb is in special administration. As you know, it's actually going to courts today. There's been a complaint lodged by some of the other retailers. So we just don't know how long that's going to take. We're pretty good at working these projects to help them and also get money along the way. So that's been helpful for us. In terms of Octopus, they would like to get off as quick as they can. It's a big book. And we had very, very good metrics. I actually think the operating metrics in Bulb were the best in B2C in the U.K. So they're going to need figure that out as part of the transformation if they get it, and we'll see how long it takes them. Yes, we'll see.

Just trying to get a sense of your confidence around having your FY '24 targets and how much visibility you have on revenue in that year? And how much do you hope to win that's not quite locked in you?

Look, we remain pretty confident about our financial year '24 targets. We've got all the momentum. I mean you can sort of see that the growth that we've achieved in financial year '22 and the growth that is -- that we can -- we've only locked in for financial year '23 and the growth we expect to get to financial '23 takes us across and positions us really well for our $150 million target. We're very confident on that. We've got a very strong pipeline. And it's the right size and the right position at the right stages to take us across that journey and compensate us for old revenues such as Bulb falling away over time.

Okay. Just one last question from me, you're looking to allocate $3 million, give or take into your global expansion in Asia and Europe. Can you sort of talk to exactly what that $3 million will be allocated towards? I'm just conscious that Gentrack hasn't traditionally had a huge sort of sales and marketing -- or I think historically, it's sort of been responsive to RFPs as opposed to trying to pursue business, so to speak?

Yes, certainly so it's -- for example, I think Gary gave a good example where we're relocating our former U.K. General Manager, the General Manager of the European business. He's relocating down across into Singapore. We opened up a small office there. We have support from a sales and presales team. So that's how we're growing our sort of sales and marketing cost base. It's very much using experienced leaders in the business that have a good knowledge of Gentrack and its products already and know how the business operates. So it's -- it will be a small number of sales and marketing people.

I think we need -- Josh, I think you hit on a point that I'd like to just take a moment to reflect upon. Your description of Gentrack has been somewhat reactionary to change and request and opportunities might have been true in the past. It's not true anymore. We have a sales-led organization. We've probably increased by 5x the amount of marketing experts we have in the company and 4x the amount of sales experts. We are out to get deals and win deals, period. And the real interesting question is what's going to happen with TCS, Salesforce and others as we start selling more and more together. They've got a lot of reach. So that makes it hard to predict out way out. So we're pretty cautious about forecasting that at this moment. But I would say that with -- together with our partners, we have a very strong sales mentality.

Our next question comes from the line of Phil Campbell with UBS.

Just a couple of questions from me. The first one was just to get a bit of a feel for next year, particularly in the U.K. when the price cap steps up again, just the provisioning for bad debts. You obviously -- potentially have bad debts from a customer perspective in B2C that you think an inflow for you guys. So just be interested in kind of what your views on that are? And then yes, just following on some of the international expansion question so just to be quite interested to see some of the assumptions behind the greater than 15% revenue CAGR, obviously, I'm assuming if you're going into different geographies, there will be some time in terms of developing product because there's obviously different regulations in different markets in terms of billing and so forth. So just kind of how you come up with a -- and your quite high revenue growth there?

Okay. Look, on the -- just going back to the U.K. bad debt question. I mean, I think the way we see it is a lot of that is behind us. I mean we carry a large provision. The B2C customers, a lot of them are quite smaller customers. They're already in administration. We've got a much stronger customer pace that's continuing. So it's not really an area that we see as a major risk for financial a '23 or '24. I mean we always look to see what's going to happen in the markets with the U.K. government subsidizing our customer base rather than putting a price cap on. I think that's a very positive development. We see a lot of that risk with something that we've already suffered and isn't the large risk it was going forward. Does that answer the debtor risk question?

Yes, I suppose I'm kind of interested even in -- I think that does, yes, I think it does.

So look, we're just in -- we are really just a very different space to where we would have been 18 months ago. The U.K. government's been supportive rather than having very strange policies. And we just have a very different quality of customer base that's less standing and it's growing, the larger tier customers. It's a very different space to where we were before. So in term -- and do you want to just ask your question on international expansion again?

And, I am so sorry, I cleared his question.

I think the question was in terms of EBITDA. And look, there are certain regulatory requirements in new countries that you need to try to develop towards and meet. As I mentioned, we're in 15 regulatory environments today with our technology. We know how to do it. We've baked it into our price book and our cost, and we actually think it's a differentiator that we have a layer of localization that we can configure pretty readily and enter new markets with confidence. So some markets are trickier than others, and we'll navigate that. But there's a precedent here. I mean Oracle and SAP system works all around the world with the same technology stack. So we plan to do the same thing. I hope that answers the question, if we can move to the next one?

The next question comes from the line of Jules Cooper with Shaw and Partners.

One number that sticks out to me is the $16 million of booked customer wins and transformations and resets that you talk to was impacting FY '23 recurring revenues. If I remember at the half, you were sort of talking to $7.3 million benefit to ARR being spread over '22 and '23? So that seems like a pretty solid jump from the half year to now in terms of benefiting the FY '23 numbers. I wonder if you could just sort of elaborate on what particularly is driving that increase in underlying organic recurring revenue growth, please?

Yes I mean it really is the sort of cumulative impact of bringing on the new customers and substantial customers and also the transformation of some very large existing customers. I mean example such as the transformation of Npower and E.ON. I mean that's really increasing the size of our customer base, bringing on and sort of closing at the end of the year, Mercury transferring their customers from SAP across to our platform. We've got some very major changes, very major wins that they're going to benefit the business in financial year '23. The win in Singapore, which I think we actually came into play just after the half year. Again, these are all big step-ups in our run rate business. So it gives us a lot of confidence going forward.

And it appears there are no further questions at this time, audio questions, that is. Would you like to take questions from the web now?

So if there's no further audio questions, yes, we'll take questions from the web. We're just waiting for the webcast questions.

I think that maybe it.

Yes.

John, you can see the webcast questions on the screen now.

Here we go okay. So we've got a question that's asking us why there is no financial year '23 EBITDA guidance? Is that due to uncertainty around the Bulb exit? So in part, it will be. I think we've got to make sure that we manage that exit in the right way. We can see very clearly our growth path in our revenue base. We're also very confident that our revenue growth will outstrip our cost base, which is why we're very comfortable to provide EBITDA guidance for financial year '24 and onwards, but not for next year. We then have another question. It's just asking to clarify, is the loss of Bulb and other U.K. insolvencies, $13 million in '23 and $13 million in '24? The answer is yes, what we're going to see is effectively, the year-on-year impact of that would be a $13 million drop-off from financial year '23 to financial year '22 of $13 million and then the balance of the drop-off from financial year '24 to financial year '23 million is $13 million. So it's spread across the 2 years like that.

And that's our understanding as of today, if the core system delays, then this will just be pushed out and we'll continue to make the revenue in the meantime.

Yes, but that's what we based our targets off of.

Yes.

We've got a question on, is there any dividend guidance or are we reinvesting in 50 to 15? I think at this point in time, we made -- an impact loss in the year, which is why we are not recommended a dividend payment for financial year '22. We don't have dividend guidance at this point in time. It's something that we continue to keep it under review, and we'll look to this -- and look at that question again this year runs through. I think you can see that in terms of reinvesting in 50 in 15 and reinvesting generally in our strategic R&D, we've been no successful to-date in doing that out of earnings. We've got a question that's asking.

I think we addressed this.

About -- we've addressed that question.

So there's a question that says utilities CAGR of high teens beyond FY '25, what is beyond FY '25, how sustainable is that growth rate? And what -- type of meter point wins will be required? So first of all, because we support B2B and B2C, it's hard to pin it down specifically to meter point wins. I think it's more relevant to see how many Tier 1 and Tier 2 utility customers we transform across is probably the right metric to look at. Look, we think that the 50 million meter points in 15 countries is the first step -- as the old industry transforms, it will take time. We want to be in those countries of high populations and high income, either one. And when they make a decision to transform, we'll have the proof points to help them navigate that transformation. This will happen faster in some countries than others, but somebody, some companies, 3 or 4 are going to win this game over the next 5 to 10 years, and we'll end up controlling the market for the next 15 to 20. And that is our target. And then I think with that, high teens CAGR is long-term, sustainable or over achievable. I hope that answered the question.

We've then got a question that's asking for the uplift that we've seen in financial year '22 for R&D, for sales and marketing, how much of it is one-off in nature? I think the thing I want to sort of just emphasize here about that step-up in R&D, that's really been ring-fenced in financial year '22. This has created a separate R&D team, a division a lot of engineering resource there, focused on delivering our next-generation technology stack. So it hasn't contributed to our revenue in the year. So that is a one-off step up in our, spend and in future years, we're expecting that to contribute to in-year revenue in a greater way. We then have a question, reasonable -- what is a reasonable margin range in the guidance on a specific revenue number. Can you please provide some color as to where some of those or sensitivities are?

This is from Guy. I'm not sure about the question. Guy Hooper from Jarden. Guy, if you could reissue it, sorry. I didn't -- we didn't really get it.

I mean we don't -- so we don't provide gross margin information on our different products on different customers. But maybe -- we pick that up when we speak separately, Guy, in terms of what you're trying to drive out there. So we've got a question on how much in terms of the resetting of customer relationships, how much of the growth in financial year '22 is attributable to those resets? I mean again, I don't think we want to give out an actual number here and be too specific about how we've changed the pricing on individual customer contracts. I mean it's -- it contributes some -- the lion's share of our growth in financial year '22 is a straightforward winning new business.

It's a business and selling more to our existing customers, which may be part of a reset. When we reset the contract, we may not reset the prices, we may go in and offer to do more things like managed services, and then we bundle something that was maybe making a loss into making a win and growth -- and that's just one of the levers we have for a growth engine, but we don't separate out specifically. And I think there's more room for us to get both EBITDA and revenue growth from our existing customers for sure.

We then have a question that's asking us to talk through the size of the contracts that we're pushing -- that we're pursuing in Asia and whether they're software only or a managed service style?

So I can take that. First of all, we are not breaking that out. And I also don't know that we know. I mean there's, some very big players over there, some utilities with 10 million-plus meter points, super exciting. Now the way to enter them may not be with the full bang transformation on day 1. We may enter in a different path. So I think we need to get out there and learn. We have a pretty good view based on our early conversations and our experience. But I don't want to try to try to forecast something at this point about the size of those contracts. So I look forward to providing more detail as we know more. Are the utilities, product commercially ready in other Asian and European markets from a regulatory perspective, this is from Shuo Yang? So as I mentioned before, I think we covered this. We're in 15 regulatory markets today. Each environment has some unique regulatory requirements. We have a layer that helps us customize and configure this. We're pretty confident that we can tackle it from region-to-region. There is a precedent here of this being the installed Oracle and SAP doing this all around the world in the last phase. So we're confident we can do that, and we'll navigate it on a case-by-case basis. Are there more questions? How much of your deal pipeline would be direct versus channel partners sourced, also from Shuo Yang? Our partners -- we work with partners today in our core markets also. We will always deliver some things directly because we're capable to do it. And then with some of our partners will be a sizable subcontractor for that. I don't know the answer at this point in time as it unfolds. I can say that with Salesforce it's interesting, we really co-sell and they sell their own software, then we may take the prime or integrator takes the prime. So that would be a side-by-side as opposed to a direct sale.

I have a question asking are there any duplicate costs can be pulled out of the cost base? I think really, the thing to look at here is the very large ring-fenced R&D spend in financial year '22. There's a lot of potential -- some of that to be repositioned into customer-funded development work, so using that engineering talent that we built up to generating new revenue.

Yes and there's another very obvious one that we historically have had 2 technology stacks, Juniper in the U.K. and Velocity in the rest of the world. And as we integrate on to G2, we'll need to support one stack instead of 2. So over time, there's a sizable opportunity there.

And asking, do we still view the Veovo business through the Rule of the 40 range?

I think we've put out numbers that are pretty.

Yes, I mean -- 15% CAGR growth and an EBITDA margin of 15% to 20%. So that's the lens that we're viewing Veovo through at this point in time.

And that's the lens we would like our shareholder base to kind of look and value at, quite frankly, yes.

Is our M&A, is M&A being considered if you would assist in the global expansion strategy?

So I would say that our balance sheet at this moment is not really in a position to do a major M&A without us needing to go raise some money. We may do that if the right opportunity presents itself, it's definitely a lever that makes sense in a growing global dominant objective, but we haven't baked that into any of our numbers. So we're always looking at it.

We got a question about our cash balance. It's high and how are we thinking about the cash? I think at this point in time, we are very comfortable with the position that we're at. I mean we can see we're a cash-generative business. Going back to the last question about potential M&A, it's not really -- it's a position that we sort of keep under review and consideration. But we don't have anything further to say on this point. We're then asking how much of our utility EMRR is coming from managed services? We don't talk -- we don't disclose this within the investor deck, but you'll see in the financial statements that we disclose the level of our revenues that are coming from managed services. And a large part of that is recurring. I mean there'll be bits that aren't, but you can see that in the notes of the accounts. We're also being asked is Veovo still core. Could value be created by spinning it off or by selling the business?

So we're always looking at our value creation opportunities. Veovo is set up as an independent operating and governance arm from a corporate perspective. So if that makes sense for the creating value, that's something that we're in a position to execute on.

And again, coming back -- and returning on the M&A theme, we're being asked if there are any bolt-on technology acquisitions in either utilities or airports that could add significantly to our value?

So I'll take that. We are definitely looking into this. We're strengthening our M&A pipeline management arm to scare the market. It's not something that we focused on much in the first 20 months of my tenure, just because we were -- I think you need to get your house in order before you start consuming new houses inside to bring them in. We're in a position to do that now. So we're definitely looking at the market.

And I think the last question that we have is, again, asking about our strategic R&D and whether that eventually disappears, that uplift whether that eventually disappears given that it's ring-fenced? Now it's not so much that it disappears. It's just that we're able to use it in other ways. We've launched the G2 stack. We've launched the G2 stack. So there's less call for all of that to be ring-fenced. I mean, we've built up a very valuable source of expertise here in engineering. And there's a lot of capability that can be used on growing the revenue base.

I would like to say that the market is very dynamic. There are super exciting things happening with clean technologies, batteries, solar, bundles, new age, energy, consumers, prosumers, flex contracts. It's a very dynamic and interesting area where retailers are spending money. Also, debt was talked about on the call the whole debt area is interesting to help them navigate that with technology. So we do see room for investment, and we look at it from an ROI perspective pretty carefully. I think that's it. There was, a lot of active questions. Thank you very much for the continued support. And for those that are watching, we hope that you'll join us on this journey, and thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.