Gentrack Group Limited (GTK) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Gentrack Group Limited's Annual Shareholder Meeting. My name is Andy Green, and I'm delighted to be attending this annual shareholder meeting as Chair of Gentrack Group Limited. Today, we are very pleased to welcome you as online participants through our virtual meeting platform provided by our share registrar, Link Market Services. As we've advised previously, given the global nature of our business, we are holding a virtual meeting again this year. Our Chief Executive Officer, Chief Financial Officer and other key executives as well as some of our Board members are located in the United Kingdom or Australia. Their attendance in person at the meeting would result in significant costs for Gentrack as well as other logistical challenges. We'll hear a bit more about where we are today later in the meeting. We have prerecorded the introductory messages for each of the directors who are standing for reelection. This is to minimize the risk of technical issues interfering with the smooth running of the business. You can vote and ask questions online. To vote you will need to click Get Voting Card within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by clicking For or Against or Abstain on the voting card. Once you have made your selection, please click Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or phone the help line on 0800-200-220 if you're in New Zealand, or +64-99-67-7751 if you're outside New Zealand, if you require assistance. I'll provide you with a reminder of these instructions as we progress through the meeting. I would encourage you to send your questions as soon as you can through the virtual meeting website. This will allow us to answer these questions at the appropriate time of the meeting. To ask a question, you will need to click Ask a Question within the online meeting platform, select the item of business and type in your questions and click Submit. Before we formally begin, I'm attending the meeting from Australia. I would like to introduce you to my fellow Board members, Fiona Oliver and Stewart Sherriff, who are attending from Auckland, New Zealand; Nick Luckock, who is attending from the U.K.; Darc Rasmussen, who is attending from Australia; and our Managing Director, Gary Miles, who is in Asia. Details of the background and experience of all directors is contained in the annual report and on the website. We'll hear more about the background of myself, Gary and Stewart, all of whom are standing for reelection as director during the formal business of the meeting. I'd also like to acknowledge that this is the last annual meeting Nick Luckock will attend as a director of the company, as he has decided not to seek reelection after serving on the Board since February 2018. Nick has played a significant role in the turnaround of Gentrack, including leading the search for Gary Miles, our CEO. I'd like to thank Nick sincerely from all of us, on behalf of all shareholders, for his contribution for setting Gentrack back on a firm [ growth ] trajectory. In addition to the management team, we have our Chief Financial Officer, John Priggen, who is attending from the U.K. Also with us today are Grant Taylor from our auditor, Ernst & Young, and Toby Sharpe from our solicitors, Bell Gully. I'd like to take this opportunity to thank our auditors and lawyers for the work they've done for Gentrack. The company secretary has confirmed to me that the notice of the meeting has been sent to shareholders and other persons entitled to receive it. The company's constitution describes a quorum requirement of 3 shareholders having the right to vote at the meeting. This requirement has been met. On that basis, I am pleased to formally declare the meeting open. Details of proxy voting are now available on the screen. I'd like to thank shareholders for their participation in today's meeting. My fellow directors and I, other than myself in respect to Resolution 1, Gary Miles in respect of resolution 2, and Stewart Sherriff in respect to Resolution 3, due to our interest in those resolutions, intend to vote all discretionary proxies we have received in favor of the resolutions as set out in the notice of meeting. The financial statements for the 12-month period to 30th of September 2023, together with the auditor's report, are set out in the company's annual report. The annual report was made available on Gentrack's website in December. Let's look at the agenda. The order of events for this morning meeting will be the Chairman's introduction, which I've just done, then the addresses to shareholders, we will take questions and then go through the resolutions. Voting on all the resolutions will be conducted by the way of a poll, and you'll be able to ask questions online through the virtual meeting website. I encourage shareholders who are attending online, to send their questions through as soon as possible, please. We'll now move to the first agenda item, which is my Chair's address. Gentrack delivered impressive growth in revenue, EBITDA and cash in the 2023 financial year. We continue to win new customers, including our first contract signing in the Middle East, as well as delivering against recent wins and expanding services with our existing customers. We have strong net people growth, with staff turnover during the year at an all-time low, and at the same time our employees are highly engaged and recommending Gentrack as a great place to work. Finally, we are proud to be working with leaders in the sectors we serve and help them innovate and move to sustainable solutions. Strong revenue results were driven by a 36.7% increase in the utilities business to $147.9 million for the year. Our underlying growth in the utilities business, excluding insolvencies, was up by 47% over the financial year '22 number. Bulb and other U.K. insolvencies represented 27.6% -- $27.6 million of financial year '23 revenue. We do not expect further revenue from these customers in financial year '24. We believe that the historical occurrence of supplier insolvencies in the U.K. B2C energy sector is no longer a material threat to our customer base, as many of the weaker players have exited and the U.K. regulator has instituted a more business-friendly regulatory approach. The Veovo airports business also grew strongly, with revenue up 21.3% to $21.9 million, with growth in both recurring revenues, which was up 15.8%, and nonrecurring revenues up 32.2% (sic) [32.9%] over the financial year '22 number. EBITDA performance was at $23.2 million, $15.1 million higher than it was in financial year '22. EBITDA growth has been achieved while continuing to invest in strategic R&D and increasing our sales and marketing spend to support international expansion. With strong cash conversion from EBITDA, net cash at the 30th of September 2023 was $49.2 million, an increase of $21.8 million over the end of the last fiscal year. As a result of this strong financial performance, financial year '23 marks a return to an NPAT profit of $10 million against a loss that we've made in the prior year. Our underlying growth in utilities is a result of doing more with both new and existing customers, particularly in the energy markets that we serve. In November 2023, we were pleased to announce that Genesis Energy selected our new g2.0 solution with Salesforce's Energy and Utility Cloud embedded. Genesis' decision to go with g2.0 is a strong vote of confidence for our product investment strategy. It also creates the opportunity to sell this market-leading product to new customers looking to modernize away from legacy systems as well as to upsell it to our existing customer base. In March 2023, EnergyAustralia went live with Gentrack to launch its innovative groundbreaking product, Solar Home Bundle, on our distributed energy management solution. This exciting solution is at the forefront of how people worldwide will generate and consume electricity in the future. In the U.K., we have added 3 more customers for our managed services offering, where we help customers deliver improvement in their operational excellence and cost of sale. These are just some of the examples of how we work closely with leaders in our core markets to modernize their businesses and help them meet sustainability and cost targets. In November 2022, we announced our plan to expand our international footprint beyond our core markets of the U.K., Australia and New Zealand. During 2023, we offered -- we opened an office in Singapore, and we've grown the local team there to support the migration to our platform at one of Singapore's energy retailers and to target new business in the wider Southeast Asian region. We've also built our European business development team based at our London office and are pleased with the business development activity across Europe. We're making good progress in building a qualified pipeline across several countries in both those regions. In 2023, we established our Middle Eastern regional hub in Saudi Arabia, and booked our first utilities contract win there in October, covering both energy and water. This win, where we will be working alongside Salesforce, demonstrates the strength of this relationship, an essential part of the g2.0 platform. To support growth in both our core markets and in new markets, we have invested in building out our center of engineering excellence in India. We opened our Pune office a little over a year ago, we now have over 100 people there. The aviation recovery has gone from strength to strength. Many airports are at or near to prepandemic passenger travel levels, driving a strong demand for digital transformation that can bring improved passenger experiences and a better operational experience. For Veovo, this has meant new Tier 1 and Tier 2 customers in the Middle East and in Europe, strong demand for upgrades to our latest platform for Aero-Billing and Airport Operations from current customers, as well as expansion of opportunities for passenger flow solutions at several of our major customers. We believe that these contract wins, combined with the strong pipeline we have built over the last year in Veovo, sets us up for another year of vibrant growth in financial year '24. Our first customer migration to g2.0 and our first wind in the Middle East in both utilities and Veovo are both important strategic milestone. We continue to build our pipeline in Southeast Asia and in EMEA and to sell new products to new and existing customers. We're excited about the transformation required by the industries we serve and the opportunity that that represents for us here at Gentrack. For airports, we are seeing pent-up demand being unleashed in modernization programs that are now following through into contract wins and upgrades. For utilities, no other market requires the level of modernization that the IT systems in both the energy and water markets require. Our new g2.0 solution is now established. We have the delivery track record to make customer transformations that are necessary and make them successfully. And we have positioned Gentrack as a leader in innovation. It's an exciting time to be in these dynamic markets. On closing, I'd like to thank our customers and shareholders for their continued support and the entire Gentrack team for their achievements this year and their commitment to Gentrack's future. Thank you for your attention to my Chair's address. We'll now move to the CEO's address from Gary Miles.

Thank you, Andy. As Andy mentioned, I'm in Asia at the moment. I'm actually in Singapore, where I'm visiting our people, our customers and our prospects. It's great to be out here. Everything is good about it besides maybe the hour. But anyway, it's fantastic to be here at the ASM. I just want to say that, as we mentioned in the November financial update to the markets, that we started the year strong with the Genesis and Neom wins. We recently closed our Amber win alongside our investment in Amber. For those of you that are in Melbourne, there was a pretty volatile markets recently and some energy price spikes and Amber navigated that very, very effectively. Some of the Amber customers making $500 on the day. So I think that resilience plays well towards the thesis for that investment. I would want to underpin that I remain very confident in our industry that we're in, that it is transforming. The competitive landscape is still something that we're really comfortable with, although we take seriously. Our pipeline is progressing. And I think we're going to have a -- I look forward to having a continued long-term success of the business as we transform it. Andy gave a lot of the details, so I won't go into those here on this call, other than to say that I want to thank our investors that have been with us for quite some time. We have several new investors also that have joined our register. Welcome those. And prospects that are looking to join us. So we look forward to that, and we look forward to continuing to transform both the utilities industry of water and energy and airports. So with that, I'll hand back over and say thank you once again.

Thank you, Gary. We'll now move on to questions. I'd like to give you the opportunity to ask questions, whether related to the presentations, the financial statements or the management of the company. You can continue to provide questions online, but we will first address questions already submitted. If we run short of time and unable to answer your question online today, [ we'll turn to ] the formal part of the meeting business and endeavor to respond to you after the meeting. So over to you, John. Have you got any questions online?

We have not received any questions from shareholders online.

You have further opportunity to ask question against each of the items, the ordinary resolutions as we go through them. But I'll move on to those ordinary resolutions. If you do have questions, please do submit them. So ladies and gentlemen, we now come to the formal part of the business, matters requiring resolution, which are outlined in the notice of meeting. You may ask questions on each matter being put to shareholders through the Virtual Meeting website. Now moving to the resolutions. I propose to call a poll on each of these resolutions. As I mentioned, shareholders will be able to cast their vote using the electronic voting card received when online registration was validated. To vote, you will need to click Get Voting Card within the online meeting platform. You will be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by ticking For, Against or Abstain on the voting card. Once you have made your selection, please tick Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or use the help line on 0800-200-220 if you're in New Zealand or +64 99-67-7751 if you're outside New Zealand, should you require assistance. Voting will remain open until 5 minutes after the conclusion of the meeting, and the results of the vote will be announced via both stock exchanges this afternoon. Each resolution set out in the notice of meeting is to be considered as an ordinary resolution, and as such, must be approved by a simple majority of the votes passed by shareholders entitled to vote and voting on the resolution. The outcome of proxy votes will be displayed for your information on the slide for each of the resolutions. As I'm personally involved in the next agenda item, I'm going to hand over the Chair to Fiona Oliver for the next item.

Thank you, Andy, and good morning. The first resolution this morning is related to the reelection of Andy Green as a director. Andy Green joined the Board as a Non-Executive Director in November 2020. He retires by rotation and offers himself for reelection this year. Andy's credentials are set out in the notice of meeting. I now invite Andy to address the meeting on his proposed election, which is in the form of a prerecorded video.

Hello, I'm Andy Green, and I've been Chair of Gentrack for just over 3 years. I'm pleased to put myself forward for reelection at today's meeting. Over the last 3 years, the Board have supported the management in reenergizing Gentrack and creating growth despite the turmoil in the U.K. energy market. We are now focused on setting Gentrack on a sustainable growth path, taking advantage of the global shift to green energy. I've been working in the global tech sector for many years, formerly as a CEO and more recently as a Chair and Non-executive Director. I also advise the U.K. government on long-term infrastructure policy. I hope to bring my understanding of global markets, my passion for the green energy transition and my long experience as a Chair and Non-executive Director in many markets to bear on our journey. I would be delighted to serve a further 3 years if that was the wish of shareholders. Thank you.

The Board has determined that Andy is an independent director for the purposes of the NZX listing rules. Andy himself has also determined that he is independent in accordance with the new provisions recommended by the Corporate Governance Code. The Board unanimously supports the reelection of Andy. I now propose that Andy Green be reelected as a director of Gentrack Group Limited. Are there any questions for the Board concerning the motion from shareholders in attendance [ of ] online?

There are no questions on this matter from shareholders joining online.

Thank you. Please now select either for, against or abstain for resolution 1 on the voting card. [Voting]

I now hand the chair back to Andy.

Thank you, Fiona. And we now move on to Resolution 2, the reelection of Gary Miles as director. Gary Miles joined the Board as Managing Director in October 2020. He retires by rotation and offers himself for reelection this year. Gary's credentials are set out in the notice of meeting. I now invite Gary to address the meeting on his proposed election, and again, it will be done by video.

Hi. My name is Gary Miles. I'm standing for reelection as a Gentrack Board representative. I've served on Gentrack's Board for 3 years. I think we've achieved a lot as a Board team, but we have amazing things to do in front of us to grow and scale this business globally and to continue to provide long-term value for our shareholders, our people and our customers. And so I would like to get your support for this next term in Gentrack, and we look forward to delivering continued long-term value. Thank you.

The Board unanimously supports the reelection of Gary. I now propose that Gary Miles be reelected as director of Gentrack Group Limited. Are there any questions for the Board concerning the motion from shareholders in attendance online?

There are no questions on this matter from shareholders joining online.

Thank you. Please now select either for, against or abstain for resolution 2 on the voting card. [Voting]

We'll now move on to Resolution 3. Resolution 3 is the reelection of Stewart Sherriff as a director. Stewart Sherriff joined the Board as a Non-Executive Director in 2020. He retires by rotation and offers himself for reelection this year. Stewart's credentials are set out in the notice of the meeting. I now invite Stewart to address the meeting, again by video, on his proposed election.

Good morning, everyone. I've been on the Board of Gentrack now for just over 3 years. I also served on the People and Culture Committee. It really has been an exciting journey, what with the opening of new offices in India and Singapore and then also the development of our new product, g2.0, soon to be deployed in New Zealand. But to me, the biggest unsung hero within the organization has been the transformation of the culture. I'm a huge believer in great culture leads to great results. And so if I'm reelected, I would continue to strive to create an environment that allows everyone to reach their potential within the organization and contribute to the success. So I'd like to thank you in advance for endorsing my nomination for reelection for another 3 years. Thank you.

The Board has determined that Stewart Sherriff is an independent director, and he himself has done so as well for the purposes of the NZX listing rules. The Board unanimously supports the reelection of Stewart. I now propose that Stewart Sherriff be reelected as director of Gentrack Group Limited. Are there any questions for the Board concerning the motion from shareholders in attendance online?

There are no questions on this matter from shareholders joining online.

Thank you. Please, would you now select either for, against or abstain on the voting card. [Voting]

We now move on to Resolution 4, the final resolution, which is authorization to fix auditors' remuneration. Resolution 4 concerns the remuneration of Gentrack's auditor. The Companies Act of 1993 provides that Ernst & Young continue in office as auditor. However, a resolution is required in respect of their remuneration. Details of the proposed resolution are outlined in the notice of meeting. I now propose that the directors are authorized to fix the remuneration of Ernst & Young as auditor of Gentrack for the ensuing year. Are there any questions for the Board concerning the motion from shareholders in attendance online?

There are no questions on this matter from shareholders joining online.

Thank you, John. So thank you. Please, could you now select either for, against or abstain for resolution 4? [Voting]

That concludes the formal part of the meeting. You should now have submitted your votes, but if you haven't, there's 5 minutes grace period at the end of the meeting. Ladies and gentlemen, we thank you for your attendance at Gentrack's General Meeting and for your continued support of the company. We'll be announcing the results of the formal business of the meeting on the stock exchanges later today. I now declare the meeting closed.