Gentrack Group Limited (GTK) Earnings Call Transcript & Summary

Hi, everyone. I think we're on air. They've given me a little script to read, so I'll do it. So I'm Gary Miles. Welcome to our HY '25 half year results presentation. Online attendees can submit a written question at any time by clicking the Ask a Question button on your screen during the presentation and phone attendees can listen and ask questions during the meeting. Your questions will be answered at the end of our presentation. So welcome, everybody, and thank you for your interest and attendance. I'll jump right into it. We're here in Melbourne, actually, and I'm happy to be in Australia, where we continue to have great engagement with our customers, 22 customers in the country. I just came out of New Zealand, where we've got a lot of exciting things happening. So I'll start with the financial headlines. Revenue was up 9.8% to $112 million in the half year. I think you can see this here. We're most pleased that recurring revenue was up approximately 17%. So as we put more emphasis on the recurring revenue elements of our business, I think this is a good achievement and an intentional one. I want to call out specifically that our Airports division had another fantastic year. The growth 24% for Veovo. I mentioned before that the airports are moving to Airports 4.0 and transition and digitizing and modernizing. And I think we're setting not only a global pace there, but a vision for where airports are headed, and they look to us to help them on that journey, which is fantastic and once again, moving into the larger airports and the larger utilities as part of our results, and I'll talk more about that. So EBITDA 5.1% in the period. NPAT had an excellent result, up materially to almost 35%. And then I'd like to just close on the cash element of the business. Once again, cash is a sign that the company is performing well, that we deliver value so we can invoice our customers. We know how to run projects well. So we don't get hung up on large unbilled and then we can collect our cash because we have good customer engagement, relations and value. So a fantastic result on the cash side. So those are the headline numbers for the year. John will go into them in more detail. We'll jump to the next slide, which is the outlook for the year. So for FY '25, we expect revenue to be at or above $230 million and our EBITDA margin to be above 12%. As we have said very clearly in the past, this is a year of transition as we expand out of our core markets into Asia, the Middle East and Europe, building on early wins in those new territories and our pipeline is strengthening and maturing. With our global leadership ambitions, our proven track record and the market potential as the industry transforms, we remain confident of our midterm guidance of growing revenue more than 15% CAGR and EBITDA margins of 15% to 20% after expensing all development costs. So that's the outlook, and we'll surely have questions and talk more about that. If you go to the next slide, we are a purpose-driven company. Our vision is to accelerate the world towards a net zero future by leading the global modernization of energy and water retailers. It is essential that these retailers modernize their IT stacks that support smart meters, time-of-use charging, battery assets, et cetera. They cannot meet green targets if they don't have systems that support these types of services, and we're moving from an industry that was for about 30 years very static on the IT side and is now on the move to transform. And as it transform, we believe that 3 or 4 players will have a hyperscale stack and to be able to have global reach and scale and delivery capabilities, and they will capture this modernization event that's happening over the next 10 to 15 years and be able to amortize the software over 300, 400 utilities each. So that's -- our ambition is to be one of those leaders and to help the energy and water industries transform, which they are in need of help. If you go to the next slide, how are we going to do this? So if you're one of our investors, you've seen this before. We have a modern stack from all the way from the meter to the call center to the agents and the automated agent interaction with customers, whether they're individuals with EV in the garage, powering maybe their house and getting power from the grid to solar and battery on the side of the home, all the way to hyperscale major, major industry players like smelting plants and other things that require enormous amounts of energy. Same for water, as the industry moves from kind of dumb meters to smart meters and better per capita consumption and better water leakage detection and usage and understanding the value of this precious asset and also to engage with communities better, they need a modern system. So g2.0 is resonating very well. We've got some questions about some of our deployments that have already come in around Genesis and others, which we'll come to. I would like to say that it is designed as a global stack. We know how to deliver it. We've actually never failed a delivery. And the industry is -- unfortunately, has some failed delivery programs, which are not healthy for the industry. But we know how to do it, and we like to do this with our strong partners of AWS and Salesforce and other key partners, SI and consulting partners that we lean on in the market. So if we go to the next slide, in terms of customers, obviously, customers are the heart of our business. We are fanatic about trying to service our customers well. I think that we are a very capable partner in this regard. Some of the customer success, one of the things that's really important for our customers is they have a strong brand. It's a competitive marketplace in most of the places where we operate, so the retailers have competition. So being at the top of the league tables for customer excellence is very important for our customers. And if you have a bad system that runs their operations that bills wrong or gets meter reads wrong or doesn't provide seamless transfer from one utility to another or bad experiences in the call center, it hurts the brand, it leads to churn. And our customers are growing and they lead in the league tables in really all of our core markets. You can see the 3 countries here. Last year for Citizen Advice. Ecotricity for 2 of the quarters, which is a customer of ours was #1. The last 2 quarters is Utility Warehouse, which is a new customer of ours, which is #1. Red Energy continues to be #1 for most trusted. They're actually, I think, the only utility brand in Australia that's in the leading 100 brands of Australia across all industries. And then Frank is a brand with Genesis. By the way, Frank is the first part of Genesis to go live this winter in the Southern Hemisphere, and this summer in the Northern Hemisphere. So -- and then on regulatory compliance, there's a -- the regulator is doing a lot of things. Let's talk about Australia specifically. The regulator is doing a lot of things to protect vulnerable customers, is pretty active in this regard. Fines are significant. We've seen them. If you take the top 4 suppliers in Australia, one of which is our customer, our fines are 17x to 20x less than their fines. The others are 17x to 20x higher than we're seeing. We're able to keep our customers in line with what the regulator is intending to do and to take care of the markets in which they operate, which is really important both to the financial well-being of the retailer as well as the brand of the retailer. On customer renewals, upsells, look, you saw our 17% growth in recurring revenue. A lot of it is about doing more, renewing with more value so -- and securing our customer base for multiyear projects. So we have a lot of fantastic renewals, which you can see here. We have renewals every half year period, but we've called out because we had quite a few this section. And then we have some exciting new projects. We've now landed Amber and Ecotricity, which is the second now energy supplier in the U.K. So there was E.ON in the U.K. and now Amber. Some new fun projects with npower, which is a very stellar flagship large customer of ours. Npower represents about 17%, 16% of the U.K.'s GDP with Power Solutions and some other projects which we have here, which I'm not going to go into detail. London Gatwick, by the way, is about integrated airport control and queuing and passenger flow and more things around Airports 4.0. So we put that up. Now Utility Warehouse is a new customer in the billing segment. Utility Warehouse was a customer of ours for our managed services. Now they're a customer for our mainstream billing stack. This does not include the CRM component because they are the multi-play leader probably worldwide, which means they sell mobile, insurance, broadband, energy. It's a really interesting business model, but they have a multi-vertical CRM on top of that, but they're taking our stack to keep their energy business at top of the league table. So that's pretty exciting. So that's an approximately 2 million meter point installation in the heart of a very competitive landscape in the U.K. Obviously, they looked at all of our competitors, and we won that business based on our capabilities. So some really great customer momentum. If we go to the next slide, and I know people are keen to get to the financials with John. But I do want to say that this slide is somewhat abstract, although a lot of people talk to us about the market size in which we operate. So you can see at the bottom on the right that we estimate the worldwide total addressable market estimated at about NZD 17 billion, and we've triangulated that number from several sources. What's interesting is how it will transform. And we took a very clear case study from the United Kingdom, where in 2015, about 90% of the utilities were on legacy and now less than 10% on legacy. So if the rest of the world follows this journey, and we do think the legacy systems, although they're supplied by very capable, long-running vendor technology companies, they are multi-vertical stacks, meaning they support not only energy, water, but manufacturing, government, health care, health sciences, et cetera, telecom, et cetera. We believe they are a sea anchor of change on the industry. The industry needs to go to -- because the industry is rather unique in some of its requirements needs to go to special platforms like ours that are leading this transformation. And you can see the number of utilities that we believe are the addressable ones. By the way, this is not all the utilities. There's a lot of water suppliers that are in municipalities and things that we did not include here. But this is the addressable market that we're going after right now. Obviously, the world, as we see it, is the addressable market, and we plan to be a global leader, as we said in our purpose. So -- but one step at a time, and we really want to focus and get momentum in these markets, which looks strong, and we'll talk more about that, I'm sure, in the Q&A. So if I think that is -- if we go to the next slide, I think that kind of sums it up on the core Gentrack side. We did have a slide on Amber. It's important to -- we made an investment here. We like to make more investments. Generally, we prefer to do acquisitions than minority investments. But since Amber is a retailer in the U.K. also and a technology company, we were interested in working with them for their technology. Their technology is exceptional. So they've now launched some EV products for vehicle to grid, which will be an amazing acceleration of uptake. The other thing that's happening is in Australia in the core market, there's new subsidies coming on, the new government, et cetera, supporting battery type of assets. This will be very good for Amber and their Amber uptake of their own utility service. But from our perspective, how it helps us win more deals, influence the industry, drive sales. We see the Ecotricity win, which I spoke about, which is a great win. We are engaged with them on several of our pipeline and our upgrade opportunities. You can see they are a Canstar Innovation of the Year award winner, really a good management team and a good vision and good, strong capable products. So we look forward to continuing to stay close to Amber and help them as they help us. So I think that's the closure. I'm going to hand over to John to go into more details on our financials. Thanks, John.

Thanks, Gary. So looking at the group's profit and loss account first. So the group's revenue is up by almost 10%. And the call out there really is the strong growth in recurring revenue, up nearly 17%. Now for our EBITDA, we've set out the margin both before and after our LTI costs. So it's a similar style of presentation that we shared back in November for our full year last year. And what we can see is that the margin before LTI costs, that's 17% versus 18% in the prior year. The reduction is really because we're investing a lot more in sales and actually in our product. And I'll talk a little bit more about that later in the presentation. In terms of those LTI costs, so the accounting charge for share-based payments for LTIs, as we guided, that's lower than the prior period. And the full year charge will be lower than last year's full year charge as we guided before. In terms of the payroll tax, in last year, we actually booked around about $7 million against these costs. Now all but a small amount, all but $700,000 of that was booked in the second half of last year. And this means that when you compare this half against the first half of last year, you see an increase. But just to reaffirm, we expect the full year charge to be lower than last year's full year charge. And we expect it to then drop as we roll into the following year in financial year '26, but we still think it will be less than 1% of revenue. Our profit after tax, our NPAT, that's up almost 35%. I call out a few of the pieces here that fall below EBITDA. So in terms of Amber, that's -- we account for that as an associate company because we have a 10% equity stake. And our share of the loss at $1.1 million in this half year, just to note that, that's for the full 6 months, whereas it's comparing against only 2 months in half year '24. Our investment was on, I think, the last day of January in 2024. Now you heard a little bit about Amber's momentum. They're investing in their strong growth. So we'd expect a similar charge in our books to what you see in the first half of the year in the second half. Gentrack benefited from about $2 million of ForEx gains when you consolidate its intercompany balances, the overseas subsidiaries have back with the New Zealand parent. And that's because of the depreciation of the New Zealand dollar across the period. I think a call out is also the income tax. So that's roughly 1/3 lower than it was in the prior period, even though profit before tax is higher. So our effective tax rate, so the tax charge divided by profit before tax, it's around 21% this half year. That's far lower than the statutory rates of the main countries we operate. So U.K. is 25%; New Zealand, 28%, Australia, 30%. It's also a lot less than our effective rate in the prior year. Now the reason is we're getting a benefit from the vesting of shares under our LTI schemes. They're vesting at higher prices than the accounting values. And in New Zealand and in the U.K., that's deductible for tax purposes at the price they vest at. So that's given us a real tax benefit. We'll pay less tax as a result. And we should expect to see our effective tax rate be lower for the full year. So if we move on to utilities. So looking at the revenue in the Utilities business, it's up around 7% in total over the prior period. And that sort of splits between higher recurring revenues, showing the prior period wins, projects, upgrades, et cetera, they do flow through into our recurring revenue year after year, and that's what we've seen in the first half of this year. Now the overall impact of that is partially offset by lower nonrecurring revenues. They're 12% lower, and that really reflects quite a high level of project work in the first half of last year and actually the variable nature of such revenues. However, we do expect strong levels of nonrecurring revenues going forward, as you can see from our outlook, both from established and from new customers. Moving on. We show a little more analysis on that revenue in the Utilities business, similar style and consistent with the way we've shown this before. I think just looking at the regional revenue mix, you can see that the half year has seen continued growth in the U.K. and in Australia. In New Zealand, when you compare it to the first half of last year, it's relatively flat. The Genesis upgrade is an important project in that part of the world, and that upgrade spans last year, this year and rolls into next year as well. The rest of the world includes Saudi Arabia, Singapore and the Pacific Islands. And this year also now includes the Philippines, which is starting to give some revenue. It's relatively flat compared to the first half of last year, just the timing of projects overall, I think, between different halves. This is an area that we do expect to see a lot of growth as we go forward into next year. Turning to Veovo. Veovo has had a very strong start to the year, so 24% growth over this time last year. And that's been driven by wins in the U.K., such as Manchester and Stansted airports, and the Middle East as well as upgrades in the APAC. So we're seeing higher recurring revenue, 14% growth over the prior period. So again, we're starting to see those wins of prior periods flowing through into recurring revenues. That's a feature of our business in both utilities and in Veovo. In the Veovo business, we've also seen very strong nonrecurring revenues. They're up actually 34% compared to the first half of last year. So continued strong levels of project work, a large backlog of work that we've got from wins that sort of came across during the course of last year. I think what I'd note is that in the first half of this year, there's a similar level of hardware embedded within that sales as in the prior period. So we have hardware sales, for example, our passenger predictability software as part of the overall solution that we supply to our customers. The reason I call that out is just that, that can be quite variable from half to half, $3.6 million, $3.8 million, they're relatively high levels. Turning and looking at the cost base. In our Utilities business, where we show the walk between the operating costs in the first half of last year to the operating costs this half year. Our direct costs, so engineering, hosting, those sorts of things, that's increased by $3.5 million to support higher revenues. We've increased our investment in R&D in our product. We're actually spending a higher percentage of our utilities revenue in this half year. It's closer to 16%. And I think if we look at the first half of last year, it was close to 14%. That's a $2.5 million increase. We've also increased the amount that we're spending in sales and marketing. That's gone up by $1.3 million compared to the first half of last year. Now that's really -- I mean, that's really a consequence of the very high levels of sales activity that we're seeing in this first half of the year in terms of our current pipeline. Moving across to the group's cash flow. Cash at the end of the half year, $70.7 million, around about $4 million higher than the start of the year, and actually compares to $39 million this time last year. So a big rise over those 12-month period. I wanted to try and sort of call out the sort of the half 1, half 2 dynamics of our cash flow. We said something about this, I think, in the first half of last year as well. But the first half, we expect to see a working capital cash outflow in our business, just the dynamics when we pay staff bonuses, commissions, the payroll taxes on incentive schemes. And what that means is in the first half, we have a working capital outflow. But in the second half, we actually have a working capital inflow. We don't have those payments, but we're accruing those costs into our P&L. Outside of that, other working capital movements is pretty flat in the first half of FY '25. So capital movements on receivables, trade payables, et cetera. I mean that can sort of be a little variable, plus or minus a couple of million or so. But in the first half of this year fairly flat. And the other call out we have here is that holding cash in subsidiaries overseas, in the U.K., et cetera, has given the group a ForEx benefit of $3.7 million when you convert that back to our reporting currency in New Zealand dollars. So what do we expect to see in the second half of the year for cash? We're likely to see a working capital inflow because of that -- the half 1, half 2 dynamics I just described. We'll actually also see lower tax payments. Our tax payments are in financial year '25 very much first half weighted. They'll probably be half as much as you've seen in the first half of the year in the second half, whereas other items -- outside of ForEx, other items are likely to be pretty similar to the first half of the year, maybe slightly favorable. So that's the group's -- that's running through the group's results. Now just before I hand back to Gary, we do also have -- and I'm not going to go through them on this call, we do also have the standard slides that we share in our presentation in the appendix where we show the -- what our revenue and EBITDA would have been had last year's foreign exchange rates being the same as this year's. And then we also show how the revenue and the way we describe it in this presentation in terms of recurring, nonrecurring, et cetera, how that then maps back to the way that we describe revenue in our financial statements. So with that, I'll hand back across to Gary for his closing remarks.

So as we stated, a year of transition as we move also into the international markets where our pipeline continues to strengthen and mature. We have achieved growth in our base actually since I've been in the business and secured exciting new projects like Utility Warehouse. We target to announce new wins in the second half of this year as g2.0 gains momentum. I'll say here that the way we generally work is we are selected and we sign a scoping agreement, and we start to work on trying to nail down the details of a project transformation, and then we use that to secure a long-term contract on the back of that scoping. So we have some scoping projects in play now, which gives us confidence in the g2.0 and our plans and our ambitions. At a time of increasing global uncertainty, the energy and water industry is a good place to be. I think we all see what's happening around the world and things are slowing down. We don't see a slowdown really around this -- our area for transformations because utilities need to keep transforming and the addressable market is very significant, as we showed on the prior slide. And then the Veovo airports business continues to perform exceptionally well, delivering on its backlog and targeted new wins. So we are investing more there. We have a strong balance sheet and we'll assess M&A opportunities continually as they arise. We're in a position to be able to absorb companies into Gentrack and get that scale and capabilities. And then I would like to say that we -- I think we have an exceptional investor register. We appreciate that the register is growing and continuing to have confidence in us, and we're glad that you are part of this exciting and purposeful journey. So with that, I think we reiterate our midterm guidance, and we'll move to Q&A.

[Operator Instructions] And your first question comes from the line of Guy Hooper at Jarden.

Can you talk a little bit about some of the dynamics at play in the project work? I mean I think you've talked previously about being able to plug sales gaps with upgrade work from the existing customer base. I mean, is there an element that some of the projects you had going maybe required greater resource and therefore, limited other scope to carry out additional projects? Or was there sort of some other dynamic at play around the upgrade opportunities?

So look, thanks, Guy. First of all, what we did say, and thanks for recalling that is that over the next 5 to 7 to 8 years, we will upgrade our base to g2.0, and that will be a bit of a shock absorber for, let's say, as you win new projects, you have some lumpiness in your nonrecurring revenues, so we can plug some of those with upgrades that are smaller programs. And I think that will be a really strong tool for us. But we also said we're not really pushing g2.0 hard through the whole base just now because we want to harden it and deploy it well. Genesis is our first deployment with the Philippines following shortly thereafter. In terms of added investment, we never really went out and raise capital to build g2.0. We've been building it on the P&L of the business. I think it's been a very good execution. As we're deploying Genesis, we are putting more resources in making sure that we land that successfully. And that's part of landing any first hyperscale program in a good, solid way and where we stay close to our customer and they continue to recognize and provide references for us and have confidence that we will deliver. So that has been an element in the first half of the year. We don't expect to see that continuing, obviously, as g2.0 gets more and more productionized in customers.

I guess that leads us to just, I guess, as you've hardened that product and some commentary just earlier about in scoping potentially with g2.0. I mean what can you say around that? Is that with new existing customers or in or outside core markets? What additional color can you give there?

So we'll try to say a few things in this call. And then I think through the week, we'll probably get questions from every possible angle around this point. So I'd like to try to address as much of it in this call as possible. We have some scoping in our core markets, and we are scoping outside of our, say, our target growth markets. But we -- it would be -- anyway, we don't plan to talk about the specifics of those until we contract them. That's just the way we roll as a company. So yes, we just want to be sure about things and then publish it.

Yes. No, fair enough. Maybe just one last one for me then. The Bulgaria example where you've been hiring resource, I mean, can you just talk a bit about, I mean, how you resource up a new market and like at what point of the sales cycle you'd look to hire in market?

Yes. So let's leave Bulgaria aside. I think if we're doing anything outside of kind of New Zealand, Australia or the U.K., then we will obviously need to have some local resources to deploy that project, maybe a small number to scope it, language dependent. And also, each deal is a little bit different. So what is our partnering approach? Is somebody priming us, that they're taking us in that have a strong local team? Are we using a boutique, let's say, Salesforce shop that's local, that's underneath us. They're all a little bit different. We have experience doing both or 3 or 4 permutations of that. It's kind of horses for courses, you have to play to win with the partners and dynamics in the market and the price point and what the customer would like to do. But anyway, you would need a small number of people to implement scoping. And then once you turn on the project, there's a bit of a surge for about a year to run the project. Thanks, Guy.

Your next question is from the line of Cameron Halkett from Wilsons.

Gary, John, can you hear me okay?

Yes.

So first question, 2 parts to it. Can you talk, I suppose, on deal progression over the financial year-to-date, particularly like the Utility Warehouse renewals, potential opportunity in Bulgaria, have things largely gone to your expectations back at November? The second part would be around the commentary on announcing deals in the short term, should we take that as because you have to for materiality or exchange purposes? Or just to help us around color and the timing of things this year?

Okay. So maybe John will take the second half of that question. I think that's fine. So for those that may not have been with us, we did not provide guidance in November. As we said that it's kind of -- it's a year of transition as our having gone out internationally 18 months or 12 months or so before and then that pipeline matures. This year was really a question on whether deals would come in earlier on in the year, so we could get revenue from them or later in the year. And that's not always in our control and things usually take a little bit longer than expected in these big decisions. So we didn't really talk about that in November with our saying this is going to happen or that will happen. We wanted to be really kind of clear with the market and not overextend ourselves from that perspective. I would say that things have happened. First of all, the Utility Warehouse mentioned is a renewal. It's a complete new billing system win. Just to be -- I mean, it's an important win in a really competitive market with a leader also in the B2C space in the U.K., it's a really important win. It's the service -- the managed service business that we had prior has helped us because we have relations, but it's a totally different thing over there in that shop. So that's important to clarify. Look, once again, we -- the competitive landscape of players that can transform this industry is relatively small. We are a capable company with great technology and outstanding results for our customers. And we think as we get more and more g2.0 deployments, this will play out. So we're bullish. We're doing more with Salesforce. And just to be kind of more applicable, Salesforce is doing more with us. They're showcasing us more and more around the world and particularly in our core markets and bring us leads. So that's why we are comfortable with the midterm guidance, and we just need to keep doing what we're doing and hope the industry just presses on. Yes.

Cam, if I answer just the second part of that question. So in terms of disclosure, I mean, for every contract, we consider our sort of market disclosure obligations. I think you can see that where we think that's appropriate, we'll make a disclosure. And if it isn't so appropriate, if it isn't appropriate, we won't. Look, when it comes to -- Gary talked about scoping contracts or scoping sort of work that we might do in advance of securing a longer-term deal. They're not necessarily large in themselves, but they're very important part of the process because it gives you increasing levels of confidence and it's the way that you build up to larger, more material announceable sales. So I think that's really the way that -- that's really the way to look at whether we're able to come out at various points with announcements or not. Cam, does that answer both of that?

Yes, more or less. If I just turn to your medium-term guidance, I suppose your confidence in this revenue CAGR, the guidance this financial year, you're at as low as 8% growth year-on-year and you think you can get to 15% CAGR over a midterm horizon, that would imply the '26 and/or '27 comes back strongly. Is this what you're comfortable implying, I mean, that statement in the market?

Yes. I mean we've been -- if you take the prior 4 years, it's been approximately 26% growth over the 4 years despite some headwinds we had from the U.K., some insolvencies in the U.K. due to regulatory issues. So we like the market in which we're operating for those macro dynamics we talked about. But once again, you come out with a new stack, you go to a new territory, this takes time, and that's what we've been going through, and that's what we plan to execute against.

I'd just add to that I think. So look, making -- I think we're sort of on track to make the sort of progress in terms of closing the number and type, et cetera, of deals that we were hoping to. I think less of that we'll see in this financial year in terms of the revenue impact. But it doesn't actually change or distract from the benefit that sets us up for in years to come. Whether we secure something at the start of the year or close to the end of the year has a big impact on this year financially, far less so when we roll forward. And that's what it is that's given us the confidence.

The other thing just -- just the other thing that I think is also important to say is, obviously, as a recurring capital type of business, the -- just our starting point each year just gets higher and higher. So obviously, that's the nature of the beast, but we are putting emphasis on that as well. Please go ahead.

Yes. Yes. And I'll just add and lastly, I suppose then with the EBITDA midterm guidance side of the equation, if the pipeline continues to remain full and buoyant and the new opportunities replace those that convert or don't go your way, would you walk back the 15% to 20% as you've shown in the past, a keen interest to keep chasing the opportunity or that 15% we should really take for growth?

So we value growth and market share. First and foremost, at this moment, I think that as the industry transforms, momentum, scale, leadership, all of it is kind of compounding. And we value that. So if we decide to invest more in sales and marketing or new markets or technology, then we will be clear about our intention to do that and the impact it will have. What we've said several times this is important for us to get some kind of some of these proof points internationally. And you also -- there's a cadence in which you make those investments or let's say, a sequence that would make most sense. We do look at this with the Board. We had some strategy sessions last week, for example. So I think right now, we'd prefer you to just take the guidance as is. But if we had higher revenue, we may look at that in light of the margin expansion that gives us more room headwind anyway to spend more money.

It is important just the fact that, again, our LTI costs come down as a percentage of our revenue. So our margin -- the margin that you see in '25 is, I guess, artificially suppressed by that. And the dynamics of sort of leverage on the business as we scale are intact. I mean that's why we think it's a really appropriate range.

Your next question is from the line of Joshua Dale with Craigs Investment Partners.

Just first one on the Utility Warehouse thing as well you called it out. On the time frame for that, how much implementation falls into FY '25? There's only 4 months left or so and how much into later years? And then when does recurring revenue from that contract begin in earnest?

Yes. Look, I think for an individual customer, I don't think we want to sort of just talk numbers, the specific numbers of what our fees are to the customer. In more generic terms, look, we signed it right at the end of the first half of the year. We'll see implementation revenues in the second half. I'm sure we'll see implementation revenues in the following year. The recurring revenues really, they start to become more significant in FY '26 and beyond. That's not something that we'll get a lot of benefit from here in the second half of this year. And it's a great relationship. We hope we fully expect it to build on that and continue to grow.

And I mean, is there sort of a rough steer you can give us as to when recurring revenue on the contract will hit in FY '26? Is it more at the beginning or more at the end or halfway through?

I think it's partway through that you start to see. So -- and I think you'll start to see often recurring revenue builds up over time in terms of when it reaches its first extent won't be early on in the next financial year. It's quite -- it's not untypical of the number of contracts we have, but it flows through to recurring revenue regardless.

Okay. And just I appreciate you haven't landed this Bulgarian contract yet, but more just a broader question. Is there any detail you can provide us on country-specific variations in price per meter point? It looks as though it's fairly consistent across your core markets, but just in these sort of noncore markets do you get much variation in sort of fees you charge or competitors might charge?

So I'll take that. First of all, there's quite a bit of variation. It depends on -- it does depend on the market, like Asia, where you have very large national players and the price points are different than they are in some of our core markets for sure. That's not unique to energy or water software at all. It's pretty consistent with enterprise-grade software costing. Same thing, parts of Eastern Europe will be less than Western Europe. On the other hand, some things are easier in Eastern Europe than they are in Western Europe. And then if it's a B2C player with millions of meter points versus a B2B player with huge payloads of energy going through industrial systems is just -- it's -- so I understand that some software companies are able to translate this into some kind of forecasting metric. It's a little bit less, I don't know, standard in our space. Water is also a little bit different. So we play to win at profitable levels and try to push more towards recurring, and that's kind of how we price our software. I mean, obviously, we have price focus and things.

Okay. I mean just one last clarifying question on that point. I mean, is there any sort of magnitude in the difference you might be able to point to? Are we looking at, I don't know, very rough numbers here, half the rate of your core markets or 20% of the rate? What are we sort of talking here?

Well, once again, I mean, if you're in Asia and it's a 10 million meter point, it could be -- per meter point, it could be less than half, but you make up for it with volume. So it just kind of really -- it's just -- it would be hard to put that into a formula. Yes. So sorry not to give you. And the last thing we want to do is talk openly about pricing because our competitors also track these calls, and we have to just be careful about it.

No, that's fine.

Your next question is from the line of Jules Cooper of Shaw and Partners.

Gary, John, can you hear me?

Hi, Jules.

All right. Well done on a good result and particularly Utility Warehouse, 2 million meter points in the U.K. Long time since we've seen a good material win in that market, so well done. Gary, I just -- you've talked there about the scoping studies that you have around the world and that you've got a target to announce new wins in the second half of this year. Without getting into specifics on names and regions, can I just ask, are they of a scale that would be similar in nature to what we've seen with Utility Warehouse? Like are they the sort of scoping opportunities you're looking at? I'll just leave it there.

So Jules, look, we've said it before. We have Tier 1 customers today. We are looking to win more Tier 1 customers like Utility Warehouse because our product is a good fit for that. But we're also pretty good at deploying Tier 2 and Tier 3s profitably and making money out of that. We also mentioned that we're more inclined to go towards those that are not just retail only. They have generation assets or things so they have better profit pools. So we are -- as you saw in John's slide, our customer concentration is not -- we don't have super high concentration. We have a pretty mixed level of concentration across now, I think, 60-plus utilities in the utility space. So they're all -- we like all the sizes as long as they have money and are serious about change because we can deliver it pretty well. And with g2.0, we'll be able to -- I mean, our target, and this is aspirational and don't take this into your model but it's where we're headed. When we design g2.0 is to be able to do a transformation in half the time and half the cost. So we can charge more ARR. We can do twice as many installations with the same number of people. It's aspirational, but that's where we plan to take and mechanize our business more and more. And we'd like to do a lot of them. We like to service Tier 1, Tier 2 and Tier 3 and B2B, B2C and multi-play. And we're pretty unique in that, and we plan to go after all those segments. And so some of the scoping has a different range of suppliers in it.

Okay. Thank you for that insight. Look, Amber is going really well. We can see that the E.ON deal more recently with Ecotricity. Are you able to give us any sort of perspective on the revenue growth there? Because I think potentially the associate NPAT is not the best indicator of performance. It looks like it's going really well.

Look, their core business is performing well. And as I mentioned, Jules, I think some of the battery subsidies that are coming in Australia will just be really, really be a great accelerator for Amber Electric and their core business of retail. On the technology side, there's a lot of interest, but they also need to land that successfully in the U.K. in those 2 deployments and get a really strong reference. Both of those deployments see Amber as very strategic for their energy transition goals. And it's not like a project that's kind of off on the side. It's a pivotal part of those companies' strategy. So I'm -- our approach and their approach is to land those really well and then scale, not scale and then land. So I think that's the right sequence of things, and we're in that phase now, but there's a lot of discussions going with other retailers. So we're pretty pleased with their contribution to this program.

Fantastic. And just last for me. I think you called out utility ARR growth of 17% was a key highlight. That's intentional. Should we really expect that the ARR within the business to continue to grow match to the nonrecurring revenues? Is there any reason not to think that won't be the case? Because I think you've got a fairly good model forming that investors can now sort of observe in the financials.

Look, we would like our nonrecurring revenue to also grow really fast because it just means we've landed projects, a lot of projects that will allow us hunt today to eat tomorrow. So that's -- NRR translates into ARR. So I think that's -- that's something that -- I think the main -- we shouldn't try to track ARR against NRR. We should just try to track ARR against itself and make ARR grow and grow and grow. And if NRR is performing really well, that will translate, and that's the way we should look at our business.

In the interest of time, we will hand over to management for any written questions.

So I think we have 6 minutes.

Okay. I'll try and sort of pull out some of the ones that I haven't really covered in great depth. There's actually quite a few just asking us about Genesis and how the rollout is going there and how the migration is. Are they on track? Are they a good reference site for customers? So there's a few on -- yes, there's a few that sort of talk about the same sort of...

So let me take Genesis. First of all, I met the executive team last week together with our executives that are leading that program. We have a lot of focus on Genesis, rightfully so. We are pleased with the way the project is progressing. As I mentioned, this summer Southern Hemisphere, we should be going live with the Frank brand. Genesis is very supportive of our mutual cause. I think they see huge upside in the deployment of g2.0 for their cost to serve and their customers' satisfaction and their innovation of product road map. So they've been super helpful to us as customers call of them and we're really glad that we have the kind of relationship that allows us to help each other. Yes.

I've got a question here on Veovo from James Lindsay. Veovo had another strong period of nonrecurring revenues. Can we expect this to continue in the second half? And what does the new customer pipeline look like for them? Maybe I'll just take this one. Look, I think it's got a good backlog of work, and it's got a good pipeline of business. So we expect Veovo to remain strong. When we look at the second half, the thing that I would just call out, and I said it in the presentation, is just it was strong hardware revenue in the first half, $3.6 million, probably lower that component part in the second half. But overall, other aspects are growing. I mean -- and it's another business -- going back to, I think, Jules' question on nonrecurring revenue, it's another part of our business where you can see the direct link between the project activity of prior periods flowing through into recurring revenue growing in -- across the business. So that's the sort of dynamics we're seeing in Veovo in the second half.

The other thing that I'd like to call out for both the utilities and even probably more so for the airport business is the momentum in the Middle East, the Middle East is a growing part of the world. And we're kind of over-indexing on that area also because we see a lot of potential there.

Question in from Wei. Why did utilities' EBITDA, so their margins, the percentage margin go backwards? So again, I can take that. In the first half of this year, the margin was lower than the first half of last year. Actually, that really is the impact of investing a lot more in our product. It's a higher percentage of revenue that we invested in the first half of this year compared to the first half of last year. We're making sure that we can land g2.0 in its first implementation. So we want to invest strongly in our product at this point in time. We're also spending a greater share of our revenue on sales and marketing in the first half of this year, particularly in the Utilities business. And again, that's really a reflection of those strong activity levels that we see across this year. So that's really why the margin itself has dipped from last first half to this first half of the year.

I think that was definitely intentional. And there's a good reason for both of the increase in sales and marketing as well as R&D, very good reasons. Also, we didn't really touch on it, but as we have more of a global footprint, from a currency perspective, the Australian and New Zealand currencies are -- have had some softening. I think that this is a good component of our business that we definitely appreciate having.

Question from Owen Humphries. When you talk about near-term guidance, is the revenue growth ambitions expected in financial year '26, financial year '27? So this is when we talk about our sort of 15% CAGR growth in the midterm. Are we expecting to see that sort of flowing through into financial year '26 and '27?

So we're trying to get in our earnings statement for next year now. So let us get closer to the end of the year, and we'll be -- Owen, it's a good -- it's a really good question. We'll be clear about that. We'll be clear about the timing of that.

But I think it's just the statement that we're winning business across the course of this year sets us up for next year and the year after. I think we're almost at time.

I think we are at time. If we miss some people, we'll circle back.

Yes, we'll circle back.

All right. Thank you all for the support, and we look forward to continue to engage. So thank you.