Gentrack Group Limited ($GTK)

Hi, everyone, and welcome. My name is Gary Miles, I'm the Chief Executive of Gentrack. And I'm here to give -- with Mike Carruthers and John Priggen, to give an overview of the deal rationale and field any questions that the participants may have. James Williamson, who is the CEO of our Veovo Airports organization, is not with us. He's got a pretty heavy viral load, but he'll be joining us on our earnings call that we have on May 18 in 2 weeks to field any questions directly. So -- but we're very comfortable covering it from this side. So with that in mind, let's jump into it. So first of all, we're going to go into a little bit more detail about the company. But Dubai Technology Partners is a software and transformation services company. They have a set of highly skilled software experts that have been making applications that are very complementary to our technology stack. We've talked a lot about being in more than 150 airports, and to be able to find technologies that we can bolt on and upsell into our base and make a more compelling overall proposition to our pipeline is always -- has been something that we've been pursuing for about the last 1.5 years from a potential acquisition perspective, and we think we found a great asset in DTP around this strategy. The second thing is I'd like to say is that Veovo's business is a very high-growth business. It actually is any high-growth business, quite frankly, are struggling between do we answer this tender, do this delivery or this upgrade? Scale is a factor in any high-growth business. And DTP brings about 60 highly skilled professionals that know airports and airport transformations very, very, very well. Quite frankly, we've been working with them for years in the region. They also have a strong presence in the Middle East, which we'll talk about, which is -- we are convinced will continue to be a major airport hub of the world. So those are the main deal rationales. It would go without saying to mention the leadership and culture of DTP, we think is fantastic and will continue to bring more kind of cultural and color to the Veovo organization and perspectives as well as leadership to James' leadership team. So with that in mind, I'd like to hand over to Mike and John to go through some slides in more detail. We're going to try to get through this in about 10 minutes so we have time for Q&A.

Thanks, Gary. So Mike Carruthers, Gentrack's Chief Strategy Officer. And I'm just wanting to give you guys a bit more detail around those strategic rationale pillars that Gary described there. Just touching on a little bit more on DTP. These guys are a premier airport technology and service provider focused on a real growth region being the Middle East. A well-established player in this region, having long relationships with some top-tier premium airport providers in the region: Dubai, Abu Dhabi, Sharjah, as well as managing the Saudi Arabian airport [ suite ]. This is an acquisition that builds on a strong successful partnership over a number of years that James and Abdul have worked on together. The wins that Veovo have had in the region have been -- the work that DTP has done and the way that we've partnered has been instrumental in delivering those wins. And so we are really pleased to be building on that partnership with this acquisition. We've talked about the Veovo Intelligent Airport Platform. This is a view of how we manage across the various different elements that make up the core components of mission-critical software in the airport space. DTP's technology is highly complementary, bringing strong AI-centric technologies into our existing airport operations, capabilities -- with capabilities -- with the DTP platform bringing LLM capabilities in operations and business intelligence. And then adding around Veovo's core platform in the messaging hub and airport app space, both of which are growing demand parts of the airport IT landscape, becoming more and more critical in tenders and in our customer base as the IT landscape becomes more complex, with airports continuing to look to technology to help to manage the increasing passenger flows and volumes without interfering infrastructure spend as much as possible. We have already been leveraging DTP's technology, as I said, through that partnership. So we have a number of tenders where we have already been deploying the airport app as part of a combined solution from Gentrack and Veovo and DTP. And we see great opportunity in being able to take these complementary technology elements across over 150 airports globally to expand and partner with DTP to take that technology global. Now while in terms of our other rationale there being investment in the team and the region, we acknowledge that there's uncertainty in the region at the moment. However, we remain confident that the Middle East will continue to be the airport hub of the world. There's significant investment going into the region on both the airports infrastructure side and in the airline space. Dubai and Saudi Arabia are both investing in two of the largest airports in the world that will over double capacity, and what is in Dubai, one of the busiest airports in the world already. These are decade-long investments. And so whilst short-term uncertainty is obviously a risk, it is a small delay we would see rather than putting the actual projects themselves at risk in the long term. Both of these are well funded by governments, as are some of the world's premier and largest airline carriers who operate out of these global hubs and are well capitalized in place to manage the short-term disruption and we believe will bounce back strongly and continue to be key global players beyond the current situation. We talked about DTP's fantastic customer base. You can see here that it slots into the Veovo global platform that we have with customers over -- a global customer footprint over those 150 airports. In addition to that, as Gary mentioned, the key -- additional key benefit for us is being able to accelerate and enable the continued growth of the Veovo business through leveraging those deep industry experts, of which there's over 60 that DTP brings, not only for the Middle East, but also in supporting and growing our business in those other regions in which Veovo has an existing customer footprint. I'm now going to hand over to John to talk through some of the more financial elements of the transaction.

Thanks, Mike. So turning to the financials. The consideration is an enterprise value of around NZD 17 million, and that's funded from cash on our balance sheet. It's subject to the standard completion activities, which we expect to occur within about a month. Now in terms of the financial impact. As we sort of say here, we expect that DTP will add around $3.5 million of revenue across the last 4 months of this financial year. We're not expecting there to be a material level of investment that's required. And in fact, we expect the deal to be profitable from the start, so excluding acquisition costs. Now in practice, it's not going to have a large impact on earnings this financial year, simply because of the short period of time that's going to be left in the financial year post completion. But we see great potential here to leverage the capability that DTP's people bring and that combined global footprint. In fact, we see really strong synergy here to support that combined growth of Veovo and DTP. Going back to what Gary said at the beginning of the call, trying to scale each of these businesses individually is actually quite expensive. This brings great synergy in doing that. And it includes great opportunity for cross-sell and upsell. Now as a result of that, we expect the -- we expect this acquisition to be EPS accretive in financial year '27 and beyond. And they're the main highlights. So really, that brings us to the end of our presentation. And it takes us over to any questions that those who have joined on to attend may have. And I think what we'll do is we'll take questions by phone, first of all, and then we can move on to any questions that have been put on and posted online.

[Operator Instructions] And your first question is from the line of Phil Campbell of UBS.

Just a couple of questions from me. I suppose the first question was kind of what was the decision for DTP to sell now? Secondly, kind of what's involved in terms of the staff -- retention for some of the senior staff? And then just lastly, from a Gentrack perspective, what would you think about success in, say, 3 years' time of the combined group, what would success kind of look like?

Phil, it's Gary. So look, we've been working with DTP for years in the region. We know each other really well. So -- and we've been in conversations for quite some time. Look, I think the uncertainty in the region put us in a place where we were able to execute on this transaction in a way that we think makes great sense for our shareholders and for the DTP owners as well. So we've decided to be opportunistic and jump on that. They have a strong business. There wasn't any kind of compelling thing that forced them to sell at all. This was a sought after target, quite frankly. But we are confident that the Middle East -- a lot of the carriers there, they're state-backed carriers and airports. And their airport business and all that focuses around it is so central to their economic plans, that we think this is something that will run the long term, the continued airport hub of the world in that regard. In terms of retention, we put in retention places. We've all been involved in several post-merger integrations and know how to run these. And we put in retention for the key leaders and then interesting packages for all of the staff. We're keen to maintain as much of the staff as possible. We think we will provide a really good culture for them. Look, I think in terms of 3 years out, we're not going to be really specific, but these guys are software engineers. They want to see their software spread out all over the world. And they made some great software, and they can leverage Gentrack and our momentum and our installed base and see their software in operation all over the world. They also want to be able to deliver and find jobs in other jurisdictions and things, and we can provide that capability for them. And then they want to continue and we want to continue to do more and more in the Middle East. And having a presence in the Middle East of this size just gives us so much more firepower to do more and more in the region. And in 3 years, we want to be doing all of those things and continue to keep growing at the same levels and grow the business. That's the objective.

[Operator Instructions] And there are no further questions from the phone. I would like to hand back for any written questions.

Thank you. So we've had a number of questions come through online, some of which we've also answered on the call. The -- one of the questions we've had, is the DTP product suite already in market and ready to go to market? And is there any additional CapEx required for further development? Look, I think we've made clear that we've been partnering with the DTP team with this existing product suite for a number of years. We have shared customers already where the messaging hub and the airport app and some of the capabilities in the operations space are deployed together. It's a -- we think the product set is great. It already handles some of the complexities around things like multi-language and handling some of the non-English languages in the region, which means it's well positioned to be scaled globally already. And from our perspective, therefore, we've already done a bunch of work in terms of how we would integrate the products as partners, which we can carry forward. And we don't see that -- as John described, don't see there being significant investment required in the business.

Yes. And just to remind everybody, we also -- we expense all our R&D. And part of all the numbers John talked about, there's not a capital injection required at all for R&D under this transaction.

I mean, what I was going to add to that, Mike, is, of course, I mean, clearly, the business comes with its product team, and we'll continue to have that product team. But it's not that we're -- it's not that there's a material sort of CapEx injection in from Veovo as part of this deal or anything.

Excellent. Another question we've had come through is around the revenues. So John, we've had $3.5 million revenue for 4 months disclosed, a little north of $10 million if you annualize. Is that a reasonable run rate to assume on an annual basis? And then I'll follow on with a second question about customers. But if you want to take that one?

Yes. So look, we've disclosed that $3.5 million of revenue, and that's for 1/3 of the year. And while there's always variability in the revenue streams of the business in Veovo's space, we don't see that 1/3 of the year as unusual. And I think that's the best metric guide that we can provide at that point. So that makes sense.

And then we've also had a question around -- that we've named a handful of DTP's airport customers. Are DTP's revenue is concentrated within these? And how long are they locked into existing contracts for?

Yes. Look, I mean, I think they've got a number of -- I mean, they've got a number of key customers in the region that -- you sort of saw the sort of quantum, the number on the slide there. You have a number of long-term contracts and arrangements that are in place. It's a good mix. They've got really long-standing relationships with the main players there in Dubai and Saudi. And we think that's quite valuable.

Excellent. We have a question around who the seller of DTP was. And I think we've already touched on with the key management personnel are retaining -- remaining within the business. So in terms of the seller of DTP, this was a privately held business with a majority shareholding from one of the senior members of the -- who's been a member of the UAE government in various portfolios. And they've been very supportive of this transaction as a great evolution of the business, and again, building on that partnership with Gentrack. We've also had a question, John, about whether there is a lock-in period.

You mean an earn-out period?

Yes, I think. We can cover that as well.

Yes. So there is a potential earn-out component of up to $5 million that's tied to business performance this calendar year. Now the exact details of that, we can't really share due to the commercial sensitivity. However, it is set at a comparatively high bar. Now we would be delighted if DTP achieved a portion against this. But as I say, it's -- it would be at a level above the sorts of revenue that we've been talking about, and we would not want to guide expectations to that sort of level at this time.

Another question around how the recent war has impacted the revenues of DTP and how recurring its revenues are. And how does the revenue model work? How does DTP charge the customers?

So maybe I'll just talk a little bit about the revenue model here. It's not so unlike Veovo. It's got a mixture of recurring revenues and recognized in the way you always expect. And then a mixture of the project revenues that span across the implementation. So it's similar to the Veovo, and in fact, the wider Gentrack business in that respect. And I think just in terms of -- the second part of that question was how does the Middle East impact. Look, I think what we've seen in the region is a very, if you like, committed strong customer base that are keen to invest -- continue to invest in the future, the Dubai airport, the Saudi airports, Abu Dhabi, et cetera, that are keen to continue to invest even across a period of short-term uncertainty. I'm sure that we'd have seen some short-term delay, but in terms of that commitment and the continuing investment from that customer base, I mean, we've seen it in Veovo, and I think we see it here in DTP.

Just expanding -- there's a question around an indication of average revenue per logo for DTP and how that appears to Veovo. And what part -- and then secondly, what portion of existing Veovo customers are also shared customers with DTP at this stage? So first one around average revenues.

Yes. No, I don't want to -- I mean, it's got it has a higher customer concentration than Veovo because Veovo has a very, very large number of airports it serves across a wide range of customers. And this is more localized and focused on the Middle East. I'm not going to talk about sort of average values of its big customers there. I think that's probably something that they wouldn't want us to share. At this point, we have are not yet complete on the deal. But we share -- we have joint customers and shared customers for the Dubai airports and the Saudi airports. Sometimes complementary, sometimes next to each other.

Yes. That's right. And just reiterating that all of Gentrack's Middle Eastern customers have been in partnership with DTP, Veovo's customers have been partnership with DTP. Which obviously is very important for the region, but with global portfolio that Veovo has, it's a relatively small number of airports relative to the -- to that footprint. The question around the -- there was a question we've had in around the process in buying the business and how that played out. Look, I'll answer that one. The -- but DTP, were actually -- as I think I touched on in our deck, were initially looking for investment to scale the business and grow their strong technology capabilities outside of the Middle East. As Gary said, we are well positioned to be having conversations with them early about how we might be a part of that. And then those conversations evolved and developed into a realization -- joint realization that actually, a combined business formalized through a transaction like this actually made -- really made a lot of sense both to the DTP team and to Veovo's business. We've worked with an advisory partner on our side, but it was a small team, and we didn't have a lot of additional parties or bankers involved in the process. It was -- yes, it was a well-run project by James, who leads our Veovo business and Abdul and his team at DTP. So we've got a few questions -- continued questions around the product in terms of overlap and benefits. So in terms of -- I'll just touch on -- kind of group a couple of those together in terms of the -- because we've got about 4 or 5 minutes to go. So software benefits to Veovo that come from DTP. Look, I think, hopefully, it was quite clear on the visual that there's a lot of complementary benefit to having those key components of the messaging hub and the airport app wrapping around the core Intelligent Airport Platform that Veovo already provides. Where we have some ability to integrate those solutions is in the airport operations space, where we can leverage some of the really cutting-edge modern technology work that the DTP team have done, bringing AI in terms of some of those LLM capabilities into both operations and the business intelligence space. And we're really, as I say, are excited about the ability to take those. But those are not capabilities that are -- have sole value to the Middle East. They are highly relevant to the wider global business of Veovo in those airports we have in the Americas, Europe and Oceania. The -- just going to look through some other questions. We have a question around how do we weigh this investment against other opportunities on the utility side of the business. Are there similar types of opportunities in the utility space? Not sure if John or Gary, if either of you wanted to take that question? Gary, please?

John, do you want to take it?

Yes. No, I think we sort of set out that we were looking for bolt-on M&A opportunities in both Veovo and in utilities. We have that sort of financial level of flexibility in terms of holding cash on our balance sheet to hold a range of things, from capital allocation to the acquisition here to future M&A, bolt-on activities. I think importantly, we had over $80 million of cash at the start of -- at the end of September. And this is using $17 million of that, which means that we've got quite a range of flexibility beyond this deal. And certainly, I think when we were weighing up respective benefits of sort of opportunity, we've always thought that Veovo is a really great platform that we need that would benefit from bringing scale to. It's always been really apparent that it's a platform. It spans so many different airports, and it's spread across the world, and yet it's still a relatively modest-sized business. Combining DTP and Veovo we think makes the sum of those two businesses far more valuable. Just in terms of the way that business can be perceived, the opportunities it can address, the skill bases it can leverage and cross-sell. So when we were evaluating opportunities, this just has a very natural -- this is naturally very good value, I think, for the use of capital.

I think it's also worth noting that when you take a smaller business and you move it up into towards the $50 million range in the airport space, it just has a lot more credibility. We're playing with the Tier 1s. It actually has a step change in value generation at that scale. So these are all the things that it's about growth and scale and leadership. And this is one move that will help us in that direction.

I mean, probably -- might be our last question. There's been a couple of people who asked about synergies or how to think about synergies on this deal, both costs and revenue. Look, we -- I think we've talked to it a bit. But just to be clear, for us here, when we think about cost synergies on this transaction, we're thinking about it in the sense of avoided cost of having to train and grow organically, the Veovo business in terms of recruitment and the drag on growth that can come, whether you've got business with -- somewhere in the region of 100 people, managing a global footprint. This is a -- the synergies for us here in terms of being able to leverage that team of experts who understand the industry, who are hard to recruit and take time to train otherwise to really enable that continued growth that Veovo has had over the past few years, and we see strong growth coming from those combined businesses. So just to call out that we're now at time on our 30-minute slot that we promised everybody. And the message, I'm sure everyone's got busy days to be getting on to. So we'll close the call at this point. There are a couple of questions that we've either touched on partially or haven't closed completely online. But as Gary and John have both mentioned, we will be down in Australia and New Zealand in just over a couple of weeks' time for our earnings call. And we look forward to being able to talk to you more about this transaction and the wider business at that time. Thank you very much to everyone for attending.