Locate Technologies Limited (LOC.NZ) Earnings Call Transcript & Summary

Good morning, and thanks for joining the Locate Technologies Q4 FY '25 Quarterly Results and Business Update Webinar. My name is Georgia Katos, and I'm a part of Locate Technologies team. I'd like to extend a warm welcome to any new investors who have joined us on our journey, and thank you for your support so far. I'm joined today by CEO and Founder of Zoom2u, Steve Orenstein; and CFO, Michael Gayst, who will be presenting the Q4 FY '25 quarterly results and provide an update on the group's businesses. The quarterly activities report and the Appendix 4C were lodged with the ASX this morning. [Operator Instructions] I'll now hand over to Steve and Michael to take you through today's presentation.

Thanks, Georgia, and great to be here, everyone. And firstly, I just wanted to thank sort of -- many of the new investors have joined us over the last month or so, we're really grateful for your support and confidence in what we're doing inside of our business. Today, I want to spend some time updating you on what's been happening in the business over the last quarter, particularly in our core operations, but also along with our Bitcoin treasury. I know many new investors here have joined the register because of our Bitcoin treasury strategy. And it's also really clear that many of you are looking for some clear guidance on how we'll be executing on this Bitcoin treasury playbook. I'm super aware of the range of playbooks that have been played out across the wells, across many of these other Bitcoin treasury companies. These have provided us a really good framework. However, the Australian market is unique, both in terms of investors but also in terms of regulation. Today, I won't be able to give a definitive guide on exactly what our playbook is going to look like. This has been done for a number of reasons. And I appreciate while this will be disappointing for some investors, very eager to understand exactly what the future looks like in terms of Bitcoin purchases. We are very committed in working through the best way to make sure that we can execute on this strategy. The Board is very committed on executing on a Bitcoin treasury policy that will enable us to purchase Bitcoin on an ongoing basis. And so the Board is currently working diligently towards refining a strategy to ensure that it complies with all the applicable regulation requirements and in accordance with applicable parameters. So any decision we make regarding our strategy will be announced to the ASX in accordance with our continuous disclosure obligations. And while we will have Q&A today, we'll be answering as many questions as we possibly can. However, we'll be limited in answering some of the forward-looking questions. And we know this will be frustrating, but we are very committed to providing transparent and timely updates. And we are very committed into our Bitcoin treasury strategy. With that said, I'll talk through the update on the Q4 business results. But before I do that, I thought it would be really useful to give everyone a bit of a background in sort of how we got to today. It's been a journey over the last sort of 10 years in getting to today. Started the business -- originally started back in 2014. Just stepping back from before I started the business in 2014, I was running another software business called Connect2Field. It was a job management and scheduling application, used by many customers across the world. And during that time period, I saw the sort of the evolution of the iPhones that are becoming available and how technology was able to change an industry quite dramatically. In 2013, that business got acquired by a company out of the U.S. called Fleetmatics. I worked to that business during the transition. And post that, look to sort of start something new. At that time, I wasn't really sure exactly what I was going to be doing, but I saw an opportunity in the logistics space with no experience in logistics, but a real sort of desire to improve the customer experience. That was the building of the start of the Zoom2u business. What I found there in that time in 2014 is that most people when they experience the delivery, they never knew when that delivery was actually arriving. And I knew by building some technology, we could actually connect the customer to the driver to provide a really great experience. As the Zoom2u business sort of evolved and grew, what we also found was that the technology that we've built inside the Zoom2u business was really useful and a number of our customers are wanting to use that inside of their own business. And so we decided to build a SaaS product, which is now known as Locate2u. And so in 2019, we started that journey in building the Locate2u product. And so this product is designed for companies that are managing their own fleet of drivers, and allowing them to have all the functionality in terms of what we do inside of our Zoom2u business. And today, the Locate2u business is now the fastest-growing part of the Locate Technologies business. And so whether we started -- when we started in 2014, it was always about streamlining the customers' delivery experience, providing them with real-time transparency and being able to see the live location of their driver, but also allowing them to have the efficiencies inside of their business to allow them to scale and do that really efficiently. A lot of our customers come to us, when they're using spreadsheets, they're doing manual sort of processing in terms of how they're actually operating their business. And we're able to streamline that operation to reduce their costs in running their business, but definitely in being able to improve the way which the customers experience working with them. The technology today is used by a number of companies, both in Australia and across the world, some small, but also some really large businesses that are using us and we run their entire business operations. Once the Locate2u product is used inside of a business, then it becomes very sticky and they use it for a long period of time and pay a monthly subscription to using the product. So I'll touch on more on that shortly. In terms of my journey with -- in this business and sort of how that evolved into a Bitcoin strategy, back in sort of 2017/'18, I became aware of Bitcoin and sort of started to see that it was -- this was something that could really change the future of the world in terms of a new form of money. And so this was in the very early days. In that stage when I purchased that first bit of bitcoin, I didn't really sort of get what I was buying or what the potential was. And over the last 3 years, I've really come to understand bitcoin in a lot of detail, and can see that the real benefit of how this can change, what's happening inside of the world, particularly with governments printing large amounts of money. So with that, towards the middle of last year, we spoke with the Board around sort of -- as our business works towards being more profitable, what will the business be doing with the excess cash that we have in that? And how can we sort of, to convert our balance sheet into being something that can really scale up into the future and to grow substantially by using Bitcoin as a mean of holding our cash in treasury. And that's where we started on our Bitcoin journey, and we expect that to continue into the future. So I'll now move on to the next slide. So just some highlights from the last quarter. We had revenue -- so group revenue for the financial year was $6 million. Locate2u, you saw some good growth in there, which was 24% for the quarter of $722,000. So up from the previous quarter, and we'll talk you through that in more detail shortly. Over the last quarter, we also raised $2.5 million. This was done through a placement to wholesale investors as well as using our ATM facility. And today, we will be walking through how the ATM facility works inside of our business. We also acquired 12.3 Bitcoin during the quarter, but also just more recently in the last -- yesterday, we acquired 2.1 bitcoin that added on to our balance sheet, giving us the current value of $2.2 million. I'll now pass over to Michael, our CFO, who will run through some of the numbers, and I'll come back to you after that to walk you through the rest of the presentation. Thanks, Michael.

Thanks, Steve. Just to start, let's have a look at our Q4 performance. Revenue for the quarter came in at $1.4 million, which is flat compared to the prior corresponding period. However, we've seen mixed performance across our businesses. Locate2u continues to perform strongly, as Steve just mentioned, with revenue of $0.72 million, which is up 24% year-on-year, and which is a record quarter for the business. Contrastingly, the Zoom2u, including 2 Enterprises recorded revenue of $0.68 million, representing an 18% decline year-on-year, and this was primarily caused from a drop in volumes from enterprise customers, together with a generally softer consumer spending environment. So while the top line is flat at the group level, the underlying growth of Locate2u is really helping to reshape our mix of revenue, shifting towards more recurring and scalable SaaS income. Our next slide, please, Georgia. In terms of EBITDA, the quarter marks a continued improvement in our financial performance. Group EBITDA for the full year FY '25 came in at a loss of $205,000, which is a $600,000 improvement over the prior year. For Q4 specifically, group EBITDA was $159,000, negative. Importantly, the Zoom2u business remains profitable, notwithstanding a decline in revenue, contributing $277,000 of EBITDA for the quarter, whilst Locate2u had an EBITDA loss of $94,000 as it heads towards becoming EBITDA breakeven and positive. When we exclude noncash ESOP expenses and one-off costs such as some staff termination costs and bonus accrual in Q4, our Q4 EBITDA would be close to breakeven, underscoring our improved financial performance. In terms of the cash performance of the business, we generated positive operating cash flow of $160,000 in the quarter, which is a turnaround from the $113,000 outflow in Q4 last year -- sorry, $131,000 last year. It's worth noting though that in Q4, we did benefit from [ some ] deferred tax payments in that quarter, which did help the quarter. However, the improvement in operating cash flow is still tending towards positivity. The full year operating cash outflow was $169,000, which is an improvement of over $600,000 from the prior year. And on an average monthly basis, cash usage dropped from $65,000 per month on operating activities to just $14,000 a month in FY '25. There is a detailed cash flow statement for Q4 and the full year FY '25 presented at the end of this slide deck for those that would like some additional detail. We've also entered into an arrangement of the payment provider to bring forward some Locate2u subscription revenue. This will enhance Q1 FY '26 and going forward, and Steve will talk to this arrangement a little later. I'll now hand back to Steve.

Thanks, Michael. In today's update, what we also thought was useful is to just share how some of our expenditure is happening inside of our business. What we are very focused on at the moment is that we are spending a reasonable amount of money in our research and development outside of our business. This is purely focused on our Locate2u product in majority of the instances where we're building sort of additional functionality inside of our business, but also making sure that our product is going to remain relevant into the future. While we don't have to be spending the amount of money that we are today, we think it makes sense, and we think this is going to deliver real value for all investors into the future in terms of future earnings inside of the business. So this is spread across development, there's some QA, there's some design resources inside of that, but it's a really important part. I see of us building a really great product into the future and delivering increased revenue as we move forward. You can see over the last sort of 3 or 4 financial years, we've really looked at every single cost in our business. And as revenue is being able to grow, we've actually been able to decrease our overall operating expenses. We've gone through every single expenditure at a fine-tooth comb and making sure that where we're spending money, it makes sense. And as we start to scale up, we're not going to -- we don't expect to see a large increase in expenditure moving forward. There will be some expenditure that will increase as we scale up, particularly around sort of hosting expenses or any of those variable expenses. But a lot of our expenses are fixed in terms of where that cost base is today. There's still the ability to remove some costs if we think it makes sense to do that. But at this point in time, we see that we're moving towards being cash flow positive in the future. And so it makes sense in maintaining this cost base to allow us to keep on scaling in terms of our Locate2u product into the future. In terms of our treasury update, as I mentioned earlier, we added 2.21 Bitcoin just yesterday with a total Bitcoin holding now of 12.3 bitcoin. And 1 of the things that we are looking to do in the future is to be able to really demonstrate proof of reserves. Today, we hold all of our Bitcoin sitting with Zodia. Zodia is our custodian, and we're looking at sort of ways to be able to share securely the best way to be able to make it so that our investors can see proof of reserves. In terms of that, we will share more details on that. I do have here -- and I'll just -- if I can just briefly share it. I'm just going to replace this. Just some investors -- you can see this. This shows you a PDF document that's downloaded from Zodia today, which does show a balance there of the number of bitcoin that's sitting on that. So it is in line with what we have reported. But I do think it's a really important part of every Bitcoin treasury business. To be able to show proof of reserves, and that's something we're definitely working towards. And Georgia, [ request ] to start the share again, if you could. And moving on to the next slide. This is our ATM facility, and I might let Michael sort of talk through this slide.

Thanks, Steve. So on capital management, we've made strategic use of the ATM facility we set up a few months ago with Novus Capital. The facility gives us a lot of flexibility for raising capital. We can set the terms and the timing of capital that we'd like to raise and Novus independently execute sales on market, which translates into funding for our business. Since June, we've used the ATM facility to raise $1.44 million across 5 tranches with an average price of $0.161 per share. So the beauty of the ATM facility, it enables us to set prices at which we're willing to sell shares, and it can be executed quickly without significant documentation being prepared and without needing to sell shares at a discount to market, which is often the case for rights issues or placements. And I'd have to say the ATM facility has been key in helping strengthen our balance sheet. So alongside raising $1.95 million in 2 placements earlier in the second half of the financial year, the funds we've raised through the ATM facility have significantly strengthened our financial position. Back to you, Steve.

Thanks, Michael. So now I'll just talk you through the Locate2u product. And just to give everyone, I know there's a number of new investors and just to give you a bit more background in terms of what the product is and why we see it's an important part of our strategy moving forward. The Locate2u product is a SaaS product. It's sold on a monthly subscription. The monthly subscription is generally charged based on the numbers of users that, that customer will be using. We have a range of different types of customers using the Locate2u products. Everything from a small retailer that is delivering goods to their customers that might have 1 or 2 vehicles right through to some really large enterprise customers that have 200 to 300 vehicles that are doing deliveries. Where they see the benefit in using the Locate2u product is around the organization of all those deliveries that need to actually take place. If we move to the next slide, I'll just -- so the system is very robust. It does a lot of things in terms of running a delivery business in terms of managing all the deliveries, but then doing things like route optimization. A lot of companies come to us where they have hundreds of bookings to be done in a particular day. They're sitting there in spreadsheets, trying to figure out which driver is going to complete which 1 of those deliveries. Our system is able to take all those deliveries, optimize them into the most efficient route and then allow those to be seen by a driver on their mobile device. It completely runs their delivery operations and does everything from the billing side of things as well as the capturing of things like proof of delivery and monitoring and providing those live tracking links. Over the last few years, we've been building out the functionality so that we can really go after some really large enterprise businesses. And we're seeing this in some of the wins that we're having today. What we have seen over the last few years is that when we did win a large enterprise business, it would require us many months to actually get that business operational. And we're seeing that speed of that rollout now starting to reduce dramatically because the functionality we've built for 1 customer is then being able to be used for many customers. And so we see that the work that we've done over the last few years has really helped us to fill out the product and so allowing us to go through that sales cycle much faster than we have done previously. The product is being built in a way so they can be used by customers globally. It's not just limited to Australia. And we do have customers in the U.S. and throughout Europe, and we're looking to expand that to drive more revenue into the future. So when you look at the graph here, the top graph shows you our quarterly revenue in Locate2u. You can see when we listed the business in September '21, it had only $56,000 of revenue for the quarter. In this most recent quarter, it was $722,000. So many -- significant increase in revenue. And this month, we also -- this quarter, we also had a number of new businesses that came on board. Coco Republic being a premium furniture brand here in Australia. And so a really great brand, along with iRise and other logistics business. And also Sydney Tool has been able to track their drivers but also use us for their salespeople and being able to monitor and provide performance updates on how the salespeople are actually operating. So it's great to see these enterprise customers coming on board, and there are a number of other enterprise customers that are in the works, they're in the final stages of going through an agreement with us at the moment. We have also set up in this last quarter a revenue prepayment solution. This has been done for a number of reasons. And this allows us to be able to get -- capture the full value of a customer's contract upfront minus a service fee. And that can be done on a customer that's signing a 12- or 24-month contract. The payment provider will pay us the money upfront, minus a small fee. And they will take on the risk of that customer in terms of collecting a payment. They manage that monthly payment for us, but they also manage and take on the risk of no payment being made by that particular customer. So it's a really great way of being able to -- for the work that we do, not just receiving that first month subscription, but the whole -- the contract period upfront, allowing us to then use that money inside of our treasury and how we see doing that best wave forward. There's some great advantages about doing this, obviously, collecting that money, increasing access to our working capital. We don't plan on using this for every single customer, but we do plan on using this for many of the new customers moving forward. So we will maintain our base of customers that pay us on a monthly basis, but then new customers, it's likely that we will move them on to using this payment provider into the future. This was first used in July. So just recently with 1 new customer that's come on board, and so we'll look to continue using that in the quarters ahead.

Can I just add, Steve, on that, that there's no change to our revenue recognition policy. We'll still be recording the revenue as it arises during the course of the contract.

Yes. Perfect. Our Zoom2u business is the business that we started back in 2014. And so this is a marketplace connecting customers to drivers for generally a same-day delivery. We deliver anything from a small box through just some large items, and we have a range of vehicles inside of our network from bikes, cars, vans and even some large trucks. This operates 7 days a week. So every single day of the year, the network operates, customers go in there, they place their booking. The booking automatically gets sent out to our network of drivers to accept those particular deliveries. The real benefit in being able to do this is, this connects the customer directly to the driver. You can see the live tracking of that driver arriving and being able to move those parcels really quickly and fastly. To the next slide. So you can see our revenue over the last few years. And so there has been some spikes, particularly over the calendar year of '21 that were during -- that was during the COVID period, there was some spike in volume. And then we have seen some reduction in volume over the last few quarters. We see this as being a softening in the economy that's occurred. We haven't sort of lost any particular customer. We see there has been some decreases across a number of customers in the volume that they're actually sending through the Zoom2u business. And so we see this is economic related through cost of spending reduction. We are looking at a number of things to see what we can do to increase the Zoom2u business. And so we will explore that and update you as we move forward in the months ahead. So finally, I just wanted to remind investors that we do have our investor portal available at locate.tech. You can register your e-mail address. It's also worth making sure that you have got your access to Automic, which is our share register update. Make sure your e-mail address is in there so that you do get e-mail updates. You can also receive SMS alerts just by sending an SMS to that number on the screen and saying yes. But also connecting with us on X at our @locatetechhq and also you can connect directly with myself, @sorenstein. And now we'll move on to the Q&A side of the questions.

Thanks, Steve and Michael. So we have received a few questions so far. First 1 is for Steve. Congrats on winning Coco Republic as a new customer. How do they come across Locate2u and why do they choose Locate2u?

Good question. So yes, Coco Republic came across us -- I think actually through a number of different ways. They had a number of logistics partners that they were using -- that are using Locate2u, and they could see the experience that they were getting. In their essence, they're looking to have complete visibility over their deliveries and being able to see the live location of where those deliveries are occurring and what times they're going to be delivered but also getting real-time access to proof of delivery. And so knowing when that delivery is complete, here's all the information that has been and so in their business, it's like how do they improve that customer experience? How do they give and enable their customer service people to see that real-time information as that's been complete. And so yes, we've been working with them for a little while now and expect to go live in the weeks and months ahead.

Why using the prepayment provider to upfront customer payments, you seem to be well capitalized now.

Yes. So while we are well capitalized now, we see this as a great way to add to our treasury and this may be something that we will use in the future for increasing our Bitcoin holding in the future. And so it's something that we're definitely considering and we think that makes sense for our business.

Are you going to continue to use the ATM facility?

Look, I think that makes -- the ATM facility has been very good, where it makes sense for us, we will definitely use it. We tend to look to use it when the market is going up. We don't want to be using it to depress prices. And so we will use that in a strategic basis.

Your slide showing like ATMs functionality makes it look like the product is close to being fully featured. Will you be able to reduce your development spend on the product soon?

There's no intention today to do that. I think it makes sense for us to continue building and what we are building. There's a number of things that we think are going to make a lot of sense in terms of AI coming out. And so we see our product as being this core platform that our company -- customers will use to manage their day-to-day operation of their business. But then adding on top of that is a layer of AI in terms of AI agents. And so I think where our customers are going to see real benefit in using our product is, now they have a platform, how do they layer on top an AI agent that can take phone calls to be able to answer live phone calls and to interact with live orders with a customer or even with a driver. And so I think there's going to be some enormous cost savings that businesses that are doing deliveries will be able to do by using AI agents into the future. And that could be from a customer service point of view, but it also could be from an accounting point of view. A lot of these businesses have a very large back office in terms of how they're running, accounting function, and we think we can streamline that dramatically. And by doing that, we can go back to our existing customers, we can increase revenue from those existing customers that we're working with.

We did actually have another question specifically about AI opportunities within the business, but I think you've touched on that there. Next question is, are we having any regulatory issues in conducting the BTC strategy?

Look, as we mentioned earlier, we definitely are wanting to carefully make sure and diligently work through to make sure that we are doing everything in line with all the regulations that are there. The Australian market is very different to other markets across the world. And so there are some more things that we need to be more careful about in this market. But we're confident we're going to be able to work through those over the weeks and months ahead.

And just around the use of the product globally in terms of Locate2u, have you given any more thought recently on international expansion for the product and being able to tap into new markets?

Yes. So I mean, the product has always been built at a global level. We are strategically looking at sort of what we will do into the U.S. and also into the European market. One of our staff members is moving into the U.K. in the coming months. And so we think by having someone on the ground who really understands our product has been in the business for a number of years. It's going to be helping us to onboard some customers in those -- enterprise customers in those markets. These enterprise customers are spending thousands of dollars and sometimes upwards of $20,000 to $25,000 a month on a monthly subscription. And so we can see -- now we have this really rich enterprise products being able to win sort of these large enterprise customers and having people on the ground, who understand that product makes a lot of sense for us to do that.

And when do you think you'll be able to update the market?

Soon. So well -- yes, look, obviously, we're very keen to keep everyone up to date and we're very keen to update the market on exactly what our playbook looks like. And as we said earlier, the Board and myself are working very hard on making sure that, that can happen.

Thanks, Steve. Thanks, Michael. That's all for the questions today. Just wanted to say a really big thank you for everyone for joining us and taking time out of your Wednesday. Have a great rest of your week.

Thanks, everyone, and appreciate everyone joining today, and also, again, a big welcome to the new investors and look forward to updating you in the weeks ahead.

Thanks, everyone.