Locate Technologies Limited (LOC) Q2 FY2026 Earnings Call Transcript & Summary

Good morning and thanks for joining our First Locate Technologies Results and Business Update Webinar since our listing in New Zealand. My name is Georgia Katos, and I'm part of the Locate Technologies team. I'd like to send 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'll be presenting the Q2 FY '26 quarterly results and providing an update on the group's businesses. Following the presentation, we'll have the Q&A session. If you would like to ask any questions, please use the Q&A function located at the bottom of the screen. I'll now hand over to Steve and Michael to take you through today's session.

Thanks, Georgia, and good morning, everyone. Great to be here and great to be giving our first update as a New Zealand listed company. And so I'll just share my screen and get the presentation on the way. Excellent. So I guess I want to touch on a number of different things in today's presentation. obviously give you a financial update, but also talk through our strategy moving forward. There's 2 parts of our business. One is around building out -- continuing to build our logistics software platform and using AI heavily in doing that. And I want to talk through a bit of the strategy and the use of AI, both in terms of the development of the product, but also how we're actually integrating it into the product as well. And continuing our Bitcoin treasury strategy. And so obviously, one of the key drivers in moving the New Zealand market was the ability for us to continue to keep on buyback claim. And yes, we're absolutely -- intention is to continue to keep on being able to do that. So in terms of the quarter 2 results, we had a really good quarter from a Locate2u point of view. Locate2u revenue was up 40% on the prior corresponding period. And so it's great to see the growth and all the hard work that the team has been doing in Locate2u to see that resulting in revenue numbers increasing. So group revenue was $1.88 million. All these numbers are in New Zealand dollars. And we continue to hold 12.3 Bitcoin on our balance sheet, and so we continue to do that. Normalized EBITDA was $144,000, and we'll talk you through sort of what makes up the normalized EBITDA shortly as well. So Locate2u continues to be the growth engine of our business. It's a reoccurring software subscription. We continue to win large enterprise customers, and this is the result of the hard work that we've done in terms of building the platform and making it extremely feature-rich for a large number of enterprise customers. We saw the second time, positive EBITDA in Locate2u of $95,000. And today now, Locate2u makes up 54% of the group's overall revenue. We were fortunate in winning a large enterprise customer during the quarter that makes it in the U.K. We did a pilot stage at the moment with 300-plus drivers, but we see that as being a very positive step in terms of the ability for us to capture international clients across the world. This last sort of 3 months, we've also spent a lot of time looking at AI. There's a lot of this changed even since December in around AI and the capabilities that are available to companies like ourselves to be able to develop products quicker and more efficiently, but also enabling other members of our team to be able to use AI to enable our customers to do things much more efficiently than what they have done previously. And so if you look at sort of -- when we listed in Australia, back in September '21, we had very little revenue associated with Locate2u. It was very much an idea. We won our first sort of enterprise customer. And since then, we've typically had consistent growth every single quarter. And our revenue that you see here, revenue is made up of subscription revenue and there also is, at some instance, some one-off revenue that does occur. That one-off revenue is generally made up of installation like implementation fees and maybe some hardware but generally, it's reoccurring revenue that's coming through on a consistent basis. And so yes, we continue to focus on Locate2u. We continue to keep on developing inside of the Locate2u product. In terms of the EBITDA, I'll just pass on to Michael to talk through that.

Thanks, Steve. As Steve mentioned earlier, our normalized EBITDA for the quarter was $144,000, but I should just talk you through how we got to that from reported EBITDA. Our reported EBITDA was negative $829,000, but there are a number of items within reported EBITDA that don't really reflect the underlying operating performance of the business. So the first item is New Zealand transition costs, which were $446,000 in the quarter. They're very much one-off in nature, they're legal advisory and other costs associated with the transition and the nonrecurring. The portion of the transaction costs that are taken through the P&L of additional costs, primarily related to the IPO and capital raising taken against equity in accordance with the accounting standards. The second item, $49,000. It's a noncash share-based payments expense, again required to be made in account of accounting standards relating to our employee share option plans. And the third and also significant was $460,000 unrealized big cone valuation loss in the quarter. We hold Bitcoin at fair value on the balance sheet under New Zealand IFRS. The Bitcoin price declined during the quarter, which produced a noncash charge. Important to note, we haven't sold any Bitcoin. It's purely a mark-to-market adjustment, which we're required to take through the profit and loss statement. Adjusting for those 3 items, normalized EBITDA for the quarter was positive $144,000, which we believe provides a clearer view on how the underlying business is performing. At a divisional level, Zoom2u contributed an EBITDA of $432,000, and it continues to fill its role as generating cash that supports the group's broader strategic goals, notwithstanding recent revenue declines, which are detailed in our activities report that we lodged with the NZX. Locate2u, as Steve mentioned earlier, delivered a positive EBITDA of $95,000, its second consecutive quarter of positive EBITDA. And when you have revenue growth of 40% year-on-year together with continued focus on costs, you can see the profitability potential of the business come through. I'll hand back to Steve.

Thanks, Michael. So I wanted to touch on the AI opportunity, particularly for us in terms of building what we're building in the logistics space. And there's a couple of things that we've seen happening over the last few months. One of the key things that occurred in December was the release of a new AI model by Claude. This is Anthropic's AI engine and this is enabling companies to do a lot. And I think a lot of investors may have talked of this in the media and the ability to produce software. And I think there's a couple of key things that comments I'll make around this. This is enabling us to deliver software to our customers much faster than what we've been able to do historically, particularly at the enterprise level. When we're walking into an enterprise customer and they have some very customized or niche things that they're looking to do, our ability to build add-ons on top of the Locate2u platform allows us to do that at a rapid pace. We've been able to do that with a number of different customers where we've been able to build things in a matter of days, which historically would have taken us many weeks or months to actually build. This is happening today, and we've already been able to deliver on this and being able to help us in winning new customers. In one example I had was a customer that we were meeting with and they e-mailed us 3 days before that meeting, requesting a particular feature. That feature didn't exist in our platform. However, we were able to build it within a day. And so in our meeting that we had with them, we were able to demonstrate that new feature. This is something we've never been able to do and historically, that feature probably would have taken us about 6 weeks. And so for tech-enabled businesses, this is a really great thing for us to be able to do this. So this is not something that's new and coming. This is something that's happening today and is being used actively. Our development team has completely been restructured to use AI very heavily in the ongoing development of product. as well as other aspects in terms of our business. And it's solving real life problems for our customers. We're also working on looking at how best we integrate agents. And these will be agents that will be able to do things for our customers and will make our customers more efficient than what they are today. So areas around dispatch and optimization but also around customer service and accounting. We'll look to use and test these type of agents inside of our business in terms of the Zoom2u business, but then deploy these inside of our customers. And so this is, I think, going to have a very big impact for businesses across the world that are using our platform. And so I have seen a narrative and so I guess, a concern from investors globally, where they're looking at SaaS companies and going, they're going to be replaced by AI. I certainly don't think that is the case. I think there's 2 in that's happening here. The first is that AI is going to help these companies to be able to deploy software much, much faster than what they ever had. There's still complexity around building software in being able to know what to actually tell the AI engine to actually build, but also how you go about deploying this and thinking about security and infrastructure and the product knowledge that's required to actually build these. Often when we go into a customer, the customer has the problem, but they're not necessarily sure around how to solve it. They may actually come up and tell us, hey, we think we need to do this, this and this but often, that's not the necessarily the best way to actually solve the problem. It's coming up with those ideas to be able to say, "Hey, you can do this in this particular way, it's actually going to solve the problem for you faster than what you have done today." What I do think will struggle is very large software companies that have a large base. They're going to find this quite a challenging time because they're going to go against competitors like ourselves who have a much, much smaller base of employees and able to move much faster than what they're able to move. And so I think you'll see smaller technology software companies being able to compete with the large enterprises because they've got the same amount of capacity, development resources than what they have given. If they've got 1,000 employees to be able to do development with AI, you're able to compete with the number of agents that we're able to deploy. And so I think what is an advantage in a world where basically anyone can build anything, and that's not entirely true because you're in still going to need product knowledge. But the key things around being able to compete against companies that can do this. is the speed and the reduced cost base in being able to deploy things very, very efficiently. Product knowledge is going to be critical. You're understanding what your customer actually wants and being able to deploy something in the AI world is going to be critical to do that. And it's not necessarily something that can be replaced by AI. Often when you're using AI, the output that you receive is how good you've actually described what you're actually wanting and being able to do that is really important. And I think also design is a very important piece. And that comes down to designing as to how you want the product to actually function to how you want the product to look and be used by your customers. And so if you take the example of Apple building an iPhone versus Google building their Android device, most people in the world use an iPhone, they're probably seen as the leader in the space. And they both got access to the same amount of money, the same amount of tech -- same type of technology one's been able to lead, and that's because of design. And so design is going to become more and more critical in an AI world, and not something that's going to be easily reproduced using AI. So I certainly think we're in a really good position. We're a very lean team. We're moving quickly. I think we're able to move much faster than large enterprises. And we're going to be able to compete. When customers are asking us do we have certain functionality, we're going to be able to build that functionality much rush faster than what we have been able to historically. We've seen this in the last 6 weeks where we've been into customer demonstrations, either being able to build those things before those meetings, all being able to build rapid prototypes in a matter of days. it's definitely helping us in terms of acquiring larger enterprise customers. So an update on the Zoom2u business. Zoom2u continues to operate revenue of $860,000. Revenue did decline on the prior corresponding period. And this is something that the Zoom2u business continues to operate and run on a daily basis and do deliveries, but we have seen some decline in overall revenue. This hasn't been from any particular customer that is in being a general decline that's occurred. And there are certain aspects of what we're doing here, we're looking to improve the growth prospects of to Zoom2u, and we're using AI to be able to do this. And so there are a number of new initiatives that we are launching in the weeks ahead that we'll see, we hope that we'll see increased revenue inside of Zoom2u. But for us, Zoom2u provides a very strategic role. One is it's the knowledge that we've been able to gain in building that business over the last 10 years, and it's been able to take that knowledge and build that into the Locate2u your product. It's generating cash for the business as well and helping us fund our overall strategy in building out the Locate2u product but also provides a real life environment for us to demonstrate the functionality that we build inside of Locate2u particular features that we develop inside of Locate2u. And so still a very useful part of our overall business strategy. We continue to hold Bitcoin, and we see this as an important long-term our value for our business. We hold 12.3 Bitcoin in our balance sheet. And we definitely look to increase that Bitcoin holdings in the future. We've obviously seen the volatility in the Bitcoin price over the last few weeks. But it doesn't concern me in terms of -- this is not a trading position. Our focus is to accumulate Bitcoin, and this is a long-term hold. Any Bitcoin that has been around through many different cycles has seen the Bitcoin price being extremely volatile through periods of time, but seen it go down and return positive and reached new hires in the future. And so it's a matter of just not watching it on a daily basis. You're buying it. You've got a strategic reason as to why you're buying it. I still believe that strategic thesis in why we own kind side of our business makes sense, and we'll continue to see us look to grow our Bitcoin holdings in the future. So as an investor, how do you think about our financials and sort of what we're doing in the future? One is, we'll continue to see Locate2u revenue. We focus on growing that revenue. And you'll see that you'll expect to see that increasing the group's revenue increase over time. Zoom2u, we'll continue to look at how do we best evolve that and how do we see that increasing. However, we're not sort of while we're going to do things to try and increase that growth, our real focus is building the Locate2u business. And that's where we see the dominant share of revenue is going to come from in the future. Our balance sheet will continue to hold cash, and we'll continue to hold Bitcoin and we'll be quite strategic in how we deploy that cash into buying more Bitcoin into the future. And we expect volatility that was something that the Board was very aware of before we went into this and a lot of our investors were very aware of this as well. Locate2u is now EBITDA positive. And so while we had some one-off costs throughout the quarter through our transition to New Zealand and the Bitcoin revaluation, we think that the normalized EBITDA gives you a very clear picture of exactly how the underlying business is performing. From a capital raising point of view, we do have the ATM facility available to us in New Zealand. And where it makes sense, we will look to definitely to use that, and we'll update the market as to when that is -- that does actually occur. On our website, locatetech.nz, that will show you all of our announcements, but also show you our current Bitcoin holding, and you'll see that live. And so any time we do make a Bitcoin purchase that will be made live available through an announcement through the NZX and then placed on our website as well. So as we head into 2026, where is that time going to be focused on? Continuing to win more enterprise customers, looking to expand in other markets. We do have a staff member that is actually positioned in the European market. And so looking at sort of seeing how we can grow that. We're working on a large U.K. implementation at the moment. But also expanding in terms of existing customer base. We have a number of large enterprise customers, and we're seeing opportunity to go back to those customers and actually provide them with additional value that's integrated inside of Locate2u. And so there's a number of additional add-ons that are coming in the months ahead that will enable us to capture more revenue from those customers. And very focused in scaling towards profitability, thinking about cash flow being cash flow positive for the group and looking at sort of every single cost base that's sitting inside of the business. We're constantly doing a reevaluation of our cost base and looking at where we're spending our money and seeing can we do that more efficiently. And so, definitely, we're spending a lot of time on that. AI capabilities are going to be a big part in the weeks and months ahead. Part of that is by using AI to redevelop certain aspects of the system. And so being able to where we've had ideas or things that we can improve, we're able to deploy those ideas into actual releases to our customers. And so we're going to continue to keep on doing that over the weeks and months ahead. But also then at the next stage being able to deploy agents that can assist our customers in being able to be more efficient in their current workflow. And so if you think about our sales journey today, historically, when we go into a customer, they're looking at sort of improving the way in which their business is operating and improving the customer experience. And I think that's a really key thing for these businesses. But now the next stage of this is actually saying, well, yes, you're going to improve your customer experience, you're going to have some operational efficiencies but adding an AI agent on top of that will enable them to be even more efficient than what they've had and will enable them to actually reduce their cost base. And so I think the reducing of the cost base is going to be a key driver for a lot of these logistics-based businesses to deploy locate to you into their business. And so our Bitcoin treasury will continue. We'll continue to look to acquire Bitcoin. As and when we have free cash flow, we'll look to deploy that in line with our treasury policy and provide updates to the market through our live dashboard and announcements to the NZX. So on that note, I will open to any questions that investors may have.

Thanks, Steve. So the first question is around the Locate revenue for December. Can we get some more detail on the rise in L2u revenue in respect to customer wins? And if that $1 million is based off recurring? Or is there some one-off in the quarter?

Yes. So there definitely were some new customers that came in on that particular quarter, but there was also increased usage from existing customers. And so in the Christmas period, that's obviously a peak period for a number of our customers where they do have a number of new driver licenses. And so some of that may not be recurring. And there is also usage for -- we do have some implementation fees that may not be reoccurring and there is also SMS fees that are based on usage of the platform. So some of that may not be reoccurring. But definitely, the software subscription revenue where there's new customers that have come on board, that is occurring.

You described Locate2u as the operating system for last mile logistics. What percentage of a customer's logistics workflow are you actually replacing today?

Yes. So when we go into a business, there's probably 2 types of businesses that we go into. One is we go into a logistics-based business that that's their business. They're a courier or they're doing something logistics-related. And typically, when they receive their order, they're using our system to go end to end. And they're taking it from doing things like the rail optimization through to the scanning to onboard that parcel for a delivery notifications to customers right the way through to proof of delivery and then invoicing of that driver but invoicing of that customer. And so we're now in a position where we can actually run the entire end-to-end process, which, yes, it's very, very powerful for these businesses. For other companies where there might be a retailer or e-commerce business, typically, they're receiving that order. That order is then coming into Locate2u. And then they're doing the rail optimization to figure out how many drivers they need on a particular day, and then going through the delivery process. In that instance, then, a number of these businesses will use us to actually do payments to their drivers and do the rates engines to figuring out how best to pay those drivers and then the notifications to those customers. In that business, there are areas that we think we can deliver more value. And so we can provide earlier notifications to those customers. The moment that order has actually been received and using that tracking link to as a way of being able to provide additional marketing to those customers as well as being able to do things like rescheduling of when that delivery is occurring. And so really thinking about how does our customers use delivery as a way to differentiate themselves against a company that's not providing a great delivery experience. And so I think there's a lot of opportunity there to do that.

What was your ideal customer profile? And has that changed as you've moved upmarket in enterprise?

Yes. So we're very much now -- we've gone from dealing with lots of small, medium-sized businesses and now we're sort of seeing ourselves fall into the enterprise customer. And so we're very focused on these enterprise deals. They offer a larger amount of revenue, and we can get scale inside of those businesses, and I think we can deliver real value to these businesses. We're definitely finding that we are getting a lot of word of mouth that is occurring because larger businesses are using us. Other companies are seeing that they're using us. One of the great things around the loco notification system is that when someone is receiving a delivery using Locate2u platform, then we will receive a live tracking link, and they will be able to see that it has come from our platform. This in turn leads to people in the industry saying, "Oh, this is a great experience. How do we get that for our business?" And we're seeing live examples of that occurring over this last quarter.

How international is the customer base today? And which markets are you most excited about?

Yes. So today, most -- the majority of our customers are sitting in the Australia and New Zealand market. However, we do see a big opportunity in the U.S. and also in the U.K. And so we're definitely starting to see our first sort of large enterprise customer in the U.K. sort of kicking off at the moment. And yes, we expect that others will follow being deployed in that market.

If the existing business needs additional cash, would you look to sell Bitcoin or raise money another way?

We would -- we generally don't want to have to sell our Bitcoin. And so we want to hold our Bitcoin for the long term. We're very focused around what we're doing right now in getting to cash flow positive and so we don't see that there's a need to sell our Bitcoin. And so I'll do everything possible to make sure that we never have to sell our Bitcoin. It's a long-term strategic hold. We believe that's going to be worth substantially more in the future. And so we don't plan on selling our Bitcoin.

What does the sale look like for an enterprise customer from first contact, sorry, to signed contracts?

Yes. So that really varies depending on the customer, and it really depends on the need that our customer has. Typically, these enterprise customers will be coming to us. And it's not because they will have like a need that needs to be solved. And it might be that they just won a new contract with a new particular customer and that new customer is demanding that they actually provide a live tracking experience. And so there'll be something like that, that will be occurring that will be driving this customer to actually get implemented. In terms of the example of the U.K. customer, they had recently won a new customer that came on board and that customer needed a way of being able to place bookings with them in a particular way, and we were able to deliver a solution to that. And so that sales cycle journey will depend on the urgency need. Sometimes it could be a 6-month process. Sometimes it could be as short as a 2-month process. And so yes, it varies depending on the type of customer, and it varies depending on the demand that, that customer might have at that point in time. We're able to deploy our software in a matter of days. And so we're very much ready to help these enterprise customers as and when they've got their needs to be to be on.

What does your product road map look like for the next 12 months? And what are the biggest features you're building?

Yes. So right now, it's very much focused on -- I think there's 2 parts. One is there's been a retraining of our entire development team in how they code. If you're a developer, the world that you lived in 12 months ago today is very, very different. And the way in which you build software, it has completely changed. The skills that you built are still very useful, but your ability to actually develop code has increased dramatically. You're able to build 10x the amount of software that you could have previously. And so -- but there is a large amount of change that needs to take place in how they actually do that, retraining is to how best to use these different tools. There's a number of different ways in which you can do this, and it's use of agents so that a developer can actually have multiple agents running at the same time. And there's some complexity around setting all these things up and how they integrate in terms of a code base. And so that's the first stage for us and we've now got through that over the last sort of 8 weeks. And so it's getting the developers to use AI and use that really, really efficiently to deploy more products much faster. The next phase will be is other areas of the system that we think can be improved and rebuilding those areas of the system, and we're now in that phase at the moment. And then the next phase after that will be, okay, what are the AI-enabled elements inside of our platform that we can deploy that are going to help our customers. And so thinking about AI agents that can be deployed that are very specific to helping our customers. And that's going to be around automated dispatch processes, automated responses to customer inquiries, live chart and from a customer service type point of view. And then thinking about your accounting functions, looking at helping our customers be able to deploy agents to assist them in doing their invoicing and cross-checking of those things. So it's providing a lot of additional skill for their staff in the work that they're actually doing. And so it's going to make our customers really, really efficient.

What negatives has the business identified as a result of the transition to the NZX? And are there any learnings for the future?

I don't think there's -- yes, there's been any sort of negatives as such in moving to the NZX. Now the NZX is obviously a smaller market. And we obviously listed in December, and that's probably not a great time to be listing a business because a lot of investors are sort of heading towards the holiday period and coming to January, they're also on holidays. And so we haven't been that active in the market yet. We're aware of that and we look to change that in the months ahead. And so I think it's going to take a little bit of time to educate the New Zealand market. One of the things I think about is that New Zealand has about 130 listed companies. Australia has about 1,800 listed companies. And so the ability to be heard and to be seen in the Australian market as a small micro cap was very, very difficult. And so I think our ability to actually deliver on some great results in the New Zealand market to be able to be heard in the New Zealand market is going to be substantially easier. And so over the months ahead, we plan on being able to do that. And so, yes, and now that we are listed in New Zealand, there's nothing -- we can do a dual listing into other markets. We can dual list back on to the ASX and the rules that apply to us are the New Zealand rules. We can do a dual listing on to the OTC market in the U.S. as well as other markets as well. And so those are definitely things that will consider and look to deploy at the right time.

You touched on this in one of your previous responses, Steve, but in terms of development team size, how many developers do you have? And how are you using AI to accelerate development internally?

Yes. So today, we roughly have, I think it's around about 15 developers in our team. That's split across both mobile and also core product development. And we also then have a QA team that does a lot of the quality checking of the product. And so every single person is now using AI. They're using it to take product specifications and our product team is building product specifications. We're building wire frames, handing it over to the developers to be able to then turn those wire frames into real life product. And yes, every single developer is now using that. And typically, they're now using multiple agents to running it. And so they're able to have the AI agent actually being given a task or something that needs to be completed and complete that task and then being able to review that task before it's being pushed into a live environment. And so our ability to now complete functionality at a rapid pace is really enabled through the use of AI. And historically, a lot of these features that we're able to develop in days would have taken the business 6-plus weeks to actually build. And so yes, it's really -- if you've got the product expertise and you've also got the developers to be able to do stuff and you've got the design of what your customer actually needs, you're able to deliver things much faster rate than what we've been able to do historically. And so I very much believe that smaller teams are going to be able to deliver what very large teams have been able to deliver historically. And so I think we're in a really good position to be able to deliver some great product to our customers.

That's actually all for the questions, Steve and Michael. That concludes today's Q&A session. So thank you to everyone that did submit questions today, and we hope you all have a great day and week ahead.

Thanks, everyone, and look forward to speaking with you in our next quarter results. Thank you.

Thank you.