Locate Technologies Limited (LOC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our Q1 FY '27 investor update. Thanks, everyone, for joining and joining us today. Just a reminder, if you do have any questions throughout today's presentation, you can use the question option there to ask any questions, and we'll be answering any questions at the end of today's presentation. So thanks, everyone, for joining. So, as you can see from the results, Q1 FY '27, we had a really good quarter. What you're seeing right now is some really great results that are coming through in our Locate2u business. And this is our SaaS product that we sell to companies globally where they're using our products to help manage their logistics from an end-to-end point of view. We saw revenue grow overall in the business to $2.2 million, Locate2u revenue of $1.5 million and a net profit after tax of $62,000 with operating cash flow of $828,000. So it was a really, really great quarter and really good to see the work that the team has been doing inside of the business and the onboarding of new customers that is resulting in this revenue growth, but also while maintaining our cost base and, in fact, being able to reduce our cost base inside of the business. The breakdown of the numbers, as you can see on the screen here, all very positive. Locate2u -- the Zoom2u revenue sort of very much flat, and we'll talk through that in the presentation today. But really positive to see the results that appeared over this last quarter. And these results have come from many months of hard work over the past year in really focusing on the business in onboarding new customers, building new features into the product and really being disciplined in our costs and maintaining and looking for opportunities to reduce costs inside of our business. And these results, I think, speak for themselves. We saw in this quarter the Locate2u revenue increase dramatically. And this was driven from a number of different reasons, but primarily through our new enterprise customers coming on board into the platform. This did have some revenue that was one-off implementation fees that were associated, but also new subscriptions that are coming through, which are paying on a monthly basis. When we're onboarding any new enterprise customer, typically, these enterprise businesses are paying an initial setup fee. And then once they're operational and using the system, then they're paying a monthly recurring fee. These enterprise customers are typically signing a 12- to 24- and sometimes 36-month contract. And really, once they're starting to use the product, they become very engaged in our product and very reliant on using our system. And so they become long-term users of Locate2u. Enterprise customers, we're seeing a lot of inquiries from enterprise customers, and these are larger businesses than what we've historically been working with. Historically, our revenue base has been made up of lots of small and medium-sized businesses and some larger businesses. But now what we're seeing is a shift to engaging with much larger businesses than what we previously have. These businesses are seeing an opportunity to reduce their cost of running their business by using our platform. And this has been seen across a number of different areas, including the route optimization side of things, but also from a compliance point of view as well. We're -- typically, the cost of rolling out our software for these businesses is insignificant compared to the value that we're actually providing these businesses. Often, we go and do an exercise at the start of the process of where they're looking to use our software. And we run some tests in terms of what does optimization look like for the routes that they're currently operating. Often we find that the number of drivers that they have to actually do these deliveries, they might be using 150 drivers, for example, and we can actually reduce that quite dramatically down to maybe it's 120 drivers, sometimes further. And so these are quite material cost savings for these businesses to be able to use our technology to do that. Not only are we able to reduce the numbers of drivers, we're actually able to reduce the cost to service those customers from a customer service point of view and being able to reduce the number of phone calls that are coming into their office by providing their customers with a live tracking experience. So the customers know when those deliveries are actually occurring, along with customer portals where their customers can actually log in to be able to access more information around those deliveries. What we're also finding right now is the ability for us to deploy new functionality to these customers at speed and being able to use AI to be able to increase our output from a development point of view. AI is being used across the board in development of Locate2u and really allowing us to onboard customers much, much faster than what we've previously been able to. What would have taken us a month to develop is now taking us a number of days. And so our ability to provide significantly more functionality when a customer is looking for it is allowing us to onboard these customers much, much faster. And so, what we're seeing from an AI point of view and there's been a lot of discussion, I guess, in the market in general about the use of AI in software businesses and the impact on software businesses. My strong belief is that there is a large demand for software to be built for enterprise businesses. Enterprises have always had a large demand for software, but that software could never be developed because there simply wasn't enough software developers available to actually build it or the cost to actually build that software was so large that it was just -- it didn't make sense for those businesses. And so these enterprise customers have been relying heavily on spreadsheets, heavily on people to produce -- do processes inside of those businesses to manage orders. And now this can be actually streamlined and optimized by using software to do that. And so our role as we start working with more enterprise businesses is looking at all these manual processes, seeing how that can be implemented inside of Locate2u and really help streamline these businesses to provide their customers with a much better customer experience. And so yes, it's a very exciting time for our business. We're able to onboard customers much quicker, which is then resulting in increased revenue growth. And so yes, it's really, really exciting to see this happen. So what does that mean for Locate2u? Our business historically has been really focused on the route optimization, the delivery side of things. That's now expanding. And our aspects in terms of how we're helping our customers is a lot more than just the route optimization. We're doing a lot of work around the order capture side of things. And so allowing companies to use our platform to actually receive orders from their customers and providing them with the customer portal for customers to be able to log in and enter in their deliveries and have that -- all their orders and have that going flowing right the way through to delivery. And so no longer did they need to have a separate system to capture that order, which is what they always used to do. They can use Locate2u to actually do that, and it has their own brand and their own feel to do this. So I think that's a really key element in helping our customers use Locate2u more efficiently. Following on from that, you've obviously got the delivery side that we've always been really strong in and the customer experience with the live tracking, but also now the fleet compliance piece. And so being able to make sure that your driver fleet is compliant from a regulatory point of view. And that's making sure that the drivers have the right insurances, the right sort of safety checks that are being done on those vehicles and the right maintenance that's also being done on those vehicles as well. Our system now covers all of those aspects. And so expanding the ability to capture more revenue from those customers through this new functionality. And then followed by that is the ability to make sure that we're helping them from a finance point of view. And this is through the invoicing and billing side of things. And so being able to understand how do our customers bill their customers and providing them with the rates engine to be able to do that. And so this now provides like a fully end-to-end solution for businesses that are running logistics as part of their operations. This could include a big box retailer like an appliance retailer or furniture retailer, distributors of many types of businesses as well as courier and parcel networks and large e-commerce businesses. And so there's a range of different types of customers that we can assist. And these customers are not just in Australia, they're across the world that we're able to help them with. The next part of this is the use of AI agents. And so when a business is using a modern platform like Locate2u, the ability to then plug in AI agents is going to be a key aspect. And so where a human has historically been able to manage things like dispatching, answering customer inquiries that's now going to be done through AI agents. And we're actively working on a number of different strategies around this and looking to deploy some solutions to our customers from an AI agent point of view. And so yes, it's going to be quite exciting for these businesses to be able to provide their customers with a faster response time. And so in times where they've had peak periods where they haven't been able to respond to their customers, they're going to be able to have AI agents being able to do this. And ultimately, in the future, AI agents doing a large chunk of their workload moving forward. So one of the things you did see this quarter is revenue growth increased, but also we were able to reduce our cost base in terms of wages. And so what does that mean for our business as we go forward? What we are finding is the amount of output that our staff members can put out has significantly increased due to the way in which we're using AI. And so as I mentioned earlier, what it would have taken us weeks to build, we're building in days. And so that's really assisted us in being able to reduce our cost base. As we go forward, we will increase headcount, but that headcount will be linked directly to customer contracts as we go forward, where there is demand for dedicated developers to work specifically with individual customers. And so we think we've got a very good cost base where it is today. It doesn't need to significantly grow, but where it will grow will be linked directly to customer implementations as we go forward. Our Zoom2u business has been very much running in line with where it's been historically, and we haven't seen substantial growth inside of our Zoom2u business. We've been very much focused through -- in focusing on our Locate2u business over the last few years, primarily because of the growth opportunities that we're seeing there. However, this doesn't mean that we're not going to look at growth areas inside of Zoom2u. We definitely are looking at that. We did launch a new website in September, and we're in the final stages of launching a new booking platform for Zoom2u. The new booking platform, I think, will be one of the best available in the market, allowing customers to book a same-day delivery, along with a number of additional functionalities that will become available to customers. And we expect that this will result in some increased growth inside of the Zoom2u business. The Zoom2u business has been extremely useful for us in understanding what to build inside of the Locate2u platform. And so it's definitely something that we continue to test. And we're releasing new functionality, we're looking at using the Zoom2u business to be able to test that functionality. And so still very much an important part of our strategy moving forward. As you can see, reported EBITDA was positive in every month of this quarter. And so really great to see that the business is now operating in a positive EBITDA sense as well as net profit point of view as well. We didn't revalue our Bitcoin this quarter. So there is an increase in our Bitcoin holding from where it's being held on our balance sheet. That only happens twice a year at each half yearly event. And finally, we have a current debt facility with Pure Asset Management, and this is our $3 million debt facility. That needs to be refinanced by the 7th of November. We're in active conversations with a number of different parties at the moment and in the final stages of completing legals in regards to the refinance of this debt facility. As soon as that information is available and that's been finalized, we will announce that to the market, but we expect this to be completed before the 7th of November. We did continue to do some on-market buyback, a small amount, just under $5,000 worth of buyback. We will continue to do more, and we will look to be more active in the market to be able to do that. One of the things that is a little bit challenging in doing the share buyback is that we can only operate in the market when we don't have any sort of information that sort of keeps us on the inside. And so there's only certain trading periods as to when we can actually do that. But we definitely look to be more active in our on-market buyback moving forward. We currently still maintain our Bitcoin position and look to continue holding that Bitcoin position. And as we move forward and particularly as we move forward as a profitable business, then we'll look to increase that Bitcoin position on a going-forward basis. But we really want to make sure that the business is in a strong position before we look to do that. And so yes -- and we'll revalue it at the end of this calendar year. So our strategic priorities remain the same, very much focused on scaling Locate2u, winning onboarding enterprise customers, both here in Australia but also globally. And when we look at the pipeline of customers right now, there are a number of large enterprise customers that we're working with and been working with for many months. These enterprise customers do take some time to onboard. There's often a negotiation period, a testing period and then going through a contract negotiation period. And there are a number of customers that are in that stage at the moment that we expect to be able to update the market in the months ahead. While we're doing that and onboarding these customers, then we obviously want to maintain -- be very disciplined in our cost base, and we'll continue to keep on monitoring what's doing that. And then finally, continuing to maintain our Bitcoin position and look to grow that Bitcoin position into the future. In terms of our near-term milestones, Pure refinancing is occurring, and we'll update the market before the 7th of November in regards to this. We have our shareholder meeting coming up on the 23rd of November, and we will continue our on-market share buyback.

I will now just start to kick off with some questions. So feel free to use the question function to answer any questions, and we'll go ahead and answer those. We'll just give everyone a minute to drop any questions in there. Cool. So first question, just in regards to the pipeline of opportunity. Can I talk to that? Look, there are a number of businesses that we're actively working with. And we will update the market when we do have something when agreements have been signed, but there are a number of different types of businesses. And these businesses are large businesses. They have a requirement to improve the way in which they're operating from an optimization point of view. And so often looking at sort of how they can reduce their cost of servicing their customers through route optimization, but separately, being able to improve their overall customer experience. And so being able to help them with their order processing as well as the back-office functions, improving the way in which they're working with those customers. And so yes, so there's a number of people that are in that pipeline, but they're quite far down that pipeline. And I'm expecting that we'll be able to make some further updates regarding that. We do find that many customers that we are onboarding don't want us to make announcements. They want to keep it quite confidential because they see what we're doing is very competitive advantage for their business. And so we have to sort of balance that out with obviously keeping our investors up to date from what we're actually doing. There's a question in regards to the buyback being paused. It has been paused. We need to be mindful of our disclosure requirements and when we have active things that are occurring, particularly around refinancing, when we're doing announcements to the market regarding our quarterly updates or anything else that might be happening. And so the Board has to have approval when we do, do the buybacks, and we will be active in doing it when we can and when it makes sense for the business to be able to do that when it's inside of a trading window. And so there are dedicated trading windows, but the Board can approve trading windows outside of that when there isn't sort of known information inside of the business. There's a question here regarding jurisdictions and where we're finding some of the most traction overseas. Look, there's a lot of activity in the Australian market, but also the APAC region. And so Southeast Asia, we're seeing some activity as well as in the U.K. There is definitely opportunities that are occurring in the U.K. In fact, I've just returned from the U.K., spent a week there with a large business that is looking to roll out our software, and we're quite far down the path, and we look to make some further updates regarding that business in the future. There's another question here in regards to FedEx and where we're up to with that. Look, it's difficult to comment specifically about a particular customer because often these customers are wanting to keep this information quite confidential. However, what I can say is the FedEx project is going extremely well. There's multiple projects that we're working with FedEx across their business. And there's 3 key projects right now that are in play, and it looks like there's going to be further projects with them. Two of those projects have been complete and in the final stages of being rolled out. There's one -- there's the third project, which is larger, and we're expecting that to go into a pilot phase -- or an active pilot phase in the next few weeks. And yes, it's helping their business run -- improve the way in which they're running in a particular area of their business. And so yes, it's going extremely well. A couple more questions. There's a question here in regards to competitors globally that have appeared. We're not finding really any competitors that we're up against. There are a number of players in this market that do route optimization. They do -- there's companies that just specialize in doing compliance side of things and doing fleet management side of things. And in fact, we've -- our fleet compliance and safety piece, which we've built into its own stand-alone product that we're now selling to customers. This is a stand-alone product that we've developed that's allowing businesses to manage the requirements in terms of managing a large fleet of drivers, particularly heavy vehicles. In Australia and other markets, there is a number of requirements around when you're running heavy vehicles and making sure that you're maintaining information regarding insurance, but also the requirements in making sure the vehicles have been serviced, so maintaining logs around vehicles maintenance and also if there's defects relating to those vehicles. And so if a driver is driving it and they report a defect, there's a way of being able to report that and then report that this vehicle is actually off the road as well as other aspects relating to safety. So doing on-demand safety checks of a vehicle on a daily basis, but also on an ad hoc basis and being able to record that information. We now have a platform that does that, and that platform is fully integrated with Locate2u. And so in the instance where a driver hasn't completed the correct safety things or, for example, one of their insurance records has expired, it will stop that driver from them being routed on to future bookings in Locate2u. And so this is a really great feature. Our customers historically would have had a disconnected system that would not have talked to the route optimization platform, and now this is connected. And so it creates a lot of value for our customers. And so there are companies that specifically focus on just building the safety platform. And now we've got this as part of one platform that allows our customers to use it end-to-end. And I think that's one of the great benefits that we've been able to do in use of AI and to be able to build this technology into our platform that we historically might have had the idea for, but we just didn't have the resources to be able to do that. And so there is a real advantage for smaller software companies being able to compete with larger software businesses and do that at a rapid pace much, much faster than what these larger software companies can do and at a much cheaper cost. And so I think that's where we're seeing the revenue growth that we're seeing inside of the business today. I'll just run through a couple more questions. There's a question here regarding if Locate2u keeps growing, how much headcount needs to grow? Could we double revenue without doubling staff? I mean, definitely, I don't see us needing to double headcount to double revenue. Fundamentally, we can continue growing right now with the headcount that we do have. What I -- where I do think we will see some headcount growth will be specifically related to the onboarding of enterprise customers and where we're going to be able to provide dedicated resources for particular customers as they've been onboarded. And they might engage us to actually provide them with development resources for an extended period of time for their business, and that could be on a 1- or 2-year contract. And this will allow these businesses to take the full use of our product and really help them with the onboarding. What we find is -- dealing with a lot of these businesses is they can't move as quickly as we can. And so by having development resources that can sit inside of their business, it's going to allow them to actually move much faster. We can make sure those development resources are trained on our platform and can allow those businesses to accelerate the use of Locate2u. Our goal is to see how a customer can go from agreeing that they want to use our product and to be operational in a matter of weeks to months and providing them with additional resources to do that is going to be a key part of our growth strategy moving forward. I see there's 1 or 2 more questions. There's a question here in regards to who we're targeting for customers in regards to Locate2u. Yes, we're very much targeting larger enterprise businesses. We've historically focused on small, medium-sized companies. We had some large businesses. But now what we're seeing is there's a real shift in demand from these larger businesses, and we want to make sure that we focus all of our efforts on these larger businesses. These larger businesses require substantially more software, and we see a much bigger opportunity to actually capture a much larger amount of revenue. With a number of our enterprise customers today, one example where a customer started spending $20,000 a month with us is now spending $50,000 a month with us. And so this has happened through them working with us and coming back to us saying, "Hey, we've got this particular problem inside of our business," and us being able to solve that problem and provide them with additional licenses to be able to do that. And so being able to grow inside of the existing customers is a real key part of our strategy. And where someone joins with us for one aspect of our platform, but then is able to grow into additional modules that we make available to them. There's another question here regarding are we noticing any slowdown or impact on customers from the economy or any slowdown in the economy at all. We're not seeing that at this point in time. And in fact, a slower economy is quite positive for our business. This is because a lot of our customers are looking to how they can reduce cost base, optimize the way which their business is actually operating, and this is exactly what we help them do. We help them to be able to streamline what they're doing, to do more with less staff and less cost and to provide their customers with a better experience. And so I think what we will see is where customers are looking to reduce that cost base, we can definitely assist them in being able to do that. Thanks, everyone. I think that's the -- all of the questions. Let's give it another second. Yes, it looks there isn't. So yes, thank you, everyone, for joining today. We'll look to update you shortly with an update in regards to our refinance, which will come out in the next couple of weeks. And as new things eventuate and occur with some of these enterprise customers, we will make announcements where we can regarding that and keep you updated. But otherwise, we'll be updating the market at our AGM towards the end of November, and we'll make an announcement regarding the timing of that. I think it's already been announced at the 23rd of November, I believe, Monday. But thanks, everyone, for your ongoing support and look forward to updating you next quarter and keeping you updated on the business. Thanks, everyone, for your time today.