Smart Parking Limited (E8Q.F) Earnings Call Transcript & Summary

Welcome, everyone, to Smart Parking's Annual General Meeting, which is all by Zoom, a virtual meeting. And welcome to -- sorry, I got the script now -- virtual shareholder of Smart Parking. My name is Chris Morris, and I'm the Chairman of Smart Parking, and I'll be chairing the meeting today. I would like to introduce my fellow Directors and Company Secretary, who are present at the virtual meeting. Paul Gillespie and Richard in the Melbourne office. Fiona is somewhere, we're not sure, but she's on the thing. And Jeremy, I think, is in Australia and not in Canada. Mr. Richard Ludbrook, our CFO and Company Secretary, also in attendance. I would like to also welcome the company's auditor -- auditors, Grant Thornton. I advise the meeting that there's a quorum present, therefore the meeting is properly constituted, and I declare the meeting open at 10:04 in Queensland, and 11:04 in Melbourne and other places in Australia. If shareholders wish to ask questions during the meeting, I confirm that there will be an opportunity before putting any resolutions to the meeting to ask questions of the board as it related to formal items of the business of this meeting. If you wish to ask questions, please do so by typing a question into the chat function in Zoom. We ask that when typing a question, shareholders include their name, so that the Board can properly address the shareholder. All questions in the first instance are directed to me as Chair. Please note that while you can submit questions from now on, I will address all questions at the same time at the relevant stage of the meeting, which will be after all the items of business and proxy positions have been presented. The Notice of Meeting contains details of how to vote is also shown on the screen. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you're eligible to vote at this meeting, a voting icon will appear on your screen. Selecting this icon will bring up a list of resolutions and voting options. To cast your vote, select 1 of the options. There is no need to hit a submit button as the vote is automatically recorded. You do, however, have the ability to change your vote up until voting closes. I now declare voting open on all items of business. Please submit your votes at any time. Proxies. Please refer to your screen for a summary of the proxy votes received for each resolution. Where a valid proxy vote has been given to the chair, without voting instructions, please note that in all cases, I intend to vote in favor of the resolution. Information on how to access the Notice of Meeting and explanatory statement dated October 10, 2025, was distributed to all shareholders, and I will take that notice as read. All resolutions contained in the notice of meeting and to be put to matters today, will be displayed on your screen, so I will not read out each proposal resolution. We will now move on to Resolution 1. Resolution 1, the resolution terms and the proxy votes for Resolution 1 are shown on the screen. Are there any questions on the Resolution? This is the adoption of the Remuneration Report. Give you a couple of minutes. No questions. I will now put the resolution to a vote. [Voting]

Resolution 2, approval to adopt employee incentive scheme. The resolution terms and the proxy votes for Resolution 2 are now shown on the screen. Are there any questions on this resolution? No questions. Okay. I will now put this resolution to a vote. [Voting]

Resolution #3, allocation of equity to managing director under the employee share scheme. The resolution terms and the proxy votes for Resolution 3 are shown on the screen. Did quite well there, Mr. Gillespie. Are there any questions about this resolution? I now put the resolution to a vote. [Voting]

Resolution 4, re-election of Director, Jeremy King. The resolution terms and the proxy votes for resolution form are shown on the screen. Does anyone want to have a chat with Jeremy? Do you want to say anything, Mr. King?

I'm interested to understand the $13 million against. But no, I'm very happy to be reelected, and I think the company and the Board are doing some wonderful work. My role is -- my background is legal and corporate. So I look at things through that lens effectively. And I'd like to think I'll give some reasonable support to the executive as they're making their way through building the business and particularly looking at acquisitions. Yes.

Yes. How long have you been on the Board, Jeremy?

I think it would be -- is it 10 or 11 years.

Yes. Since we converted from an investment company to Smart Parking.

That's correct. I think I just joined the board a couple of years afterwards. But yes, I think originally, I was the Company Secretary when we did that.

Okay. I now put this resolution to a vote. [Voting]

Other business. That concludes the resolutions to be voted on today. Could all shareholders voting online, please ensure you have submitted your votes. I will now pause to allow you time to finalize votes. [Voting]

Thank you, everyone. Voting is now closed. The results of this meeting will be released to the ASX later today. We've now completed the matters contained in the notice of the Annual General Meeting of Shareholders, and I declare the meeting closed. Mr. Gillespie, our famous CEO, will now give a presentation. And then you'll be -- following that, you'll be asked -- you'll be able to ask questions. Paul?

Thanks, Chris, and good morning, everyone, and thanks for joining our Annual General Meeting for 2025. Today, I'm pleased to update you on the progress we're making as we execute our growth strategies. This execution strength is a key driver to our long-term earnings performance. Over the last couple of weeks and ahead of some broker presentations, we released an updated slide pack to the ASX. It includes a review of the FY '25 and a trading update on the first quarter of FY '26. Today, I'll update those slides in order for today's meeting to share with you. You will see in this deck that we're building the foundations for multiyear growth. We've made a strong start to the new financial year, and we have momentum and tailwinds going into the second half of FY '26. As usual, after today's presentation, we'll be very happy to answer any questions that you may have. But let's start on Page 2, please. FY '25 continued our strong growth trajectory, delivering record results supported by a transformational acquisition in the U.S.A. Smart Parking has again demonstrated that its fast-growing, profitable and cash flow positive company with the ability to scale in large markets and self-fund our organic expert -- our organic expansion. We have robust technologies and the capability to deliver long-term sustainable growth. On Page 3, where we -- if we take a look at Page 3, we can review our record results for FY '25. The last financial year, revenue increased by 42% to $77.2 million. Adjusted EBITDA was up by 47% to $20.5 million, and earnings per share rose by 37%. We generated adjusted free cash flow of $13.3 million and finished the year with a strong balance sheet and cash of $12.7 million. While the results are impressive, we're still very early in our growth journey. Our markets are nascent. We feel we're at the forefront of driving industry change, raising standards and delivering better outcomes for site owners. Our opportunity is to scale quickly and entrench Smart Parking as a leading technology provider of parking management solutions across major markets. So how are we progressing and building scale across these markets? U.K., our largest market today continues to grow, and we have impressive contributions from the new territories. Revenue in the U.K. was up 19% to $52.5 million, driven by new site additions and a broad base of new business wins. We issued 13% more PBNs, which is consistent with the year before and closed the year with 1,335 sites under management, which is an increase of 19% on the PCP. EBITDA increased by 17% to $16.7 million. These are solid results in a core market. Our U.K. business has a long growth runway. We estimate the TAM is around 45,000 sites with our market share of less than 3%. So we have plenty of scope for growth. We also have substantial growth opportunities in the new territories. In particular, our New Zealand business is a highlight. It continues to perform strongly. Revenue was $7.4 million for the year, up 62%. Adjusted EBITDA increased by 128% to $3.2 million, and margins are the highest in the group at just under 43%. We closed FY '25 with 238 sites under management in New Zealand, that's up 47% on the PCP, and we delivered 48% growth in PBNs. The business has more than doubled in 2 years. Once again, there is substantial scope for long-term growth. With the TAM of 3,000 sites, we have less than 1% of the addressable market. In Germany, growth is accelerating. Revenues for the year increased by 60% to over $4 million. PBNs were up 37% and the number of sites under management at June 30 was 107. It's a good milestone. While we continue to invest, scale is building, and it will deliver profitability in the near future. We sell our operation in Denmark in February of 2024, and now have a sales team and a structure in place. The business has performed to expectations and generated revenues of $1.3 million in the period. At the year-end, we had 48 sites under management and a strong pipeline to convert. However, as we highlighted at the full year, there have been changes to the regulations around PBN issuance in Denmark. After discussions with the transport departments, they have decided that the first notice to keeper or the PBN in the enforcement process should be placed manually. Whilst this has added some cost to the business and also slowed our progress with PBN issuance as we adjust our operations, Smart Parking is well positioned to respond with proprietary technology to drive efficiency. Elsewhere, we continue to expand our footprint with a new business in Switzerland. We see this as a constructive market and a natural extension to our growing European operations. We've recruited a well-qualified Managing Director to lead the business and are busy setting up our operational structures to support scale. We have recruited sales and operational people so we can win customers and commence revenue generation very soon. So overall, Smart Parking is well placed to continue to grow in existing and new markets for many years to come. Of course, as we grow the number of sites under management, our revenue and earnings will also grow significantly. So after a series of successive record results, what is Smart Parking today? Well, we are a leading technology-driven service provider to the parking industry in the territories in which we operate. At September 30, we had 1,799 sites under management, that site growth of 31% on average over the last 7 years. I'll note that figure does not include the 71 locations we removed from Queensland during the first quarter. We employ over 330 people globally with 90 heads now in the U.S.A. It's important not to forget that at our heart, we are a technology company. Our systems and platform are proprietary and are the foundations of our ability to scale across multiple markets. Our growth strategy is consistent. You would have seen this slide many times before. But to recap, we aim to drive long-term value creation through strong organic growth in existing territories, build scale in new territories with constructive regulatory settings, and complement this with selective accretive acquisitions. I can tell you that as a CEO, there is great value in our strategic consistency. It allows us to focus on execution. Everyone at Smart Parking knows their role in the process, which allows the team to work seamlessly. We build discipline to drive performance with everyone in the team pushing in the same direction. This is one of the keys to our success. This playbook has enabled us to expand over the last 4 years into 5 territories, complete 5 acquisitions and increased revenue from $23 million in FY '21 to over $77 million in FY '25. In FY '25, we made further progress. We surpassed 1 million PBNs issued, which is a significant milestone for us. We delivered double-digit revenue growth in 3 original markets, the U.K., New Zealand and Germany, and we established a beachhead in Denmark where we can build our presence across Scandinavia. In February, we entered the largest parking market in the world, the U.S.A., through a highly attractive acquisition Peak Parking. This acquisition has already contributed immediate accretion to earnings and provides a significant point of difference against local competitors by enabling the implementation of our market-leading proprietary SmartCloud AI engine. The acquisition was funded by a successful equity raise in the $45 million through fully underwritten placement and entitlement offer. We thank the shareholders support and mandate for growth. Through our entry into new territories, we've expanded our total addressable market opportunities to over 250,000 suitable sites. Given the size of the U.S. market as well, that figure is arguably conservative. Our goal is to execute on the opportunity and deliver sustainable growth that will endure for years to come. The key to delivering our exciting future is our ability to grow and win market share in large markets. So let's reflect on why we win. First, we solve an important problem for our clients. We enhance returns for site owners. We ensure genuine customers always have a place to park. We increased footfall and turnover without any need for them to invest capital expenditure, and we do this in a compliant and constructive way. Second, we have invested in and developed market-leading technology, of course, that there are 2 parts to this. First, SmartCloud enables a collection of huge amounts of data from the whole estate, processes play images and payments, generates all contraventions, communicates with government agencies, issues the breach notice, manages the appeals process and customer interaction. And finally, deals with the debt resolution process. This is the back-office solution that drives our business across all our operating territories. Second is Smart Hub, which we launched last year and is the customer-facing portal that provides our clients with data analytics, flexibility, and deep insight into their parking location. This is a unique level of control that we give back to our customer that allows them to see exactly how the site performing. It also provides instant access to data, something that is -- something that the vast majority of landowners have never had before. This data and reporting are competitive strengths. The car park is often the first entry and engagement point our clients have with their customers. It's a lead indicator of business performance, the data is both insightful and value to our customer base. Our technology separates us from the competition and gives us a significant competitive advantage across all markets in which we operate. The technology is the cornerstone of a highly efficient industrial strength and scalable activity system, which we've created. This activity system includes another key strength, our disciplined sales process. We leverage our deep domain expertise, regulatory strengths and proprietary technologies in a systematic way to build the estate. We target attractive sites and optimize performance across the estate and we diversify our portfolio across sectors and landlords to reduce contract risk. In summary, we've created a deep moat that sustains our competitive advantage and drives our superior long-term performance. So have you seen our operating activity system is highly scalable. What is the financial model that underpins smart parking success. SPZ is capital-light with attractive incremental margins and high returns. We invest approximately $18,000 installing technology at each site to which we retain ownership. We typically see a payback on this of 9 to 10 months compared to a contract life of 3 to 5 years. Each new site generates an incremental EBITDA margin of 55%, which drives our long-term margin expansion. We generated strong positive cash flow and can self-fund our organic growth strategy. So we've covered our products, our service, our strategy and FY '25 performance. So let's now turn to the first quarter trading update on Page 11. I'm pleased to report that Smart Parking has started FY '26 well. We've maintained our strong exit run rate from FY '25 and growth is continuing across our major markets. Three points today before we get into the numbers. Number one, Q1 does include a full contribution from Peak Parking, which is not in the PCP. Second, it also includes all start-up costs in Switzerland. Again, they were not in the PCP. And three, I will remind you that Q1 is a seasonally positive quarter for the Northern Hemisphere with the Northern Hemisphere holiday season, increasing foot traffic across some of our areas of the estate in July and August. That said, revenues for the first quarter were up 69% compared to the PCP. Adjusted EBITDA is up 56% at $7.9 million. PBNs are up 10%, and we have 21% more ANPR sites in the estate on average this quarter compared to the first -- compared to the first quarter last year. And we closed the quarter with 1,799 sites under management. I'll close this slide on the improvement in our ticket yield and the average PBN value. Despite lower PBN issuance in some areas, the average PBNs value in Q1 was up 17% -- 17% on the quarter. This is significant. To achieve this, we've upgraded and advanced our debt resolution processes in the U.K., we're just delivering a higher recovery rates. We look forward to that continuing process into H2 and beyond. If we touch on the performance across our markets now for the first quarter. The U.K. had a good quarter with average value per PBN increasing by 19%. Site installations also increased by 18% with a strong pipeline for further growth. In the U.S.A., we made a good -- we've made good progress with conversion of peak sites or summer peak sites to our ANPR technology. Ten sites are now installed and 8 are issuing PBNs to date. The pipeline is growing and the local team are busy executing on their plan. New Zealand delivered a very pleasing result. We saw 48% growth in PBNs versus the PCP. Total site installations were up 47%. And like the U.K., there is a good pipeline in place. Germany is tracking well to turning profitable. PBNs increased by 34% with 65% growth in site installations. In Denmark, we now have over 50 sites installed. The changes in regulations since we commenced have delayed our profitability time line, but the market remains attractive due to the high PBN values and exceptional payment rates. We aim to use Denmark as an operating base and a growth base to go across Scandinavia in the future. We started operating in Switzerland in July, and the recruitment of the team is now complete. We're building the sales pipeline and expect to commence revenue generation shortly. And finally, on this slide, as I highlighted earlier in the call, during the first quarter, we removed all 71 ANPR locations from our Queensland customer base and shifted the technology to New Zealand for redeployment. Whilst this is an unusual churn event, it will be listed as churn. However, usual churn can be broken into 3 areas. The first one, the largest one being voluntary. This is where we removed the sites at our -- for our reasons, if it's not performing in order to optimize the return on capital. This represents around 50% of all churn events. The second point to be seen is change of operation or change of use. This is where the location may be sold for redevelopment or the site operations change. This will account for around 30% of churn events. And finally, there's also the customer churn, which is where the customer may exit contracts towards the end of their life. This accounts around 20% of the events. It's worth noting that FY '25, the total churn for the group was 62 sites, which is 3.5% of the total installation base. It's clear to me that we're totally focused on customer service and delivery. This has demonstrated with the low exit from customers. I'll now move to the last slide and talk about the year ahead. Having started the year well, FY '26 promises to be another successful year of growth and record results for SPZ. We've expanded our pipeline of opportunities across all our major markets, and enhanced sales capability to convert interest into new partnerships. We'll continue to drive growth across our markets and have years of growth ahead of us in the U.K., Germany, New Zealand, Denmark, Switzerland and the U.S.A. We will continue to deploy capital carefully as we invest in growth and make further disciplined acquisitions to build on our scale and strength. With this growth and momentum, we confidently reaffirm our long-term organic site growth target. By December 2028, we expect to have 3,000 ANPR sites under management. It took 10 years to reach 1,500 sites under management and we expect to take only 3 years to effectively double the business again. In short, Smart Parking is accelerating. So in growing to this new target, we will continue to focus on the disciplined execution of our growth strategy, which will serve Smart Parking, our shareholders, our employees and our customers so well. Thank you. That now concludes my presentation. Then we can open the line for some questions. So I'll hand back to you, Chris, to -- if there's anything to add.

Thank you, Paul. Richard, can you sort of manage your questions online?

Sure. Yes, yes. So question from Angus Robertson. SPZ claims to offer customers differentiated and superior service. Could you please explain and expand on this to shareholders?

Claims -- claims, I think we do. I have a claim to say we do, we actually did. So we have -- obviously, we can go back to Slide #8, please, Stacy?

Can anyone see the slide? I can't. It disappeared for me.

So I guess what we have here is obviously we've highlighted the activity system in which Smart Parking delivers. If we compare what we provide, particularly our technology and we've built everything around the SmartCloud solution, or SmartCloud solution certainly runs the business, then, of course, we have the front-facing customer portal. These types of solutions are very unique in our industry. So very few of our competitors have this type of technology. Some may outsource a customer portal to another technology provider who are not an operator. But the majority of our competing -- given the competitive environment do not have this level of technology, do not have the ability to scale the way we do. So that offer is something very, very different. But what differentiates with the customer, in particular, is the portal allowing the customers to see exactly what's going on, on their location at any time, whether it be the number of cars that come and go from the location, whether it be the average -- the average stay time of that particular car, whether it'd be what's the busiest time of day, managing their own wait listing, canceling breaches, that's something quite unique. So it's very different -- that is a differentiating factor with our -- in our customer base, if you like. So very few of our competitors have that. So that's the key reason.

Okay. Next question from John. Thank you for Page 9, how it works. In the 11 years I've been a shareholder, that page reveals the most about how our company generates revenue and ultimately profit. My question is, could you expand on that page a little further with details of what is the average number of CapEx basis for each added site, say on a quarterly basis, and approximately the historical or expected number of PBNs per site per annum going forward and the difference in each country.

I think the average space, we don't tend to focus on what the average spaces are John, because it doesn't really matter. To us, the service we're providing is all about generating footfall through the estate. Now whether that be a 10 space car park outside of a chemist or something or to a 2,000 space car park at a train station, it's really about how do you ensure that the right people are parking there. You get the footfall going through the estate for the customer. And also you ensure there's always a place to park with genuine customers. And so of course, a lot of what we do is removing the parking abuse, removing that people who are genuine customers. So that's really the key thing. So the number of spaces is kind of irrelevant. In terms of the historical expected PBNs per site, I guess we've highlighted it on this page.

Yes. So I guess, when we report half year results and full year results, you'll be aware there's a slide that heads the flags on them. And therefore, each country, we report sites, PBNs issue, revenue and EBITDA, so we do that already. Question 2. Does the Board now consider Australia and no-go zone for Smart Parking technology.

Well, the answer to that question at the moment is yes, because we can't access -- the regulatory environment in Australia is challenging, particularly Victoria, New South Wales and Queensland. We're accessing the keeper details that the driver vehicle license agent database is challenging. You can actually access the details in WA and South Australia via a court order. Now -- which is interesting. But unfortunately, we don't see that as a positive to us. It's hard to generate the same levels of revenue, the payback on the locations with that type of process because it takes 2 months to get those details. So we would see that as a very challenging environment and something there's no point investing our capital. There's many more countries out there that are far more interesting to investing at the moment.

And just related to how [ Wilson's ] seen our breach terms?

They do so via -- they do manually, and they do so via a court order, like I said. And if you were to dig into their numbers, which you can't because they're a private company, you would see their payment ratio is very, very low, so low 20%, because if you -- and the way I would look at it is, if I draw to a shopping center on Monday and overstayed or breach the terms and conditions, I get a parking breach sent to me by the Friday, the chance to be paying it quite high. Whereas if I do that on a Monday -- Monday, the 1 September, I get a breach until Monday, the 1 November, then the chance to be paying it is incredibly low, because there's a lot of time has passed. And the data tells us that the longer it takes a breach to get to you, lower the payment ratio will be. So it's not a -- we won't see the return on investment.

I think the next question was covered as part of your script, so that, actually in the last year was 3.5% and obviously, as the half of that was voluntary.

Yes.

Okay. From Simon, with the target 500 to 700 new sites in FY '27, what is the target by country? Also, is this the expected rate of install we should expect for FY '26?