Trade Window Holdings Limited (TWL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Trade Window FY '25 Half Year Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. A.J. Smith, CEO. Please go ahead.

Good morning, everyone. Thank you for joining today's presentation of Trade Windows half year results for financial year 2025. We will be presenting a series of slides that have been released to the NZX and are also available on Trade Windows investor website. Before proceeding, I would like to direct your attention to Slide 2 and the important notice regarding this presentation. I'm now on Slide 3. I'll start with an overview of our financial results and the strategic progress we have made as well as cover the prevailing market conditions. Deidre will then provide more detailed information on the financials before I finish with our outlook. There will be time for questions at the end. I'm now on Slide 4. I'm pleased to report a successful first half of the financial year ended 30 September 2024. We've extended our record of unbroken quarter-on-quarter revenue growth since listing on NZX in November 2021. We've carried momentum from the first quarter FY '25 to deliver a half year result that allows us to narrow our guidance range upwards to $7.5 million to $8.3 million. Our confidence comes from strong trading revenues at $3.7 million, up 22% on the half year result of FY '24. Annual recurring revenues have grown 14% from 31 March 2024 to reach $7.2 million. The growth in ARR reflects our increased focus on winning larger enterprise customers that offer more predictable trading patterns irrespective of the business environment. Our EBITDA loss for the year was $1.3 million, down 73%, while the net loss after tax reduced to $2.4 million from $4.8 million. We remain on track to deliver monthly EBITDA breakeven in March 2025. Monthly average cash consumption reduced from $400,000 in the second half of last financial year to $200,000 in the first half of the financial year 2025. We ended up first half of the year with cash and cash equivalents of $500,000 with another $300,000 yet to be received from the shareholder approved delayed settlement from the capital raise. I'm now on Slide 5. Trade Window is committed to financial sustainability while focusing on 3 strategic pillars. Our sustainable and targeted R&D program ensures a continuous pipeline of new features and functionality. By fostering long-term trusted partnerships, we enable customers to gradually adopt additional Trade Window solutions as their business needs evolve. Our origin and tariff solution provide a low friction pathway for acquiring new customers with short onboarding time lines, allowing them to quickly realize value. I'm now on Slide 6, which provides further metrics on our financial performance for the first half of the financial year. Our key customer segment continued to grow both in terms of revenues and customers. The average revenue per customer, ARPC, for shippers was up 14% on the same time last year to $1,944 per month. Our Shippers segment performance is underpinned by strong export trade volumes. One of our largest exposures is to the red meat sector, which includes ANZCO, AFFCO, Alliance and Silver Fern Farms. Over the first half of the year, the Meat Industry Association has been reporting solid export volumes, an increase in demand from the U.S. and other key trading partners has offset the downturn in shipments to China. Our freight forwarder segment received a boost with several large enterprise freight forwarders in Australia adopting our improved Trade Window freight e-commerce module. This saw freight forwarder ARPC grow by 29% year-on-year to reach $824. Gross margin held steady from the first quarter at 61%, up 7 percent points on the prior year. Our ongoing focus on continuous improvement provides new customers with a more streamlined onboarding experience enabled through automated workflows. Our customer numbers jumped 36 on the prior year to 549. Many of these new customers come from a new partnership agreement with Sydney-based industry body, International Forwarders and Custom Brokers Association of Australia or IFCBAA. The partnership covers our tariff solution, which is a business-critical cross-border compliance tool that allows users to find all relevant information on the tariff and search and validate commodity classifications, duty rates and other regulatory notices. Customers we win typically stay with Trade Window for the long term. The customer retention rate of 97% reflects the critical nature of our solutions, each essential tool for facilitating international trade. Our drive towards profitability has limited spend on research and development. With a modest budget, we have been able to deliver new features and functionality, which will help us fuel further revenue growth. I'm now on Slide 7. Over the first half of the year, we have continued to add leading brands to our customer base. We are starting to see the network effect play out with customers connecting their supply chain partners. Meat Exporter Alliance Group has adopted Cube to seamlessly share export documentations via an API with a customer COFCO Joycome. This represents a significant milestone with COFCO Joycome being part of one of the world's largest agriculture business groups. COFCO Joycome can now seamlessly retrieve export documentation directly into its international business integrated system, approve them and send them back to the exporter without needing to manually lock into Trade Window Cube. The status updates, approvals and document changes are instantly reflected for exporters to review all through the integrated systems. We are confident that demand for the integrated experience will continue to increase exporters, gain a competitive advantage from the cost of operational efficiencies delivered by Cube. I'm now on Slide 8. Trade Window's revenue growth in the first half of the financial year has been driven by securing several large enterprise customers in Australia. These customers provide substantial revenue and long-term stability through valuable contracts and enhance our market presence. By offering business-critical solutions that address the complex needs of these enterprises, we have established ourselves as a trusted partner in their digital trade information transformation. The expansion into Australia has been pivotal to our success as the market offers numerous potential customers with similar requirements to those we already serve. Partnerships have been a key driver in increasing our customer base. Our collaboration with the International Freight Forwarders and Customs Broker Association of Australia led to 32 freight forwarders subscribing to our Tariff solution, highlighting the importance of the strategic partnership and expanding our market reach. Looking ahead, partnerships will continue to drive our revenue growth. Collaborating with industry organizations allow us to extend our sales reach without significant capital investment. The synergy between our product expertise and our partners' local market knowledge creates a powerful combination. I'm now on Slide 9. High-quality revenue has 3 main characteristics: profitability, predictability and diversity. Trade Window delivers on all 3 of these objective measures. We covered our profitable unit economics on Slide 6 with growth margins increasing by 7 percentage points to 61%. Our revenues are highly predictable with 95% recurring underpinned by international trade, which is the bedrock of Australian and New Zealand economies. On the measure, we are 17 percentage points above the median of 78% for ASX-listed growth pre-profitable companies. And that source is the Ord Minnett technology sector update from June 2024. At 97% of our rate of customer retention is also market-leading. This is an important element of delivering profitability. Our retention rate is a good proxy for customer satisfaction and loyalty to our solutions. We are now on Slide 10. Trade Window is a growth company. As such, we must continue to forge ahead with targeted research and development initiatives. We recognize the constraints of the current capital market, and this has guided our selection of projects we believe can deliver revenues in the near term. I'm especially proud of the resourcefulness demonstrated by our team to deliver complex solutions under tight capital constraints. In addition to the Cube importer API connectivity mentioned earlier, the team has delivered a significant upgrade to Trade Window freight e-commerce module. The recently released e-commerce API allows conveyor belts to get the cargo status of each parcel and then direct the parcel to the appropriate channel. Conveyor belts replace or supplement handheld scanners for high-volume e-commerce sites. The API also allows third-party software to integrate to Trade Window freight and get customs clearance status of parcels. Our Cube CO2 tracking is fast becoming a business-critical tool as regulation moves international trade into the net zero era. For new functionality within Cube enables exporters to obtain detailed metrics for measuring any container's carbon footprint, including emissions from the entire container journey and emission intensity. We recognize the importance of standards to ensure credibility of reported metrics and have designed our solution to comply with the Global Logistics Emissions Council framework. I will now hand over to Deidre to cover the details of our financial results.

Thank you, A.J. On Slide 12, we're looking at our overall financial performance. A.J. has already covered the key points. However, I would just like to highlight, firstly, the positive impact the revenue growth, combined with the cost reductions has had on reducing the EBITDA loss 73% from $4.7 million to $1.3 million and that we remain on track to deliver monthly EBITDA breakeven in March 2025. On Slide 13, we're looking at a breakdown of our revenue by type and geography. We've mentioned the top line revenue growth. So just a couple of points from me. In the first table, you can see that the recurring transactional and subscription revenue is stable as a proportion of trading revenue and represents 95% of the total. This compares with 94% in the last financial year. And in the second table, our efforts to expand in the Australian market are reflected in the 41% increase in the Australian revenue, while we continued focus on the New Zealand, which has delivered a 10% lift. We're now on Slide 14, where we set out monthly average revenue per customer or ARPC in more detail. Monthly ARPC for our Freight segment was 29% up. This reflects the continuing trend of higher-value new customers who are licensing more modules and users than past customers as well as existing customers adding more modules and users. And as A.J. mentioned, notably in this result, there were several large Australian freight forwarders adopting our freight e-commerce module. Monthly ARPC for shippers, that's our exporters and importers, was up 14%, also reflecting customers using more of our services. We have also effectively passed on cost inflation to our customers with higher prices. And this has assisted the lift in ARPC in all categories whilst maintaining a high customer retention rate. Slide 15 provides details on our operating expenses, in particular, staff costs and numbers. The successful implementation of the business reorganization is reflected in the 36% reduction in employee costs. This represents a 29% reduction in staff numbers. Our team in the Philippines continues to provide us with a great channel of talent, including software development and customer support, and we're very pleased with their performance and effectiveness. Other costs are down 32% following our reduced innovation and market development activity. And just a reminder, as with past periods, we've not capitalized any R&D onto our balance sheet. Moving to Slide 16, which provides the high-level detail on our balance sheet. And just noting that total assets are down 6%, reflecting the noncash amortization of our intangible assets, while lower trade payables, which are the result of the cost reductions we've implemented are the key driver in the reduction of total liabilities. Moving on to Slide 17. We're looking at cash flow. Receipts from our customers grew by 29% to $4.1 million, while payments to suppliers and employees reduced 29% to $5.3 million. These improvements combined to further reduce our average monthly cash burn from $700,000 per month in the first half of the 2024 financial year, that's last year to $400,000 in the second half of last year to now down to $200,000 per month. Finally, as mentioned previously, we remain on track to deliver monthly EBITDA breakeven in March 2025 and forecast to have sufficient cash runway to take us through to this point. I would now like to hand back to A.J. to take you through the outlook.

Thanks, Deidre. Lastly, turning to our outlook on Slide 18. We are continuing to see strong demand from exporters, importers and freight forwarders seeking cost efficiencies from technology and needing to meet new regulatory standards. We reaffirm our guidance with trading revenue for the year ending March 2025 to range between $7.5 million to $8.3 million. As always, our guidance for FY '25 is subject to changes in the macroeconomic environment and the timing of customer onboarding. We continue to target the achievement of monthly EBITDA breakeven in March 2025. With momentum going in the second half of the year, I'm optimistic that we can deliver to win new customers and drive revenue growth in Australia. With that, I would like to open the call for questions.

[Operator Instructions] There appears to be no questions at this time. I'll now hand back to Mr. Smith for closing remarks.

Thank you, everyone, for joining us today. Should you have any further questions, please do not hesitate to reach out to any of the team. We look forward to providing a further update on our third quarter trading in the new year. Thank you so much, and have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.