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

Taking on the role as CEO. I look forward to meeting many of you over the coming months. While leadership has changed, our strategy has not. Our focus remain on disciplined execution, growing recurring revenue, increasing customer value and delivering innovation solutions that solve real problems for our customers. Joining me today is Andrew Balgarnie, our Chief Strategy Officer. Andrew will take you through the quarter in more detail, after which we will open the session for questions. Andrew, over to you.

Sorry about that, everyone. Good morning, everyone. Thank you for joining us today. I'm Andrew Balgarnie, Chief Strategy Officer at Trade Window. Today, I'll walk you through our first quarter results for FY '27, the period ended 30 June 2026. These numbers are unaudited, but they give a clear picture on how the year has started. I'll cover our overall financial performance, what's driving average revenue per customer growth, and then I'll provide an update on Freight AI. I'll leave time at the end for questions. In summary, the quarter has looked a lot like the quarters before it, steady, consistent growth. Let's start with the headline numbers. Trading revenue for the quarter came in at $2.7 million, up 18% on Q1 of last year. Annual recurring revenue reached $10.4 million, up 17% on the same period last year. Now some of you will be thinking that's a similar growth rate to what we've been reporting for a while now, and you'd be correct. And the consistency is deliberate. We're not chasing one-off spikes. We're building a base of predictable recurring revenue that is growing steadily quarter-on-quarter. What's driving growth hasn't changed either. It's the same 3 levers we've talked about at our full year results in May, new customer sales, deeper product adoption from existing customers and price increases that as customers move on to our refreshed trade window freight pricing plans. Gross margin has held steady at 63%, unchanged from the last quarter. And that stability reflects the fact our trade window freight cloud migration is now winding down. So better -- so we'd expect that line to be a source of stability rather than drag going forward. On customer count, we sit at 546, which is down 1 customer on the prior quarter. We're deliberately prioritizing customer quality over volume. Our focus is on mid-market and enterprise-sized customers who get more value from our solutions. They spend more, they stay longer. A slightly smaller customer base generating higher revenue per customer is a trade we're comfortable in making. And that leads on to retention. Our customer retention rate is 90%, up 1 percentage point on FY '26. For an enterprise software business, this is a strong number, and it tells you something important. Once customers use our solutions, they stay. And that stickiness is the foundation on which our growth is built upon. I want to spend a little bit more time on ARPC, because I think it's the number that best tells the story about where the business is heading. Shipper ARPC is $36,447 per annum, which is up 20% on the prior year. Freight forwarder ARPC is $16,480 per annum, up 19% on the prior year. We're growing it because our existing and new customers are paying us more because they're using more of our solutions and because we've refreshed our pricing to better reflect the value we deliver. It's a healthier growth model than just pure customer acquisition. For one, it's more capital efficient because we're not spending heavily on sales and marketing to chase volume. And it's more durable because it's built on deepening customer relationships with customers who already trust our solutions. The mid-market and enterprise focus is central to this. These are organizations with more complex trade and freight operations, which means more opportunities for our solutions to add value, whether that's through document automation or compliance workflows. Now let's talk about Freight AI because this is an area that investors ask us about the most. It's central to our growth strategy over the next several years. Our capitalized R&D spend on Freight AI grew 25% over the quarter to $800,000 as of 30th of June 2026. That investment is going into building the foundations for embedding AI directly into trade workflows. It's not a bolt-on feature. It is going to be core to how our new platform operates. Specifically, what we're building is the ability to automate document ingestion, job creation, customs preparation and exception handling. If you think about what a freight forwarder shipper currently does manually today, which includes checking documents, keying data across systems, tracing down exceptions, that's exactly the manual effort we're targeting. Freight AI moves us from digitizing that work to actually automating it. As previously guided, the initial commercial rollout for Freight AI is targeted for September 2027, and that time line hasn't changed, but we're not waiting until then to start delivering value. Over the coming months, we'll begin progressively introducing AI-enabled workflows into our existing trade window freight solution, which is already used by around 300 freight forwarders. So these customers will start to see the benefit from this technology well ahead of the commercial launch of the new solution in September next year. We believe that a staged approach mitigates the risks associated with deploying new technologies. It means we're learning from real customer usage before the main rollout. And it means the value of AI-enabled workflow starts showing up in the business well ahead of September 2027. In summary, we've delivered what we said we would this quarter. Trading revenue is up 18%. ARR is up 17%. ARPC is growing strongly in both customer segments. Our gross margin is stable and our customer retention is solid at 19%. For the rest of FY '27, our strategic priorities haven't changed. We're continuing to focus on mid-market and enterprise customers on growing revenue through our refreshed pricing plans and on building out our Freight AI product as the next major driver of growth. We remain well capitalized, which gives us a runway to keep executing on that plan without distraction. Thank you for your continued support. And we will now take questions. We will start with the questions that we've received in advance, and then we will take questions from anyone in the live audience. So Dewald, over to you with the first question we received in advance.

Thank you, Andrew. We've received a question from Rob Chamberlain. And the question that Rob submitted was WiseTech announced a $10 million purchase of frdm.ai yesterday to accelerate its advance and talk a good game on how beneficial it will be for them. With Trade Windows delivery of its own AI assistant in approximately 1 year's time, does this take Trade Window from leading the AI race to lagging? And will it negatively affect Trade Windows appeal to new sales now that WiseTech has the AI tool ahead of Trade Window? Plus, can we also speak about how our AI project is coming along as in on budget and on time. And then obviously, Rob mentioned, I suspect we will cover this in the webinar already. May I just start off to say thank you, Rob, for that question. Look, we know WiseTech's acquisition from FRDM.ai. It's important to understand that FRDM is not an AI freight forwarding platform. It's a supplier risk and compliance intelligence platform, which is designed primarily for procurement, sourcing, legal and compliance teams to help organizations manage supplier risk and responsible sourcing and regulatory obligations. Whilst those capabilities are relevant for certain global supply chains, they are not currently a primary investment priority for our customers that we serve. We therefore don't see the acquisition changing our strategic focus on competitive positioning. Our freight AI road map, as Andrew mentioned, is focused on a different challenge, automating operational trade flows such as document ingestion and job creation, customer preparation and exception handling and enabling our freight forwarders as well as importers and exporters to process work faster, more accurately with less manual effort. So we don't view this as an AI race. WiseTech has strengthened its supplier compliance offering, whereas we are embedding AI into our operational core for freight execution. They're solving a different customer problem to the one we focus on. And just to mention, our freight AI development continues to progress well and remains on schedule and within budget. The second question that Rob had was, if you mentioned -- if you haven't mentioned it already, can you speak about the current growth in new customer onboarding in Australia and the pipelines ahead there? On that one, I can mention that we're pleased with the continued momentum in new customer onboarding during the quarter in Australia, supported by growing pipeline of qualified opportunities across both new and existing customers. Our focus remains on disciplined execution, converting those opportunities into recurring revenue and continuing to deliver solutions that address the operational priorities of our customers. Our pipeline and guidance go hand in hand, and we are confident in delivering that range. Those are the 2 questions that I've received, Andrew. I don't know if there's anything else that came in.

Yes. We've got some additional questions come in. So the first one I see it's around the Middle East and the question is specifically. What impact are the Middle East shipping route issues having on your business recently now and anticipated over the rest of the financial year? We had the same question last quarter, and we haven't seen much change since then. So we don't have a huge exposure to the Middle East through our customers. So the main trading routes for our customers tend to be China, the U.S., Europe. Those who do ship to Europe, we know have started rerouting shipments through other parts of the world. So we're not overly exposed. I think we're no more or less exposed than any business that's in supply chain. I guess the main exposure there being the cost of fuel. And so freight increase in price, but that doesn't tend to affect our operations whatsoever. So yes, there's no noticeable impact to date. Further question from Michael [indiscernible] is great that you're implementing and improving the use of Freight AI. My question is twofold. Where are your key competitors with AI? And do you feel that they are in front or behind you in this regard? Do you believe AI is a risk to your overall business model, potentially reducing or removing the need for trade window products? It's also a question we get asked a lot. So what we find is our customers are very much in the compliance space. If we think about freight forwarders and especially the mid-market players that have a customs brokerage element to it. That role isn't shined in legislation in many jurisdictions around the world and that a customs broker needs to make a lodgement because someone needs to be accountable. So unless the law changes that allows AI to make lodgements, we don't see the human being removed from the loop. And so in that regard, AI actually becomes an enabler. It helps customs brokers and freight forwarders get through more work. And so we don't see that AI will be taking over anytime soon. So we're most definitely embracing it within our business and within the products that we're delivering to our customers. A further question is, do you think increasing your sales team and/or marketing efforts would deliver improved ROI in terms of sales and margin versus the associated sales and marketing costs? I'll hand this one over to Dewald.

Thank you, Andrew. Can you just repeat that one quickly, sorry? Do we think.

Yes. Do you think increasing your sales team and/or marketing efforts will deliver an improved ROI in terms of sales/margin versus the associated sales and marketing costs?