X2M Connect Limited ($X2M)

Good morning, everyone. Apologies for the false start. We were well organized an hour ago and then a glitch this end. Welcome, and it's good to have such a broad audience for this webinar today. I'm told I can't hear -- I said an hour ago, everything was functioning very well, and we had some people doing some work in this office and that the [indiscernible]. But welcome. Sorry to keep you waiting. Great to have all of you. And I think we've got over 40 people waiting in the -- who were online. And I'm delighted to be able to share the X2M story with you. X2M is an established company. We've been in operations for about 10 years now. We are a software platform that is targeted into that smart city infrastructure space. Specialty is the utility and related verticals, so water, electricity, gas, renewable energy, and public safety. Our customers are typically governments, government enterprises, utilities and municipalities. And the company is really in a very good position, having built an extensive customer base over the last decade, and now it's harvesting that and using that as a platform to move into new markets. As we speak, we've got about 89 enterprise and government customers. We've got over 500,000 connected devices. We're putting through about 300 million data feeds a month through the platform. So what we've got is a really scalable industrial-grade platform that we've built and that we're very proud of. Our established customer base, these are customers, larger governments that have chosen to digitize represent an addressable amount of over $600 million and digitize all of their water utilities in particular and a recurring revenue base of about $40 million per annum. So it's a really strong base that we are now taking this company forward from. X2M's core platform is capable of collecting data from a broad range of devices. Indeed, the acronym we used to use before BYD was such a big brand was [ BYD ], bring your own device. So typically, we connect water connect gas meters onto the platform, pressure sensors, public safety devices, solar panels, inverters, batteries the one platform. Our specialty is that we can connect a broad range of devices and have them communicate with each other and control each other without human intervention. But today is probably known as agentic AI. We feed that data into a range of applications, applications designed to drive greater productivity, cost savings and typically applications like AI engines, billing engines, machine learning engines. And if I was to give you a very simple example in Japan, 24 million households, about half of the households in Japan are bottled gas. So if you run out of gas today, the trucks there this afternoon and the neighbor runs out tomorrow, the trucks back there, you get the story. Our technology, our platform has got historical usage data and can predict who is going to run out when. And then we have, for want of a better phrase, the Uber map to try and set out the most logical way of replacing bottled gas. The result of that [ kilometers 29% ], travel dropped 29%. dispatch days go from 6% to 5%. Fleet sites are down 10% and overall OpEx is down about 19% to 20%. So really compelling use cases. So collecting data from a range of devices, bringing it together, putting -- bringing it to quickly cheaply and sending it out efficiently for real-world applications in commerce is what we do. Typically, there's a 3-stage process. So our connected devices, as I said before, typically water electricity gas meters, inverters connect on to our platform and then our platform aggregates the data and dispatches that to the customers' applications. And we can keep our smart in the cloud or at the end of the cloud, which means we've got a highly scalable platform that has a very low cost structure to operate. And we can go back and not only collect data, but we can go back and control that end device without human intervention, as I said before. There are 3 features of our platform that make it unique. One is, as I said, the ability to collect data from any device and have them communicate with each other and control each other. So typically, a gas meter vibrating talks to other gas meters around it, there might be all different makes and brands and sizes and an earthquake and then shuts down as we did in Taiwan about 10 months ago in under 3 seconds. Keeping our [ smarts ] in the cloud or at the edge of the cloud, so highly scalable, and we can communicate over any telecommunication backbone, 4G, 5G, Ethernet and our smarts are held in our micro engine and our micro engine can say actually, I'm communicating through 4G or 5G here, and this is how I communicate. So what you've got is a future-proof technology, cheap to operate, quick and efficient to operate and one that can move into new markets very quickly without the need for lots of capital. Those that are investors in the tech space will be very familiar with the role of real-time data. Cities all around the world are getting smarter and are going smart. The reality is that their ecosystems, their technology platforms are fragmented. They and cities all around the world are looking to have unified platforms. And what that means is that there is a shift in value. And there's a recognition that those companies that can provide really smart and efficient software can deliver a lot of value to their investors. And that's what we play and where we play. So typically, our technology goes into the utility sector, into the renewable sector, in the public safety into the public safety sector to name just a few on the slide covers some of the other examples of where we operate. What's driving adoption of this technology globally? There are 4 probably areas that are big consumers of data. AI systems, you wouldn't come across a company today that is not using some form of artificial intelligence. Artificial intelligence is only as good as the data that it can collect. The movement to smart cities, and we deal in countries from India to highly advanced technology advanced countries like South Korea and Japan and the underlying story is the same. They're all looking at getting smarter and they're moving towards smart cities. Renewable energy is a very significant part of energy generation today and all components of renewable energy from generation to transmission to battery storage to trading. And there's been a lot of type around data centers, data centers need sensors to become more efficient and it needs very good supply of energy. And these 4 areas are driving demand for data or platforms like ours. If you were to dig into the smart city space, look, the forecast here range from very large to very, very large. So these are in U.S. dollars and Australian dollars is close to $1 trillion market in aggregate. What's important for us are 3 things. One is the expected growth in this sector is between 25% and 30% is about 29%. Importantly, where we are playing, the utility sector is about 27%. It's about 1/4 of that smart city ecosystem. And APAC, the geography that we play in is also a significant part. So some years ago, we chose to work target the utility sector in the Asia Pacific region. And my expectation is that history will show that, that was a good and smart decision. We have 3 product categories and all 3 are highly scalable. Our flagship product is vision. Vision is digitizing utilities, it's automating billing, it's detecting leaks and it does that to a really compelling business case. Korea is a really good example. Meter readers are becoming extensive. They're becoming unionized. Meters are in a pit underground and these pits fill up with water, berating them in the winter, meter reading inaccurate, lots of customer disputes. We have a little proprietary chip, we call it a network interface card that we can bolt on to a meter. We can collect data from that meter. We can go ahead and control it and we automate billing. And that alone pays for the technology. In Korea, they're losing up to 20% of clean billable water to undetected leaks, and we pick the leaks from home from the meter to the home and that's half the loss of expensive water. [indiscernible] is an AI platform into the renewable energy sector. We've [indiscernible] Taiwan. Taiwan is a center of excellence for our renewable energy applications. And that's got its first customers on board. It's got revenues that have been recognized, and we'll be looking to take [indiscernible] more broadly in Australia is the first market that we'll be looking to bring that in. So we'll be looking to do that in this next 12 months. [ HelpMe ], we were commissioned by the City of Seoul. Anyone who's got Life360 would want to know this. [ Help me ] is a little device, about the size of a $0.20 coin about 4x, 5x the width of it. You're out late at night and you're unsafe, scared, you put pressure on this device and immediately sends an alert to emergency services that you're unsafe. The Sydney CCTV cameras then turning on you monitor you and track you to help arrives. And of course, that alert goes to the police and it goes to do that would be on your system. The city of Seoul commissioned us to develop 100,000 of these devices. We've dispatched over 50,000 already, and we expect to do the balance over the next few months. And we're looking at broader global applications help me. On performance, the -- we've had really strong momentum this year, actually over the last 4 quarters indeed. And Q1 was 25% growth year-on-year, Q2 65%, Q3 75%. Importantly, we've been able to ramp up our growth without a commensurate increase in our cost base. And of course, that goes to the heart of the type of business that we're developing. It's a sticky business model. Our customers are contracted from 12 months to 10 years. We charge -- our business model is where we deploy a platform, we charge upfront for it and then every device that comes on to our platform has a recurring revenue stream. The platform is built so that it can be easily upsold and cross-sold to our customer base. So take Korea, for example, about 55 municipalities on our platform. They typically came on board for our replication. The municipalities also on their street light. So we've released a streetlight product and the street lights then become our next revenue stream in Korea. And then similarly, [indiscernible] was also released in Korea, and we broadened that to a wider cross-section of municipalities in addition to [indiscernible]. The geographies we operate in our existing geographies are large. South Korea, Taiwan, Japan, UAE, Australia, 250 million people, 98 million households. And within that, our existing customer base is very, very valuable. So what you've got is a proven technology that has got a broad customer base that we've been able to bring on to the platform and about 50% of our revenues are repeat orders from that customer base. The new geographies that we are looking at, we're looking to go broader into the Middle East using the UAE as a base. And clearly, that's going to be a sensible targeting, and we're all aware of the challenges in that market. But we're developing potentially what could be a very, very attractive business out of the UAE. We like the Indian market. The Indian government is pushing digitization very, very strongly. And of course, in India, you're dealing with the Western system, you're dealing with English, which is an equal first language that makes it a lot easier for us, and we've got a washing brief in the U.S. market as well. Collectively, that is a very large part of the population base of the planet. Our opportunities South Korea, as I said, 55 municipalities thereabouts on the platform. They represent about 60% of the country's water supply. And so we're on the government's procurement portal. We're the only foreign company that has got a certificate of excellent product from the government, which means that government instrumentalities can buy product from us without going to tender. And we're augmenting that with street lights and public safety products. Japan, look, this is a great business for us. We entered Japan with [ Ice Kim ] as a partner. They're a large meter manufacturer and gas and water meter manufacturer. We are now -- we licensed our technology to them. We are now expanding beyond gas into water. Water is a 60 million meter market in that country. Our business model is all software as we do all the sales, marketing, customer care and we charge a recurring SaaS fee on a 3x3 business model, and that's over 90% margin. We have the same business model for the UAE. The only difference is the contracts in the UAE are 10-year contracts. So gas meter that will go to our platform today is contracted for 10 years and when it goes on tomorrow, the 10-year starts again. And Taiwan, Taiwan historically has been our innovation hub, if you like, incubation hub for new enterprises before we go commercial. Where we're focusing in that business is really to build out our renewable energy and energy practice. And again, I'm sure you all know this is a category that is large, is growing large and will continue to grow. And the demand here is for solar operators, in particular, to become more and more efficient in the production of energy and the transmission of energy and the storage of energy and the trading of energy and when our [indiscernible] enables that to happen. Australia is a market that we entered after Taiwan, Korea and Japan. Why? Because Australia was a bit slower to get going. Australia has only got 2 large population centers. Nevertheless, in the right spot, it's a very attractive market for us. In Australia, we've launched our first 2 [ Slide ] communities, one with [ Resi ] Ventures in [ Ichuka ]. We have signed a nonbinding MOU with REI to explore their other property developments on the Eastern Seaboard. And [ Ichuka ] [ 100,000 ] house subdivision in there's Riverstown in Glenmark in [ Yarrawonga ], which is an 800 household subdivision. What we do there is this, each household has the opportunity to have solar. We have a home hub that bolts on the electricity. When you have excess energy in the middle of the day and you can't do anything with it, we then optimize without human intervention, the pool pump, hot water, air conditioning and heating systems. And the excess energy goes into a community battery. And there's a special tariff, which results in energy bills reducing by about 60%. [ Nationalbank ] come alongside and then offer a special mortgage product to those people on the rem platform where you get a discount for the life of the mortgage on the [indiscernible] platform. And this is a theme you'll see from us, we've taken platform and taking technology and productized it. So we're selling into a customer need. And we're looking to scale that up throughout Australia. We're particularly looking to scale that across single title subdivisions. And we announced a few days ago, a partnership with [ Mawson Advisory ], a company that we've been associated with for quite some years. Between Mawson Advisory and ourselves, we provide operators of single title platform retirement versus full end-to-end facilities management, data aggregation, billing payments service. And of course, we provide the software to the facilities management. We think that's pretty unique in Australia. Just the retirement village market here is large. It's over 2,500 retirement villages over 200,000 residences, and we're looking to grow our penetration in that market. The beauty of that segment is that it also allows us to on-sell other services such as 5G to replace NBN, such as mobile services, what the industry calls MVNOs or mobile virtual network operators for those catchments that we provide technology for. So again, when you look at the business themes, take a platform and productize it, build a product that's scalable, build a product and a platform where you can upsell and cross-sell to your customers, so you can grow customer value, you can grow the stickiness of your customers. Looking forward in terms of what to expect from us, expect us to finish delivering Seoul over the next few months, the healthy product there. We're really excited about that, and we're looking at broader opportunities for that. The entry into the Japan water market is underway. We're using some of the proceeds from this last capital raise to ramp up that market. Japan, South Korea, Taiwan are very good markets to work in. They're straightforward, everything works, it's clean. And like I said, Japan is a $60 million meter water market. Middle East, we've made a very, very good start. We've got a great partner there in [indiscernible], [ SmartConnect ] Electronics. Again, the principles we've known for quite some time. So these are companies that we're very, very familiar with. And the principles there will also assist us with some of our ambitions in the Indian market. And we're looking forward to having a really strong footprint in the Australian market with a particular focus in the energy sector. You won't see a lot of revenues in the next 12 months. You'll see the base set up and the foundation set up for growth from there. And investors will know that -- it's one thing to have the technology, one thing to have the product. But at the end of the day, it's execution that actually delivers value. And I'm fortunate enough to have a really strong and powerful team around me, starting with our Board. [ Alan Stockdale ] is a household name, one of Victoria's really successful treasurers. Importantly for us, he was Chairman of Macquarie Infrastructure Chairman, Chairman of Sydney West Water. So he's got a deep understanding -- governance, but deep understanding of what we're doing in the water category as well. [ Damon Johnson ], CFO at Tabcorp and prior to that at BHP, he's Chair of our A Risk Committee and makes a super contribution. [ John Stewart ] has a really strong understanding of capital markets as JPMorgan is Magrescions Managing Director of [indiscernible]. My background before the 10 years with [ Tabcorp ], 10 years with Telecom New Zealand, where I sort of ran their mobiles company and 16 years with what was National Mutual and now is AMP. [ Steve Jelly ] is our Chief Operating Officer. Everything that's built reports through to him and looks after the commercial side of our business. And if you look at our 2 country manager of our 2 largest countries, [ Janssen Kim ] and [ Steve Fang ], their backgrounds in Honeywell, Intel, Huawei, Ericsson and [ Oliver Carton ] is our [indiscernible]. So with that, I'll stop there. Thank you for attending. to summarize an established company, a powerful software platform backed by a whole bunch of patents, unique position in the technology space, targeting the utility and renewable energy category of the smart city ecosystem, built a really solid base and now is on, we believe, at an inflection point in our growth story. So I'll pause there. [ Angus Kinney ] is the convener of this meeting, and he is happy to take questions from those online.

Fantastic. Well, thanks for taking us through that, Mohan. It was a pleasure to listen to it. It sounds like you guys have built a really strong pipeline backed by world-leading technology and early signals are showing that your strategy is starting to come into fruition. So I know annual recurring revenue is going to be a key metric for you guys moving forward. Last quarterly, you reported it at about $1.2 million. Can you just talk us through that strategy in a little bit more detail and how you expect that to grow over the next 6 to 12 months?

Sure. [indiscernible], let me just start with the strategy. So when we built -- got involved with this business, we had a 3 horizons model. [ Horizon 1 ] was to build a platform and validate that was done a long time ago. So investors are not paying for something unknown. [ Horizon 2 ], which was probably the last 7 or 8 years was a land grab, locking as many enterprise and government customers and get as many devices onto the platform in a steep contract. So we are past that. And we're now in [ Horizon 3 ], which is the transformational phase where we achieve scale, where we achieve profitability and take the business to being self funding. So that's the horizon that we're in, and we've just entered that phase. SaaS revenues are a very important part of our overall metric. We never shy or apologetic for the hardware component. Now that comes with margins with really healthy margins. What the SaaS component does is it gives us a base of ongoing recurring revenues and annuity income stream. By definition, at a quantum level, the SaaS number will be smaller than the hardware number just because of the sheer math, hardware dollars are much larger. As time progresses and as you get more and more devices onto the platform, then you start to see the SaaS base start to grow faster than the total revenue base. But most importantly, the SaaS revenue share of your gross margin becomes a larger component. So if you look out the next 2, 3, 4 years, then you should look at -- the metric you should be looking at is the number of connected devices coming on to the platform and how that feeds into a recurring revenue base, and you should be expecting to see that base accelerate and become a larger share of our gross profit.

Fantastic. And we understand that you've got a very low customer acquisition cost. Can you walk us through that in a little bit more detail?

Yes. Look, our customer acquisition costs vary from market to market. Our biggest market, Korea. Our sales force is reasonably small. We've got 55 enterprise and government customers. We've got 4 people selling. We have a number of channel partners and they paid a commission. So it's all variable costs. So we like variable cost rather than fixed costs. 50% of our revenues out of Korea, over 50% is repeat orders from government municipalities and straight to the government's procurement portal. And we're the only foreign company on the government's procurement portal, and that has relatively little human intervention. Then when you look at countries like Japan and the UAE, those 2 markets, we've licensed our technology. Korea, we call it a managed service, so that's a bit more expensive to operate. Where we license that technology, the partner at the other end does all the sales and marketing and customer care. And we get just straight out the SaaS revenue base. In the UAE, I don't have any staff on the ground. In Japan, we've got just one on the ground. So you end up with a really profitable business in those markets.

And it looks like over the next 6 to 12 months, you guys will be targeting the data center space. I know energy management and the stress on the grid that data centers creates is a very good opportunity for your platform to come into that market. Can you talk us through that a little bit more?

Sure. [ Angus ], it's a bit early for us to flag a movement into the data center space. And so I wouldn't want to do that on this call. When it comes to data centers, there are 2 opportunities for companies like us. As you rightly said, data centers utilize an enormous amount of energy. And you know the story in terms of potential impact on the grid and the cost to operate a data center. And the space that we're working on improving the performance and productivity of renewable energy companies has a direct application to data centers. And then data centers themselves have lots of sensors, pressure sensors, where we do pressure sensors in Taiwan, cooling systems. We're doing cooling systems in the UAE. And of course, all the racks and whatever you have sensors to measure temperature and send alerts. And so -- and there is a space that we've got an interest in. There is a space that we can take that technology to and I think do a very good job. It's really too early right at this point for me to put a time frame on it.

Fantastic. And so just finally, you guys have obviously built up a massive platform in terms of just general revenue opportunities and recurring revenue opportunities. Can you talk us through exactly what you guys will be doing over the next 6 to 12 months to, I guess, to execute on that pipeline and start to monetize that?

Sure. Look, the #1 priority is to harvest a very valuable customer base. And in sales, let's say your best prospect is your existing customer. Take Korea, for example, the available market opportunity is about $600 million of revenues. It's less than 10% penetrated at the one end. At the other end, the customers made the decision to digitize and they're changing their meters over every 8 years. And so priority one, harvest existing customer base. Priority two, sell more things to them selves, street light to the Korean new families that have got water running a platform, sell public safety to those. Priority three is to get scale in UAE Taiwan, Japan and Australia. We've already got a presence in those markets. We've got good people there. We know what market segments we're in. We've created a level of awareness, now monetize that. And then our next lever is that we've got 3 very, very good products out there, whether it be healthy in public safety, hybrid AI and renewable energy or vision and get greater depth and penetration into those customers. So you'll see most of our effort will go into working and growing in our existing markets and getting deeper penetration of our existing products into our existing customer base. We are interested in India. We are interested in the UAE. India is probably a bit more progressed than the UAE. We are very cautious about entering new markets. So we're doing the groundwork at this point in time. And I think probably over the next 7 months, we'll have something more definitive to say.

Fantastic. And apologies, we just had one more question come through, which is kind of quite pertinent to that response. You have small staff, which is admirable. How do you intend to manage business relationships and sales across these 5 or 6 markets?

Look, it's a great question. To clarify, I've got 4 staff looking after sales in Korea. I've got another 4 that looks after existing customers. And so that's in the Korean market, which is a full end-to-end managed service, everything from the communication device to the software platform. And we've got really strong channel partners. We've got about 25, 26 channel partners on the ground that manage those relationships for us. In the UAE and Japan, it's really one customer. So that customer has other enterprises that they look after us. So Japan, [indiscernible] on would have 40 or 50 key customers that have got our platform and -- but our -- and it's their job to look after the end client. Our client is [indiscernible]. In the UAE and then [ Dyco ] will have a whole bunch of other customers that they would service. So it's a really efficient business model. I don't see this as a company that's going to have hundreds of staff. And that's the beauty of our business model. It's a highly leverageable model, and you should expect to see a business model where your revenue growth materially outstrips any cost growth.

Yes. And I think we're seeing that quite clearly in the last quarter where the revenue materially outgrew the increase in OpEx.

And that's right. And the other thing to keep in mind is that the platform is built -- and when you're entering a space, a technology space and if you're in an early-stage company or a young company, your risks are when you're throwing heaps of capital building the platform and you don't know when they're going to sell it. Well, we're well past that. We've got a well-built platform. It works really well. We have a bunch of key matrices that measure the effectiveness of it. It doesn't -- hasn't missed a beat in the last quite a few years and is well regarded by our customers. So growth from here is really putting more and more devices on the platform.

Fantastic. Well, thank you, Mohan, and thank you to the shareholders and investors who joined us today. We'll be sending out a recording of this webinar later today so that you can rewatch or reshare. And we look forward to keeping you updated as X2M continues to execute on this strategy.

Thanks, [ Angus ]. And if I could echo those thoughts as well to everyone who took the time to be on the call. Thanks so much. And for those of you who are shareholders in this company, I can't thank you enough for the support you give us. So thanks very much.