Full Year 2026 Energy One Ltd Earnings Call
Speaker #1: Welcome. My name is Ben Tranier, CEO of EnergyOne. With me today have Andrew Bornwick, Chairman. The board, and Jason Maby, the group CFO. So today we're really delighted to be here.
Speaker #1: We're going to present another year with strong results, and a highly strategic acquisition that we're really accelerating our ambitions. Quick housekeeping: we'll present the fiscal year 2026 results in detail, but also we wanted to keep some time at the end for the acquisition proposal.
Speaker #1: So we slightly shortened the deck compared to what we published on the ASX, the full details obviously are available on the ASX, and this way we'll be able to keep some time for Q&A toward the end.
Speaker #1: So let's get started. Really excited. In terms of, you know, when I joined EnergyOne 2 years ago, after spent 20 years in the energy train and risk management staff for our industry, I was really on board with EnergyOne's strategy.
Speaker #1: And our vision remains the same: we want to be the world's leading provider for the energy trading software and services, and that's really key now as the CEO of the company.
Speaker #1: The vision remains, and that's really what we're working toward it. In terms of our value proposition, it's very strong and resonates deeply with all our customers.
Speaker #1: We not only provide broad and deep software solutions in market data, trading, and risk management, workflows, which address pretty much all the challenges for our customers.
Speaker #1: We also provide highly specialized services, and that's really the combination of both that creates that unique value proposition.
Speaker #2: Thank you so much.
Speaker #1: Yeah. Please be on mute also if you don't have any questions. We'll keep the questions for the end. But yes, that's really what makes us truly unique and creates a big difference for our customers, that unique combination of highly specialized trading services, advisory, combined with our set of products and software products.
Speaker #1: So we as part of our one-stop shop strategy, we do not only focus on one area of the market. Our true one-stop shop really covers the full energy trading lifecycle.
Speaker #1: So from the moment you trade to the moment you settle the trade, but we have actually a special focus on all the physical operations.
Speaker #1: And that's really all the short-term trading: the balancing operation and the optimization, the dispatching of all the assets, the delivery of the energy for the grid through the scheduling operations, and all of that really, it's not only the combination of all our products in a natively integrated platform, it's also the combination, as I said before, with specialized services which are delivered actually by industry experts and by humans, and that's very important.
Speaker #1: That's really what our customers are looking for. So very happy with the EnergyOne stop shop. It's a proven strategy, and we're going to talk a little bit more about that today.
Speaker #1: Fiscal year 2026, if we look back at fiscal year 2026, it wasn't only a transition year where we built the foundation for the year ahead.
Speaker #1: It's also been a very strong growth year. Our recurring revenue is up 17%, right? It's high-quality revenue. And again, we validate our one-stop shop strategy.
Speaker #1: We organized the different regions and the different teams, right? And through the all the efficiency, we really pushed our margin across. With the PBT, or underlying PBT, at 51%, and the underlying cash EBITDA at 42%.
Speaker #1: So we're really proud of this fiscal year. And again, it's another year of strong growth. So it's really a proof that the strategy is working.
Speaker #1: So we have and really when I look at the fiscal year 2026, I mean, I'm really proud of a few achievements which I want to mention today, right?
Speaker #1: The one-stop shop strategy is definitively validated. We've won key Tier 1 customers. In the fiscal health year, announcement in Fed, I announced two examples.
Speaker #1: This one-stop shop customers, today I'm going to announce two others. Just to keep, you know, proving that the strategy is really working. We've also been working closely with our customers to build new solutions, and we're proud to also mention that we launched new products in this fiscal year.
Speaker #1: Products like Infuser, time-series management solutions, new solutions for battery optimization, called virtual tolling. And it's also resonating well within the market. One significant achievement was the ISO 2701 certification.
Speaker #1: It's been a key achievement for us. Cybersecurity security is really important. It's not only important for us, it's important for the market. All the Tier 1 customers, they expect you to have such certifications.
Speaker #1: And that's just a validation of the strategy as we expand into bigger customers. We've been able to scale and restructure the leadership team. And again, I'm going to talk a little bit more about that, but that's very important.
Speaker #1: We're now prepared for the next phase of growth within EnergyOne. I've been focusing also on the commercial engine, right? That's really the foundation of the growth.
Speaker #1: The local expertise. So as you know, we're operating from two regions, Europe and Australia. We have expert in both regions, but we collaborate with shared resources, with shared expertise, and that's really how we capitalize on our global expertise.
Speaker #1: From a productivity perspective, and Jason will quickly cover all the financial details, but we have an excellent cash discipline. We really have our expenditure under control.
Speaker #1: We also from an AI perspective, I don't want to talk too much about AI today, but we definitely move from exploring AI to adopting AI.
Speaker #1: Studying AI. So it increased our productivity. And then last but not least, as you've probably seen already, inorganic growth remains a large part of our strategy.
Speaker #1: But I would say it's a disciplined approach. It's not at any cost. Definitely no need to be accretive on day one for our shareholders.
Speaker #1: And it needs to accelerate our existing strategy. So as you can imagine, I'll talk more about inorganic growth at the end of that presentation.
Speaker #1: I'm going to hand over to Jason now. He's going to run you through the financial results.
Speaker #2: Yeah, thanks, Ben. Must say it's a pleasure to be here presenting my first result and also first acquisition. It's been a pretty exciting first six weeks for me at EnergyOne.
Speaker #2: But yeah, Ben's already touched on some of the key financials, but I'll just elaborate on a few metrics here for the scorecards. So the first thing, just starting with ARR, came in at 64.6 million, which was up 13% on a constant currency basis.
Speaker #2: And that was in line with the guidance we provided back in May. I'll come back to ARR over the next couple of slides because I think, you know, we do appreciate that that was lower than we originally hoped to achieve during FY26, but I'll touch on just some of the currency headwinds.
Speaker #2: As well as why we think we're really positioned well to deliver a strong result on the revenue side in FY27. And we're saying we're going to deliver at least 15% recurring revenue growth.
Speaker #2: Net revenue retention, 106%, that was in line with the guidance, we think it's a pretty strong result. But we also recognize there's some work to do on attrition and also come back to a slide on that shortly.
Speaker #2: Ben did touch on cash EBITDA. Been very strong year-on-year result. The margin was 21% for the year. That was up 4%, but importantly, flagged the exit rate at the end of the year was 23%.
Speaker #2: And we're confident, as we hit our numbers over the course of FY27, that we will hit that 30% run rate by the end of FY27.
Speaker #2: Rule of 40, I know everyone probably has a slightly different way of calculating it. We use recurring revenue and underlying EBITDA. We exceed it comfortably.
Speaker #2: Recognizing if we use cash EBITDA, we're just a sliver under it. This year. But confident with an improved result next year that we will be back above very shortly.
Speaker #2: The next slide, I said I'd come back to ARR. I think it's just worth talking a bit about why, you know, headline ARR is weaker than the 13% constant currency.
Speaker #2: So what we've done here is we've taken the FY25 reported number, 60.4, adjusted it back to FY20, June 26, forex rates. That makes it 57.
Speaker #2: And so you can see on that basis, which is how we manage the business, constant currency is up 13%. So the forex impact down five, then up 13%.
Speaker #2: So hopefully that sort of clarifies why the headline result wasn't as strong. But I think it also highlights underlying momentum in the business is still pretty good.
Speaker #2: And I think that's borne out on the next slide where we've had, as at 30 June, 5.1 million of contracted ARR and 0.4 million there, very close to being contracted.
Speaker #2: And that's a 28% increase on what we had last year. So that gives us, in our view, pretty strong momentum heading into the next part of the year.
Speaker #2: The pipeline measured to what we had at 31 deck is up about 25%. I think another important metric to call out is that the total size of that pipeline is about three times the ARR growth we're hoping to achieve over the course of FY27.
Speaker #2: So I think we're really well positioned to hit that revenue target that we've given you. Now just talking a bit about attrition. We recognize that it is an area that, you know, we'd like to improve on.
Speaker #2: It was 5% in the first half of the year, a little higher to finish the whole year. We've highlighted here sort of four customers that churned out over the half and really together those four make about half of the full year's attrition amount.
Speaker #2: All of them left for various reasons. There's no sort of constant theme in it at all. But what we are doing is making a really concerted effort to try to bring down attrition going forward.
Speaker #2: Ben's hired a new chief revenue officer. He's come on board and had some excellent or excellent start to his tenure at EOL. And we've also brought in a head of customer success who will really be responsible, her and her team, for being across the customer relationship from the minute they join and an ongoing basis as well.
Speaker #2: And you can see on the side there, those are the key areas that that team will be focused on going forward. Did you want to add anything on the team?
Speaker #1: No, I think you're spot on. We don't add, there is no fundamental issue, fundamental problems, right? It's multiple reasons. Obviously, the trading business, it's a complicated business.
Speaker #1: So people's, they don't always succeed without trading strategy. So we had a few customers where it really had on-site their trading activities. The gas industry in Australia, as you know, has been under pressure recently due to the gas prices.
Speaker #1: So it has a few impacts in certain customers. But there is not structural issue with our customers or the markets, right? It's just isolated cases, but nonetheless, we definitely are going to work closely on that and bring down the attrition to the levels we're comfortable with.
Speaker #2: Thanks, Ben. The last slide for me on this part, and really I just wanted to highlight here the great amount of operating leverage that we're seeing coming through the business.
Speaker #2: You can see that cash expenditure is a percent of revenue is coming down. And as we spoke about earlier, the cash EBITDA margin is going up.
Speaker #2: And, you know, we're spitting out a lot of free cash flow. And I think that that all goes well going forward. Probably worthwhile we're talking cash flow just to point out.
Speaker #2: That we're electing not to pay a dividend this year. We're going to keep those funds for use in paying the transaction costs for the GMSL deal.
Speaker #2: We'll come back to that a little bit later, though, as well. But I think the key message here, the balance sheets in great shape going forward.
Speaker #2: And now I'll hand back to Ben to talk a bit more about the business.
Speaker #1: Thank you. So what I wanted to do is to give a little bit of insight or insights into the business. So in the half year, presentations we actually talked about two new customers.
Speaker #1: And what I want to do in line with that presentation, I want to do the same this time, just talk about two different customers and two different cases, but very much aligned with our one-stop-shop strategy and another demonstration that our one-stop-shop strategy is definitely working.
Speaker #1: In Australia, we had the case of one customers were actually using only one of our products. They expanded their trading operations. And rather than going to the market or looking at what to do, they directly engaged with us and we discussed how we can support them with that expansion.
Speaker #1: So we not only provided more software, we also provided more services. And it resulted in an increase of ARR from 100K to 300K. And.
Speaker #1: Part of our customer centricity. So we're really close from our customers. And when they want to expand, when they have an idea, when they have a new business strategy, they definitely talk to us first.
Speaker #1: And we have all the products and solutions to solve their problems. In Europe, we've been focusing lately, not only, but as part of our strategy, on large industrials crossing the meter.
Speaker #1: So large industrials are launching a lot of energy transformation programs. They're accessing the market rather than just procuring the energy directly from the traditional energy supplier.
Speaker #1: They access the market. They trade themselves. They manage their energy exposure. So in this case, it's a large industrial. It's one of the largest steel producers in continental Europe.
Speaker #1: They recently crossed the meter. To access trading markets. And they did not only need a market access solution. They really need a full natively integrated solution.
Speaker #1: It's not just one product. So they wanted to translate the steel production forecast into trading profiles. They wanted to manage their plant operations. They wanted to manage their trades, deal with the workflows, compliance, send the nominations.
Speaker #1: And in a nutshell, they really needed the full scope of Energy One, Energy One solutions. And that's where the one-stop-shop strategies again revalidated. In this case, the new ARR is around half a million to start with.
Speaker #1: But again, we have a lot of potential to expand, especially through balancing services and trading services as they start wanting their trading operations. In order to continue with our high growth trajectory, restructure strengthen our management team.
Speaker #1: So I've added a few truly recognized energy trading leaders in the last few months to really complete the existing team. I'm fully confident we have the right team to execute on our strategy.
Speaker #1: We're fully prepared. So I wanted to put some faces on top of the name so you know who's running the company. Now let's have a look at the performance of the individual regions.
Speaker #1: Australia is very solid half year after half year full year after full year Australia continue to grow. It's not because we have a large part of the market share that it stops growing.
Speaker #1: We keep selling ETRM to the new entrants. So with the batteries and all the new assets, we're still seeing new entrants in the Australian market.
Speaker #1: So it's not stopping. And we sell them our core ETRM. But we also expand into our customer base for our one-stop-shop strategy. So we get into new emerging markets like batteries.
Speaker #1: Or energy storage. And that's really key because it's a blueprint for our global expansion. But we also have the ability to really upsell and cross-sell our products within our customer base.
Speaker #1: So 15% revenue growth, 10% ARR, again, we had a few delays on recognizing or billing the ARR. But Jason mentioned we have a strong tailwind with 5.1 million ARR already contracted.
Speaker #1: So in a nutshell, that Australia very solid continue to grow. Same expectation for the upcoming years. So it's not stopping. In terms of Europe, we finished fiscal year 26 with timing delays.
Speaker #1: As you already know, but we're seeing a very strong demand. We continue to scale. I've now established a very solid lead generation function together with our new chief revenue officer.
Speaker #1: We signed multiple tier one customers. One-stop-shop. So again, even if it delays a little bit, the billing of the ARR, then it's really a great win because it strengthened our position in that market.
Speaker #1: The reorganization is fully completed. So we should also see higher efficiency in this upcoming year. So really excited, strong year for Europe, strong year for Australia.
Speaker #1: When we look ahead, what we're seeing is really the market is growing. The structural market is growing. The target market is increasing. The expectation over the next three years is really to almost double the renewable capacity.
Speaker #1: Big expansion of full adoption of the battery storage. With. X expected. ed. X three years globally. So it's not only Australia. It's also obviously Europe.
Speaker #1: With the adoption of the algo trading and automated trading, the intraday trade volumes are really exploding. And we're expecting 5X in the next three years.
Speaker #1: It was already growing exponentially in the past few years. When you start bringing trading volumes, obviously you increase the need for trading solutions. The way we also looked at our market size is we have our core market, which is all the utilities, integrated utilities, trading firms, the usual players, generations of the gen tailors of this world.
Speaker #1: And this market is also growing. We see new traders joining the market every month, but we also see additional complexity. With higher volatilities, they need more system, more advanced and sophisticated solutions.
Speaker #1: And for example, the expansion of the trading hours in Europe, they also need more services. So our core market is growing. The cross meter expansion is about all these large consumers were traditionally seating behind the meter and procuring energy from utilities.
Speaker #1: We're seeing them crossing the meter and joining the energy trading market. The example of the customer I just presented a few slides before, it's a good example.
Speaker #1: It's a large consumer crossing the meter and really it's increased our market size. And then least but last but not least, the emerging markets.
Speaker #1: The energy market is not becoming simpler. It's actually increasing in complexity. We're seeing new molecules with carbon capture storage, CO2 being very real. We expect hydrogen to pick up in the next couple of years.
Speaker #1: It's a little bit early now, but we definitely expect it to come. And also seeing new business models. So the famous DERMS. So the decentralized energy decentralized energy management systems also called VTP in Europe, virtual trading parties.
Speaker #1: DSOs in Germany. They're joining the markets. They have different set of business processes and problems, dynamic optimization of the demand. But again, it's increasing the market size.
Speaker #1: And I think that's a very positive message on that side. Now, we're definitely aligned our go-to-we aligned our go-to-market strategies and product roadmaps with the market increase and with the market dynamics.
Speaker #1: So we stay close from our customers. We work together to better understand their challenges and where we focus on four core go-to-market strategy. We target asset optimization, the asset optimization vertical.
Speaker #1: With the different set of products, we provide energy training suite for people who want to go and start trading. We have solution already ready for the new molecules.
Speaker #1: And we actually have some quite a few successes in this new vertical. And we continue pushing for the industrial and the integrated solution. So we're really fully aligned with the market expansion.
Speaker #1: That's really the key message. Now I'm talking about roadmap, innovation, staying aligned, but I couldn't do that without mentioning AI and the AI transformation.
Speaker #1: In the last 12 months, we truly embraced AI, but again, not at any cost and always in a very controlled way with strong governance.
Speaker #1: And that's very important. We started with a small group within Energy One. Through discovery phase, we spent a couple of months really playing with AI, trying to use it as a human collaboration.
Speaker #1: We train our staff. We engage with five experts and we started providing that training to our staff, producing line of code. So basically as an extended capability of our development team.
Speaker #1: We went for lessons learned analysis. And we selected four pilots. We call it the targeted programs. We looked at technology upgrades. We started another one to fully refresh our user experience in a couple of our products.
Speaker #1: We used one pilot to develop a completely new product to solve a very specific problems in the industry. And we also used one of the pilots to increase our QA automation.
Speaker #1: So the cost coverage. We finalized it over about finalized the results analyzing the results and the goal for the fiscal year 27 is really to scale.
Speaker #1: Fully adopt AI and we set some targets in terms of AI adoption. We want to deliver faster 40% faster and we want to deliver a higher quality.
Speaker #1: Now again, it's not at any cost. We're engaged with our customer. Our customer, they have very strong expectation in terms of AI usage and AI deployment within our solution.
Speaker #1: And we definitely engage with their own customers. Our SIZO is in discussion with multiple of our customers. To agree on how we're going to implement AI, the growth rails, the governance.
Speaker #1: We have security committees and we're getting aligned with the new ISO certification around AI adoption for software company. So AI transformation, definitely we see big benefits using AI.
Speaker #1: But we want to do it properly with a strong governance. So this is really the engine which is behind our fiscal year 27 ambition.
Speaker #1: We want and we definitely invested in customer excellence and sales capabilities in fiscal year 26. It's now commercial engine that works end to end.
Speaker #1: We hired new sales directors. We expanding our marketing capacity. We moved our business development in-house. And obviously it takes a bit of time to see the results, but after 12 months now, we definitely can see that.
Speaker #1: And so it's a strong foundation for fiscal year 27. When we look at the metrics, we are getting into too much detail. We are paying a special attention to feed the demands on the top of the funnel for brand awareness, to provide more content on our websites, providing more content on LinkedIn.
Speaker #1: We're building a very solid pipelines with very high quality physical marketing events. Pipeline increase, that's a result of the brand awareness and the lead generation.
Speaker #1: Sales excellence, you really are using a very solid sales methodology. We're reducing the sales cycle. So increasing the conversion rates. We maintain the win rate faster conversions.
Speaker #1: And then I think as Jason mentioned earlier, the pipeline coverage is very, very strong. It's great around 3X our fiscal year 27 targets. So if I have to really summarize, we had a strong fiscal year 26 results.
Speaker #1: We revalidated our one-stop shop strategies, proven. It works. The value proposition resonates well within the markets. The market is growing. The market is not stagnating.
Speaker #1: It's definitely growing. And we're seeing some emerging opportunities for the future. And I'm really excited about that. And then we have the right team.
Speaker #1: So position to scale. We're keeping our ambitions to reach close to 30% of cash EBITDA on a run rate basis at the end of fiscal year 27.
Speaker #1: And to continue growing our reoccurring revenue above 15% in this fiscal year. So as I wanted to keep a bit of time for the GMSL acquisition because I'm really excited about that.
Speaker #1: We're going to jump straight into it. You will find more information on the presentation we posted on the ASX in the appendix. But it's the same.
Speaker #1: It's just a little bit more detailed. And now let's go directly into this GMSL announcement. So well, just one second. It's obvious, but I'm really, really pleased to announce the acquisition of GMSL.
Speaker #1: It's not, it's been a lot of effort. It really started a long time ago and it's really part of our strategy. And it's really a strategic milestone for me and it's really how we're going to accelerate our strategy to become the leading European trading operations and software provider.
Speaker #1: And that's very important. It's a unique opportunities. The value, it brings, as I said, it really accelerates our strategies. Not a new strategy. It's fully part of that strategy.
Speaker #1: We have the capability. We're going to expand the capability. With more products, more services. We'll be able to reach a broader market because we'll have more specialized product and services.
Speaker #1: And then customer access. We're doubling the European customer base who this acquisition. So it's quite unique and I'm really, really excited about that. If we look at the rationale, so growth accelerations, again, through expanding market access, broader capabilities, so broader software, we'll have the ability to accelerate growth.
Speaker #1: We'll be the market leader in Europe for short-term energy trading operations. So market access, nomination, scheduling, and all the training and balancing services. Immediate revenue synergies.
Speaker #1: We don't have to wait. We'll have the ability to cross-sell and upsell all our products from day one. We have customer access. We'll have customer access in more than 300 customers to be able to go and upsell.
Speaker #1: And also if you remember, one of my last slides of the previous presentation, our commercial engine. So we built the commercial engine and it's now ready.
Speaker #1: So we have all the tools, all the products, and all the processes to really execute on the revenue synergies. On the operational leverage, that will give us immediate access to experts.
Speaker #1: And that's very important. So we have growth ambition. We have a strategy. We'll be able to execute on a strategy without additional investments in people.
Speaker #1: We'll have all that access on day one. And last but not least, we'll welcome one of the largest infrastructure owners in Europe as a shareholder and strategic partner.
Speaker #1: And that's very important. That will unlock plenty of opportunities and we can discuss that a little bit later but it's one of the key rationale for the acquisition too.
Speaker #1: In terms of the key terms, shareholder value impact, what you will get out of it. Well, first of all, it's a very accretive deal on day one.
Speaker #1: 35% EPS accretion on a proforma basis. We'll be doubling our market share on day one. We'll increase our focus on Europe and as you could have seen in my leadership team slides, most of the European most of the ELT team is actually based in Europe.
Speaker #1: That will increase our focus in Europe. We'll be having about 30% of market share in Europe and we'll have the right focus in Europe.
Speaker #1: And then a lot of potential synergy benefits again that we can quickly realize in the first 18 months and out over that. In terms of cost, the estimated value or the implied value of GMSL slightly below 100 million.
Speaker #1: The shares only issue will be about 7 million shares would result in 9.4 EBITDA multiple and Flux is post-transaction will have 18.26% ownership in EOL.
Speaker #1: As a strategic shareholder and strategic partner. EnergyOne combined, this is actually where one plus one is not equals two. One plus one is greater than two.
Speaker #1: GMSL has a large base or large tier one customer base. Blue Ship customers will have immediate access to this tier one customers. With a combination of EnergyOne and GMSL, we have broader software and services coverage.
Speaker #1: We'll be able to expand. We'll reinforce our strategic and our one-stop shop value proposition with software and services. And we'll have the strategic alignment with Fluxes as that will unlock, as I said before, opportunities to get into new markets, new geographies, and also validate our industrial strategy.
Speaker #1: So really exciting. I'm going to hand over to Jason who's going to cover some of the financial aspects of the transaction. Yeah, thanks Ben.
Speaker #1: And look, I was really excited to join EnergyOne recently. And then when I started and saw what the guys have been working on, I became doubly as excited about the future because it really is transformational.
Speaker #1: And I think a great deal for us. Touching on the financials, I think it really impressive attribute of GMSL is just the high quality resilient revenue streams.
Speaker #1: It's around two-thirds weighted to 24/7 operational services and about a third to software. Now, they don't sort of publish the exact same metrics that we do or look at things in the same way, but I think it's safe to say that recurring revenue is a fair bit higher than ours, which was sorry, percentage of total, which was 91% for us.
Speaker #1: So these guys are in excess of that. Very diversified customer base. You can see a couple of the pie charts there. But the top 50 customers cover around about 90%.
Speaker #1: And the largest customer, which is Fluxes, is around about 10% total revenue. The carrier has been 7% over the last two years. And I know some might say, well, that's kind of a lower growth trajectory than what EOL delivers.
Speaker #1: But I think what's really important to note is that there haven't been a massively sales-focused organization previously, but we think once we put our sales engine behind it and get those cross-sell opportunities, you'll really see that lift off.
Speaker #1: And I think that's born in both the revenue synergy guidance that we've given and then we're also saying that once the deal's fully integrated, post-FY28, so starting from FY29, we believe we can deliver 50% plus recurring revenue growth off the combined base.
Speaker #1: So that's confidence we can see that revenue growth lift for GMSL. Probably the other point to mention just on EBITDA, it's been very stable.
Speaker #1: That's for sure. But you could also point out that you haven't seen a lot of operational leverage shine through. And I think what I would say there is that GMSL has invested a lot in product capability and certainly on the software side over the last two years.
Speaker #1: So they've kind of reinvested in the business. And so you haven't actually seen the fruits of that reinvestment come through in the leverage just yet.
Speaker #1: But I think they're on track to have that shine through going forward. And I think certainly with us combined it will really take off.
Speaker #1: Also we're pointing out that a lot of that investment they've made into their product hasn't been capitalized on the balance sheet at all. And I think also we're pointing out just their EBITDA, their cash EBITDA margin is around about 32%.
Speaker #1: So that's above the 30% that we're chasing over the next year. And then we put this slide in just to give you a snapshot of what the combined entity will look like.
Speaker #1: As Ben mentioned, if you look at just FY6 pro forma, so as if we own the business for the whole year with the share dilution, it's about 35% EPS accrued.
Speaker #1: But I think important to flag a couple of things on that front. One is that it doesn't include any purchase price acquisition related amortization.
Speaker #1: But then it also doesn't include any synergies at all. And I also mentioned they don't capitalize any of their development costs whereas our policy is to.
Speaker #1: So that's worth taking on board. That's probably all it's going to cover. How do you take more questions later once we get to the Q&A?
Speaker #1: Back over to you, Ben.
Speaker #2: Thank you, Jason. So when I said it's a unique opportunity, it's actually truly a unique opportunity. It's a unique opportunity because we're talking about three parties aligned.
Speaker #2: It's not only two. It's actually three. I talked quite a lot about value creation and I'm sure you would have plenty of questions on value creation, which I'm more than happy to answer.
Speaker #2: Now, also to mention, GMSL is not a startup. GMSL is a very well-established company. They've been in the business for more than 20 years.
Speaker #2: And a lot of their employees have been within the company for a very long tenure. So they are truly experts in the industry. And that's very important.
Speaker #2: I'm aware you may not have heard about them in Australia, but everyone knows about GMSL in Europe. And I actually worked as a partner with GMSL in my previous life, like pretty much everyone in the energy industry or European energy industry did.
Speaker #2: So that's very important. Same with Fluxes. If you ask about Fluxes in Europe, everyone knows about them. And that's one of the key pipeline operator in the Benelux.
Speaker #2: So Belgium, Netherlands, and you also have a lot of details on their website and we also attach a presentation of Fluxes in the appendix.
Speaker #2: But so I think that's why it's important. It's a three-party fully aligned. I covered the value creation, which is cross-sell upsells and operational leverage opportunities.
Speaker #2: But all of that is very real. And it will happen very, very soon after the completion. What's quite unique is the combined trend, the B on that slide, is energy one will closely work and partner with Fluxes to identify and accelerate growth, to identify the opportunities and accelerate growth.
Speaker #2: It could be for recommendations. It could be by accessing new markets together. It could be by providing services or software one to each other.
Speaker #2: So plenty of opportunities to be unlocked from the partnership between Energy One and Fluxes. And then ultimately, GMSL has been providing critical services to Fluxes for 20 years.
Speaker #2: And GMSL will continue to provide these critical services to Fluxes affiliates. So that's why it's a unique opportunity and we're sharing the same objectives and the same ambitions.
Speaker #2: So we're really excited about that. In terms of the synergies, obviously, that's one of the questions. So revenue synergies, we model it, how we can actually apply our commercial engine to GMSL because GMSL, again, was really largely focused on providing services to Fluxes customers.
Speaker #2: We're truly believe that with our commercial engine, we'll be able to upsell and cross-sell Energy One products into GMSL customer base and vice versa.
Speaker #2: GMSL products into Energy One customer base. We expect to realize in full the synergy by the end of fiscal year 28. In terms of operational synergies, as Jason mentioned, then the focus has not been on operational efficiency, but we're definitely identified synergies through, first of all, expanding the margin, sharing common back-office services, the IT contract that the platforms, cloud providers, so infrastructures, our marketing spend for physical events and how we invest in code to market investment.
Speaker #2: But also as part of our fiscal year 27 budget and our expansion in terms of investing in more people and experts, now we'll be able to use directly the experts and the people from both companies.
Speaker #2: So that should also unlock operational synergies. Estimated one-off integration cost, around 2.5 million over two years, really to support the executions, the messaging, and to be able to extract all the revenue synergies.
Speaker #2: In terms you want to correct?
Speaker #1: Yeah, sure. I think most of them were pretty well covered off earlier in the pack, but obviously we intend to fund this through it's an all-script deal.
Speaker #1: Probably just flag that the 5 million transaction costs will be funding out of cash and a sliver of our debt facility mentioned earlier that we won't pay a dividend.
Speaker #1: And so that at our 40% payout ratio we did last year, that would be just over 3 mill. So that'll be used to help fund those transaction costs.
Speaker #1: The key conditions, we're going to a shareholder vote that'll be notice of being sent out in the next sort of 10 days. And hoping to have that meeting by the end of December.
Speaker #1: Fluxes will need further approval to make the acquisition and hard to say exactly when that'll happen, but we're hoping by kind of mid-November we'd have that solidified and then targeting completion at the end of November.
Speaker #1: Probably I'll mention their
Speaker #2: So just as summary of everything that was said, GMSL acquisition is a unique opportunity. It will accelerate our proven strategy and that's why I wanted to start with our fiscal year results.
Speaker #2: Because the strategy is already proven. It creates immediate value to shareholders, 35% pro forma EPS accretion, already identified synergies and bidder synergies that were very comfortable with in terms of execution.
Speaker #2: Strong focus on Europe, 70% of the combined revenue will come from Europe. And again, I mean, I'm truly, truly excited about that opportunity. The last slide just about timelines that Jason mentioned.
Speaker #2: So you should not have any surprise. We announced today we'll plan to dispatch the notice of meeting in the next 10 days, call for votes end of September, and after completion of the well, after receiving the firm approval, we'll be issuing the shares.
Speaker #2: Thank you very much. And we'll have 10 minutes for questions now.
Speaker #1: Yeah. So I'll facilitate that. I'm just going by order. I've got here but first off, Cam from Canada Corp, did you want to ask a question?
Speaker #3: Yep. Can you hear me okay?
Speaker #1: Yep.
Speaker #3: Excellent. Hi team. Well done for the result. And GMSL, it was a bit of a surprise. So maybe if I can just I think sort of interest in time, I'll probably just keep it to two since I think we're running a bit long in the session.
Speaker #3: But perhaps just the first like just with your targets for the 15% recurring growth. And then also your 30% cash you would dare. Just given like MSL is such a big acquisition, can I just confirm those targets are both organic basis just to clear that up?
Speaker #1: Yeah. No, that's correct. The guidance, the 15 and the 30 are all relating to our existing business. Not GMSL, although we are saying that 29 and beyond, that 15% sort of target applies to the broader business.
Speaker #1: But you're right, just organic for those first two.
Speaker #3: Yeah. Cool. Cool. And then I suppose the other kind of major one I'm keen to ask is I suppose when you look at the consolidation of both businesses and you think about that cross-sale opportunity together, perhaps one for you, Ben, like is there any major platforms you see like within the Energy One business that you see that would really suit their end customer base?
Speaker #2: Yes. So if you look at the platform in the from Energy Ones that we can expand into GMSL, that's the TRA. So the energy trading and risk management.
Speaker #2: That's a unique software. There are a few providers in that space. And GMSL doesn't have any TRM. So that's the most obvious expansion. The other expansion will be algo trading.
Speaker #2: So we do have an algo trading for the European markets and then market access, which is very. Century. They had very strong energy delivery solutions.
Speaker #2: But they have less focused on trading software. So energy trading and risk management and algo trading.
Speaker #3: Yeah. Actually, if I can just squeeze in one last one. Just as we sort of enter August, I suppose like you've put a pretty good bridge there, I think, around the ARR and then obviously the near circa 5 mill.
Speaker #3: That's I think been contracted, but yet to bill. Could you just help people, I suppose, think about like as much of that 5 million started billing as we enter this first half?
Speaker #3: Is there still a little bit of a period to go? Just a bit of help there would be helpful for us all. Thanks.
Speaker #2: Yeah, sure. So actually, it's well, some of it's already materialized. So we're pretty proud with the July with the start in July. So we had 2% increase.
Speaker #2: So actually, if we had looked at July instead of June, then we'll be in a better position. But that's a good start for fiscal year 27.
Speaker #2: Now, I would say most of that revenue will come in, I would say, the first so that will be the third quarter of fiscal year 27.
Speaker #2: So probably around Gen and Fed. That's when most of the project will go live. Especially in Europe, the go-live or mostly align with the calendar year.
Speaker #2: So if we're lucky, we can start the billing in December. If not, then that will start in January. But I want to mention that we're talking about contracted ARR.
Speaker #2: So it's not an estimation. It's on the contract. And it's part of the ramp-up. So as a start of the project, we started billing the percentage of say 20%.
Speaker #2: Then at completion, that's when we go out of the first phase, we go to 50% and the second phase, let's say 100%. So it's really a contracted amount.
Speaker #1: And I might just add to that, just to mention that our budget currently has relatively steady ARR growth over the course of the year.
Speaker #1: I mean, that might change as we move through the year. But just to flag that that results in us reaching our target. But given the growth this year was weighted to the first half of the year, you expect the opposite next year.
Speaker #1: So the year-on-year growth rates will be a bit lower in the first half. But then higher in the second half, still getting to where we need to get to.
Speaker #3: That's more or less what I was asking as well. Thanks, Jason. And thanks, guys, again. Well done.
Speaker #2: Thank you.
Speaker #1: Thanks, Cam. I've got Caleb up next.
Speaker #4: Hey, guys. Congrats on the solid start to the year and the acquisition. I'll keep it to two as well. So just on the pipeline being three times, I guess, the ARR target, does that include the battery module being shipped to Europe in this financial year?
Speaker #2: It's a mix. So I would say not yet. Because that's in progress. So and also when I talk about the 3X coverage, I'm also talking about qualified pipeline.
Speaker #2: So qualified by they have a budget, they have the authority, they have a timeline, and they have the needs. So it's a basic bound qualification, but it's qualified pipeline.
Speaker #2: I think that's important to mention. And no, it doesn't include this yet. So it's in discussion. It's we're seeing adoption in Australia. And now we're planning the expansion into Europe.
Speaker #2: But it's not part of the qualified pipeline yet.
Speaker #4: Yeah. And just to provide some color on how much I guess best contributed Australian growth over the past few halves, maybe?
Speaker #2: I mean, it's increasing. In terms of percentage, well, I will need to confirm that. But it's we'll need to confirm that. It's definitively growing.
Speaker #2: Let's put it that way. And we're pretty exciting in the future. Now to see the exact growth, we'll need to get back to you on that.
Speaker #4: Yeah.
Speaker #1: No, we don't tend to we don't tend to disclose product by product.
Speaker #4: Yeah. Yeah. Maybe just some color on the churn. So is that mostly in services or is it a bit of sort of scheduling and ETRM or I guess how should we think about I guess what product is getting churned the most?
Speaker #2: It's a mix, really. So in terms of the European customer, it's downside the activities. They had multiple product and they don't say the activities.
Speaker #2: So a couple of product impacted. The second European customer, they got acquired by another company. And after two years, they integrated their ETRM. I mean, they integrate the ETRM into their ETRM.
Speaker #2: In Australia, then that was mainly on the gas services because obviously the impact on the gas price on industrial.
Speaker #4: Yeah. Gotcha.
Speaker #2: But again, the gas services in Australia doesn't represent a large part of our revenue.
Speaker #4: Yeah. All right. Thank you, guys.
Speaker #2: Thanks, Caleb.
Speaker #1: Evan, you're up next.
Speaker #3: Yep. Thanks. Okay. Hopefully, you can hear me. Just the recurring revenue growth target of 15% for 27. Can you just also also give some perspectives on the ARR growth for 27 as well?
Speaker #3: I mean, is it fair to assume that it should be above the recurring revenue growth, just take into account the already signed 5.1 mill of ARR, which is obviously a pretty clear pretty clearly a solid starting point?
Speaker #1: Yeah, sure. What I can say is the target is 15% or more of recurring, but at this stage, we expect to hit 15% or more on both total revenue and ARR as well.
Speaker #3: Okay. Good one. And then let me just coming back to the customer attrition, please. Obviously, it looks like a big chunk of those were in-housing.
Speaker #3: Do you want to just speak to how you're managing that going forward, how you're trying to manage that in-house churn? Especially, please. Thanks.
Speaker #2: So I mean, there is nothing really I can do if a customer goes bankrupt. Or the trading strategy doesn't pay off as he expected.
Speaker #2: Now, what I can do is enforce contracts and increase the renewable. Period and the term of the contract. I think it really helps to move the attrition.
Speaker #2: And then it's also getting closer to our customer. I think if we get closer to our customer, we have the opportunity to resell or revalidate or represent our value proposition.
Speaker #2: And I think that's key. And the second aspect is also through upsells and cross-sells. The more products, the stickier our solution gets.
Speaker #3: Okay. That's clear. I'm just going to sneak one more in. You sort of gave some comments around the low-hanging fruit for the revenue synergies.
Speaker #3: But when we think about some of the upside over the next sort of two to three years, what products or modules really start to underpin more of, I guess, an upside case for that revenue synergy number that you're thinking of?
Speaker #2: So I think one of our strengths is actually our diversified. And we're not focusing only on one product. And that's also how we're able to sustain our growth.
Speaker #2: Because there's always something happening in the energy markets. But we're positioned across multiple verticals. So it's not only one product. In the, I would say, very near term of definitively see a lot of potential in the ETRM market and the market access through outdoor trading.
Speaker #2: But in the near future, it can change and then it can become best in our ability to sell our Australian best solution. And through the workflow automation tool, also that we're actually migrating to a better technology and start bringing adjacent options.
Speaker #2: It. Then it could also play a game the next two years. So the answer is not a single product. It's right now for the near term, yes, we're identified as a few.
Speaker #2: But mid-term and longer term, that's really the mix.
Speaker #3: Yeah. Okay. All right. Good one. Thanks. Pass it on.
Speaker #1: Thanks for that. Jonah from Unified, you're up next.
Speaker #5: Hi guys. Thanks for taking the questions today. Congratulations both to you on presenting the full set of results. A couple from me. Firstly, just on GSML, the original inception of EnergyOne's business in Europe was obviously several businesses in the energy space that you consolidated in Australia.
Speaker #5: You've got a large exposure to gas. This business looks like it is strong in gas. Can you talk about the existing EnergyOne business's exposure to gas versus electricity markets and GSML and where that blends you out versus Australia, for example?
Speaker #2: So GMS sales started with gas and that's true. Now, GMS sales also pivoted to electricity about 10 years ago. So the exposure of GMS sales is not as.
Speaker #2: Gas started. It's now. It's a more balanced exposure across gas and electricity. And also I will answer the question that I see on screen at the same time.
Speaker #2: If you compare to our existing gas business called Axis, GMSL is actually a bit different. GMSL is really focusing on services and specialized services.
Speaker #2: Provide services on provide services on trading, balancing services, but also operating infrastructure. GMSL has the only. License to actually operate some of the UK assets on behalf of customers.
Speaker #2: So even if you look at the you look at from above, you seem so it's two gas businesses. In reality, it's not. The business in Belgium, Axis, they actually also were providing a lot of services and solutions to operate assets.
Speaker #2: So gas assets, but literally power plants. And the power produced by the power plants. So it goes into that direction. And on GMSL, it's more on providing highly specialized services to operate infrastructure, manage, for example, the LNG.
Speaker #2: Very strong with the LNG and the import of gas. In Europe, we're actually becoming increasingly relevant since Europe doesn't have any supply by pipeline from Russia anymore.
Speaker #2: So I think it's different. And then GMSL is not. It's not gas only. I mean, they diversified the revenue from gas only to power, about 10, 15 years ago.
Speaker #5: Thanks. A couple more from me. It's one-stop shop cost concept. Whether it's the real sort of one-stop shop. We've seen sort of non-recurring revenues sort of coming through sort of all the transactional sort of sides across the group coming through sort of pretty flat year on year.
Speaker #5: Just talk about the importance of services in driving that uptick in acceleration in AR that you're seeing. Because I mean, this business looks a little bit heavier in this side.
Speaker #2: I think services actually I truly believe that services is going to play a very big part in the energy trading space in the future.
Speaker #2: The reason is everyone talks about AI and automation, but someone will ask you monitor the assets. Someone will have to send the nominations. When something is going wrong, you need to have someone to operate a battery.
Speaker #2: Or if you go one step further, you need to have someone monitoring the nuclear plant, right? In France, 70% of the electricity production is coming from nuclear plants.
Speaker #2: So you can't fully automate that. And we're even seeing that from big tier one customers. Actually, requiring more and more trading services and balancing services.
Speaker #2: Because they've automated most of it, but they still need someone to monitor and act a human when something goes wrong. So actually, I truly think that's going to play a big part of the expansion in the one-stop shop strategy.
Speaker #1: I think if you get customers other than the traditional utilities that have done all their work.
Speaker #2: Correct. Now, and that's absolutely right. So when you have an industrial, which is crossing the meter, to fully staff a 24-hour roster or shift, you need six, seven FTEs.
Speaker #2: And that's a lot of cost, especially if you can automate most of it, but you still need to have someone available 24/7. And the more the smaller when you start having smaller participants crossing the meter accessing the market, they still need to monitor the assets dispatch the asset and react to market conditions and that's truly the value that we're providing with these services and the acceleration with the GMSL acquisition.
Speaker #5: I understand. It's an interesting concept and look like you're a bit ahead of your time. I'm just going to sneak one more in probably for Jason.
Speaker #5: Underlying expenses in the second half, decreased and it's against like a larger business. I mean, just should we assume that that's a good run rate with some marginal increase to come into the second half?
Speaker #5: I think previous commentary has been we'll grow revenues at twice the rate of what we're growing costs is. Is that a good base to take into next year?
Speaker #5: Are there usually low into the first half, just your comments there?
Speaker #2: Yeah. So if you look at sort of the cost split, it was roughly equal, I think. But again, a bit lower in the second half.
Speaker #2: We did a lot of our hiring early. And so didn't have to add more to the FTEs in the second half. But yeah, I think going forward, I would say half of revenue is a reasonable sort of forecast for cash expenditure going forward.
Speaker #5: Thanks, John.
Speaker #2: I've got a few more questions. Claude Walker, you're up next.
Speaker #6: Hi Ben, Jason, and Andrew. Yeah. First, just want to say thanks very much for adding the slide on page 13 on attrition. It's great to see the focus on that metrics are really important one.
Speaker #6: My question was first focusing on just the acquisition. I know you can't know what someone else is thinking, but do you think the vendors intend to hold all their EOL shares in the long term?
Speaker #6: And also, what kind of investors are they? You've got Fluxus, if I've understood correctly, are the majority, but you've also a few percent. There'll be a couple of percent of the company held by other vendors, if I've understood correctly.
Speaker #2: No, the discussion with Fluxus was around funding the acquisition. I don't see an organization the size of Fluxus having a specific interest in increasing or decreasing its shareholding.
Speaker #2: So I think you would see that stay stable. But yes, we don't know what they're thinking. That's certainly not the approach they've given. Yeah.
Speaker #6: Cool. Okay. Just also staying on the acquisition, given GMSL has a fair bit of exposure to the European gas market and I was just wondering, does that because the European gas market in particular can be disrupted from time to time, have big price fluctuations, does that create risks that earnings from GMSL are a bit hard to predict or is it still a fairly steady in terms of how much it's earned year on year?
Speaker #2: So I'm going to answer the first part. So first of all, GMSL is not focusing on gas. It's historically, it's coming from the gas business, but GMSL is providing experienced services and specialized services and software to power and gas.
Speaker #2: Now, when you look at the history of the revenue, you can actually see that there is no disruption. And when you look over the last five years, we had COVID.
Speaker #2: We had the Russian war, with Ukraine, we had the pipeline, which actually blew up in the North Seas, we had 50% of the LNG coming from the US.
Speaker #2: That's a lot of disruption for the gas market. And we also had all the electrifications in the Europe. And still, GMSL revenue has been stable and growing.
Speaker #6: Cool. That's what I thought I just wanted to probe that a little bit. Thanks a lot for the presentation. And yeah, all the comprehensive information in those slides.
Speaker #2: Welcome. Thanks, Claude. Amelia, you're up next.
Speaker #4: Awesome. Thanks, guys. Just a couple of quick questions from me. The first one is, could you just do the bridge for us from the 23% exit EBITDA cash EBITDA margin to the 30% in 2027 and just sort of the key levers to get from one to the other?
Speaker #2: Yeah, sure. And just to clarify, the 30% is on a run rate by the end of the year. So if you were to sort of look at the 23% run rate, put in the 15% revenue growth, and just think about the trajectory, you should get pretty close to that 30% or you should get to the 30%.
Speaker #2: Our current budget, basically, has us getting there. If we flatline revenue and put in that cost sort of I'm not going to call it guidance because we're not giving guidance on cost, but if you were to assume half growth of cash costs and revenue, you should be able to get pretty close to it.
Speaker #4: Okay. So are you assuming that your cost remain what kind of growth level in the cost base then are you budgeting for?
Speaker #2: So if you assume roughly half of revenue, you should get there.
Speaker #4: Okay. Great. Thank you. That's helpful. And just on the net new installs, I think you ended the year at 443, which was slightly down on last year.
Speaker #4: Obviously, there's a churn element to there too, but if you sort of calculate or approximate it out, you end up about, I think, sort of in the high teens.
Speaker #4: Versus if we look at previous years, sort of in the 50s. That's just obviously approximating from the churn levels and the revenue growth. Do you is it sort of now you've got much larger customers and therefore you expect the number of installs that you're doing to be much lower or is this year a little bit unusual?
Speaker #2: I can drop a few numbers and then Ben you can add to it. But what I've seen is, yes, we're definitely getting higher value customers on board.
Speaker #2: And if I look at the ARR per customer, that was up around 14% this year. And I think the ARR per new deal is even higher than that, like about 2 to 3 times that amount.
Speaker #2: So definitely is a transition to larger customers, but maybe want to elaborate.
Speaker #3: Yes. I mean, that's one of the key aspects is we're actually signing bigger deals. It's in especially in Europe, we used to sign small new entrants with a few traders and now we're signing Tier 1 customers.
Speaker #3: Obviously, it does a big impact in revenue, but not a big impact in the growth of installs.
Speaker #4: Great. Thank you. And then last question, which this is a little bit shaky, but. Ben, obviously, you were sort of running the European business and Europe sales later by sort of, I guess, history and experience.
Speaker #4: Do you feel like the sales team is at a point where they're sort of up and running at full ramp yet since you've kind of moved into the CEO role or a bit of work to go to kind of get that going with you out of the sort of hands-on day-to-day?
Speaker #2: So we had I mean, I hired a new chief revenue officer in June. I worked with him in the past. We worked in a global company.
Speaker #2: He's actually Australian, but it's been living in Europe for the last 15 years. So we have the right team in place, right? We're strengthening the processes.
Speaker #2: But as you could see, the lead generation is already starting to show results. So I'm really comfortable with the team now. We also hired a new head of sales in Australia.
Speaker #2: So that's really the team is where it needs to be and the commercial engine is running. Almost full speed.
Speaker #4: Perfect. Love to hear it. Thanks, guys. Appreciate it.
Speaker #2: Thank you, Amelia. Lucky last, we have Stephen Scott from Veritas. Go ahead, Stephen.
Speaker #5: Oh, good morning. I'm old enough, so I'm going to be cheeky. Update on volume. Can you say anything or are we just waiting for process to play out?
Speaker #5: Thanks.
Speaker #2: Look, there's nothing that I can do to control or influence a player like that. I think the role of the companies to deliver superb shareholder and customer value and I think that I can say that my observation is that the senior manager of this company and the employees have kicked both of those out of the park, both with the organic activity this year and the GMSL acquisition they've been working on for the last couple of months.
Speaker #5: Oh, thank you very much.
Speaker #2: Okay. Well, that's it for the Q&A. Really appreciate your time today. Sorry, maybe you weren't to wrap up.
Speaker #3: No, I think we're ready.
Speaker #2: But if you have any follow-up questions, get them through to 402 initially and then I know we're catching up with some of you later.
Speaker #2: So yeah, appreciate your interest in MG1.
Speaker #3: Thank you very much. We're truly excited. I mean, both by the results, the looking ahead for fiscal year 27 and obviously by this unique opportunity brought by GMSL acquisition.
Speaker #2: Thank you all for attending the call.
