The fresh $3.45m capital raise will be used to pay down debt, and support its growing business in the US and Australia, where contract wins have picked up significantly.

Smart locker software provider, TZ Limited (ASX:TZL), has received firm commitments for its $3.45m  capital raise – funds that will enable the company to pay down debt and support its rapid business growth.

Over the past nine months, TZ has raised significant capital to remove the company from debt and its associated interest costs, which are estimated to be $1m per annum.

During this period, its debt had fallen from near $12m to $2.5m, and this latest raise of $3.45m effectively means the company is now debt-free to pursue its growth strategy.

The company is on a high growth trajectory, with US sales totalling $5.5m in the July-October period and recent contract wins in Australia totalling $1m.


A new direction

Over the last several months, TZ has embarked on a new path forward with new CEO Mario Vecchio on deck.

Vecchio is pivoting the business into software, a move  that could see TZ unlock new opportunities within the multi-billion dollar IoT devices market.

He’s also been busy restructuring and strengthening the company’s balance sheet.

Under his guidance, TZ has been paying down debt, saying that it was hindering opportunities and threatening its financial viability.

With all debts paid off now, the company says staff morale is higher and they are reinvigorated knowing the company is without the financial pressures it had previously.

Employees are feeling more secure in their employment, TZ says, which in turn has had a very positive impact on productivity resulting in the overall increase in percentage of contract wins.

TZ’s US business saw $5.5m in sales over the last four-month period, and had won contracts worth $7.75m since the last corresponding period – a 40% increase.

The company has also recently won contracts with some of the biggest corporations in Australia.

Chevron Australia has just made a purchase order for the supply of TZ electronics and software services totalling 2,800 smart lockers.

That contract follows TZ’s successful tender to supply CSL with hardware and software solutions for TZ smart lockers at its offices in Melbourne.

But like most other companies, TZ is grappling with certain short term cash flow obstacles as a result of tight global supply chains.

The company has had to pre-pay for materials to secure supply, before receiving the purchase order amounts from clients.

A recent $500k deposit to a supplier to buy materials illustrates the constraints it’s facing on the cash flow front. There is a time gap between having to order from these suppliers, and clients paying their deposits on purchases.


Looking ahead

The recent appointment of Vecchio as CEO signalled the company’s transition to the next phase of its growth.

Vecchio believes TZ’s software technology has been undervalued by previous management, and he’s now looking to unlock this potential by shifting the business from a perpetual licence to a multi-term SaaS service agreement model, where annual subscriptions could be monetised.

Recently, existing TZ clients have been requesting “additional functionalities” which provided an opportunity going forward for this annuity revenue.

To capture this opportunity, management has been ramping up TZ’s software development team.

The company will now be raising $3.45 million via a share placement to institutional, professional and sophisticated investors at 12.5 cents per share – with Reach Markets as the lead manager.

The placement will result in the issue of 27,570,000 fully paid ordinary shares in TZL.

Coming out of Covid, TZ is set to become a globally significant player where its products are seen as the  best-in-class options to support the permanently changing landscape that we’re seeing as a result of the pandemic.

This article was developed in collaboration with TZ Limited, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.