TZL AGM: Subscription based model sees recurring revenue jump, growth continues through COVID-19
Link copied to
TZ Limited AGM is watershed moment for the software maker as it diversifies into a recurring revenue based model which is expected to provide it with a strong foundation for years to come.
Access control software provider, TZ Limited (ASX:TZL), reaffirmed its transition towards a subscription-based business model at its annual general meeting (AGM) on Thursday.
The company is continuing to simplify and streamline all facets of the business, as it looks to fully leverage the Cloud and new partnerships to unlock opportunities in securing long term recurring revenues.
These transformational moves came following last year’s appointment of new CEO Mario Vechhio, who believes that TZ’s software technology has been undervalued by previous management.
Vecchio said that he wants to reposition the business from the large ticket capital items to more “service based” agreements.
Since joining back in September last year, Vechhio has already started to reshape TZ’s product offering to rapidly grow these recurring SaaS fees.
The company expects its monthly recurring revenue, which currently stands at around $235k per month, will see a rerating in TZ’s valuation and ultimately, share price appreciation.
TZL chairman Peter Graham is fully behind his CEO, saying the company is currently laying a long term foundation in which the business can thrive for years to come.
“The TZ transformation included three steps. Firstly, restructure the balance sheet; secondly, stop the operating losses and lastly, grow revenue and expand the company,” Graham said in his Chairman’s message.
For TZL and many other companies, the year 2021 was a difficult one operationally as it was severely disrupted by Covid.
The company moved to pay suppliers up front to gain surety on the timing for its supply during an unprecedented period of uncertainty.
Despite these obstacles, TZ grew its revenue from $12.85m in 2020 to $16.37m in 2021.
EBIT was a loss of $1.59m (after $852,000 Depreciation and Amortisation), but still a 68% improvement on the EBIT of loss of $5.08m in 2020.
And after paying down most of its debt, TZ is expected to save near $800,000 per annum in interest costs.
TZ’s suite of products targets three market sectors: the agile workplace, contactless e-commerce, and the e-commerce click and collect markets.
The company is leveraging its proprietary Device Connect technology, a software solution that allows third party locking devices to be operated by the TZ platform.
The open gateway API system is expected to increase the company’s total addressable market, and transitions TZ’s business from the fit-out fulfilment into a recurring revenues model.
“Customers who take advantage of our open integrations are more likely to expand the use of TZ’s products across their whole organisation, are less likely to churn, and tend to grow their usage of TZ products faster,” says Vecchio.
“We see a long runway for TZ here.”
The company is also positioned to benefit from the transition into work-from-home and e-commerce, an online market that’s expected to hit $4.2 trillion in sales as people move to buying online and having parcels sent.
“As companies reimagine how to change their workplace and deal with e-Commerce… it calls out many old habits and processes into question,” Vecchio said.
“Among them, what does the new workplace look like? How do customers want to collect purchases? How to automate contactless pickups.
“That’s where TZ’s Core products shine, and the flexibility embedded in our multiple offerings are suited to our customers’ diverse environments and workflows,” he said.
TZL says large enterprises represent its fastest growing segment, and the company says it wants to scale this up.
“Scaling out a high-performing sales and support team is critical to our success, and expansion of our channel partners,” Vecchio said.
The company is currently building out a Delhi office as a foundational cornerstone of its technical teams, while also growing the teams quickly in cities like London and San Francisco.
TZ believes it’s standing on the cusp of an exciting new era of change which hasn’t been seen since the industrial revolution.
“Cloud is where our customers overwhelmingly want to be, and where our future lies as an enduring company. As customers move to the cloud, TZ products offer some serious bang for the buck,” the company said.
The move into Cloud is expected to increase TZ’s subscription growth in the mid-30s per cent year-on-year, in both FY21 and FY22.
“Subscription is our present and our future.”