TZL’s new CEO Mario Vecchio wants TZL to capitalise on its software technology and focus on becoming a software provider as it opens up third party access and expands to global markets.
TZ Limited (ASX:TZL), is embarking on a new path forward with a new CEO on deck, along with a business pivot that could see it unlock new opportunities within the IoT devices market.
The company owns a range of proprietary smart locks, built with its patented digital locking technology that allows customers around the world 24/7 access to parcel lockers, offices, data centres and more without the need for keys.
But new CEO Mario Vecchio has now laid out a plan that would pivot the company’s focus away from being a smart locker manufacturer to becoming a technology provider.
The new focus will ensure TZ capitalises on the recurring revenue opportunity presented by its software assets, as it looks to capture a larger share of the rapidly growing global IoT devices market that’s expected to explode to US$1 trillion within 10 years.
Opportunity pipeline
The recent appointment of Vecchio as CEO signalled the company’s transition to the next phase of its growth.
Vecchio has a proven record of delivering revenue gains, profit growth and market share increases through his strategic sales experience in prior roles.
He joined TZ from global SD-WAN provider Aryaka, where he was senior vice president of APAC responsible for pushing the telco’s footprint into the region.
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.
The new SaaS model is expected to significantly increase the company’s recurring revenue base by 50% or more, and brings it in line with the model used by other service providers.
To do this, TZ will leverage its proprietary ‘Device Connect’, a software solution that allows third party locking devices to be operated by the TZ platform.
This open gateway API system is expected to increase the company’s total addressable market, and transitions the company’s business model into recurring revenues and away from the fit-out fulfilment model.
TZ has been at the forefront of IoT research and development since 2004, and its TZ SMArt device technology stands out in a crowded marketplace.
The company sells the only shape memory alloy (SMA) actuated electronic lock on the market, with over 180 patent applications as reinforcement.
It has built a list of blue chip customers that include Apple, Google, Microsoft, Disney and Netflix – a validation of its technology in a competitive market.
Vecchio says that TZ will continue to sell these devices, but will now transition to focus on higher value multi-term software agreements, where it’s able to generate a margin of 80% or more.
Solid financials
In their quarterly out earlier this week, TZ reported net cash from operating activities of $0.3m, far exceeding the negative -$1.2m in the previous FY21 Q4 quarter.
In June 2021, TZ paid down $7.6 million in debt, recapitalising and strengthening the company’s balance sheet and restructuring its debt with First Samuel, its largest shareholder.
TZ now has 193m shares on issue and a $2.5m debt facility (BBSW+4.5%) fully drawn with First Samuel, versus the previous debt of $11.75m. The recapitalisation will save the company approximately $0.8m in interest costs per annum.
Global expansion is high on the priority list, with TZ having already opened new offices in India, Singapore, and the UK – adding to its already established offices in South Africa and the US.
The company is gearing up for a successful FY22, with a pipeline that’s growing rapidly.
The business has said they are focused on being cash flow positive in FY22 and substantially growing recurring revenue streams.
Open for business
Around 54 deployments in the US are currently on the books, compared to approximately 22 deployments at the same time last year.
TZ also flagged a number of high-profile quotes currently under review, including with National Bank of Canada, Westpac and Amazon.
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.
The company is set to benefit from the expected permanent transition into e-commerce, a market that’s expected to hit $4.2 trillion in sales as people move to buying online and having parcels sent.
New CEO Mario Vecchio will be holding an investor briefing next Tuesday 26th October at 11am to discuss the strategic transition and how this sets TZ up for revenue expansion and growth. Click here to book.
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.
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