TZ Limited: Growing pains
TZ Limited's high growth rate is reflected in their result for the year ending 30-Jun-16. Revenue increased 37% as compared to FY-15, to be $20.8m. Although a good result, it was impacted by deployment delays - without these reported revenues would have been higher. The company had $10m of backlog orders, of which it is expecting at least 50% to be completed in the current quarter (ending 30-Sep-16).
The company has a large contract with a well-known US transport and logistics company. This is a milestone contract for the company (in terms of size and strategic opportunity), but it is at a lower margin than their past smaller contracts. As such gross margins declined overall in FY-16.
Margin (and thus profit) was also impacted by increased operating expenses, as additional personal were required to support the growth. This should moderate in coming periods through the increased utilisation of their partner in the US, Ricoh (a relationship which is being widened geographically).
Overall, the bottom line loss was slightly better than we forecast, especially given the life stage the company is at. On a positive note, cash flow turned positive in H2 - which we expect to continue in coming periods.