Source : THE AGE NEWS
By James Pearson
It’s been a long and winding journey for Sydney-based data centre security and smart-locker company since listing 21 years ago, however 2025 just might be a transformative year for ASX-listed TZ Limited.
After taking several affirmative steps in the past 12 months to reverse a near calamitous $6 million loss in 2023, new management says it has now set the company on what it believes will be a prudent and financially sustainable course having delivered a $700k EBITDA in FY24.
TZ Ltd’s Praetorian cabinet locking system delivers electronic access control with audit trail capabilities to data centres.
Potentially leading the way to that transformation, TZ has agreed to buy Keyvision, a high margin property technology company, in a deal worth up to $10m that it says will deliver synergies and strong revenue growth.
More on that in a while.
TZ was founded 27 years ago at the height of the dotcom boom by Dickory Rudduck and John Wilson, who has only recently returned to the helm of the company to implement a new business plan. Back then, the pair developed a method to integrate a product known as “shape memory alloy” (SMA) with micro-processors to produce a smart locking and fastening mechanism with a multitude of uses.
As a world first at the time, the TZ “SMArt” mechanism became known as a more secure system for lockers than the conventional lock and key and had the added advantage of being remotely operable.
TZ’s locking mechanism also quickly became the preferred choice for data centres to control access to server columns. Unlike other modern remote access locks, it does not generate a magnetic field—a crucial feature for preserving the integrity of the data stored within the servers.
And as the enormous growth in AI continues to drive a big push for more data centres worldwide, demand for TZ’s lock is only likely to get bigger, with the market for security at these facilities expected to more than double from US$1.72b (A$2.75b) in 2023 to US$3.4b (A$5.4b) in 2030.
Since the early days, the product has undergone several modifications and improvements in line with the ever-advancing miniaturisation of micro-processing. Today, TZ’s patented device has even evolved to include an algorithm embedded in its software allowing it to self-train using artificial intelligence.
Through a combination of data collection and diagnostic abilities, the lock can monitor real time open and close activity and recognise changes in things such as ambient temperature and the age of the embedded shape memory wire to automatically adjust the locking device accordingly.
TZ’s current business model involves the sale of its locking hardware and associated items – typically fitted to data centre server doors and smart lockers. From there, it charges an ongoing software as a service fee for each door or each user – and this is where it sees major scaling opportunities.
The company’s recent decision in October to buy Keyvision looks to be a strategic move that, at face value at least, makes a lot of sense since the deal will give it exposure to a sizeable client base in Australia’s high-density residential market.
Developed two years ago as an APP for property tenants, Keyvision’s platform delivers information about multi-tenanted properties and even provides booking services for shared facilities.
TZ says Keyvision’s app platform provides compelling cross-selling opportunities that might combine its existing services such as quick votes, on-site incident reports, amenity bookings and pet registration with TZ’s own ability to remotely unlock items.
It is also an important piece of TZ’s strategy to grow its recurring revenue to more than $10m in the next three or four years.
Of the $14m in total revenue already reported by TZ for the 2024 financial year, notably, $3.9m was very high margin annual recurring revenue. The addition of Keyvision’s forecasted $1.6m of its own annual recurring revenue will significantly boost that sought after metric.
And if Keyvision’s annual revenue targets are met for the subsequent three years, TZ will have notched its annual recurring revenue number up to $7.55m, even before allowing for growth in its core locking business.
The global market for locking and protecting is as huge as it is diverse. TZ has until now, however, focused on designing and supplying products into its two principal sectors, data centres and smart lockers.
Security is a vital part of data centres with each server column requiring its own individual lockable door. Early on and perhaps not surprisingly, the company identified server farms as a huge growth market, initially since its mechanism – unlike other modern locking devices – does not emit a magnetic field which can severely disrupt server integrity.
However just as importantly and more recently, the booming growth of artificial intelligence has driven a massive demand for bigger data centres, all of which need locking devices.
With mega clients such as Microsoft, Nike, Adidas and Google on its list, TZ is already well established in the sector, primarily in the United States, leaving the company in the box seat to win multiple new contracts as the roll out continues. Notably, only recently, the company signed a $1m contract to trial its latest lock models at Microsoft’s new data centres in the US and Dublin, Ireland.
The smart lockers sector involves a multitude of alternative markets such as parcel collection lockers at train stations and newsagents, personal lockers for the workplace, educational facilities such as schools and universities and even end of trip lockers for items such as bicycles and scooters.
Smart lockers already account for 85 per cent of TZ’s revenue stream with nearly 50 per cent of that coming from US.
TZ Ltd’s secure cabinet locking system which can record parcel deliveries and maintain delivery and pick-up audit trails.
Although parcel management facilities have traditionally provided most growth, as companies such as Amazon continue to dominate the online retail shopping sector, the education sector is an increasingly important market for TZ.
There are more than 4000 educational facilities in the US, of which nearly 600 are already serviced by either TZ – with 140 clients under its belt – and competitors such as Quadient with 200 facilities or Pitney Bowes and Qtrax with a combined clientele of 260.
The acquisition of Keyvision therefore could be the perfect adjunct to its educational locker business and spur renewed growth in a still chronically underserviced sector.
TZ has experienced ups and downs in the past 20 years that might be considered typical of many startup companies.
Although the initial six years were sprinkled with the usual issues of designing, building and perfecting the technology for commercialisation, a breakthrough global licensing deal in 2004 with US-based giant conglomerate Textron Inc put TZ on the map and prompted the company to list on the ASX.
The roll out of smart phones in 2007 elevated its prospects further with the advent of app-based solutions for remote access and security.
From a 40-cent listing price, TZ hit a heady high of $7 a share and a market capitalisation of $300m at one point in time before encountering choppy corporate waters that eventually resulted in Wizard Home Loans founder Mark Bouris coming in as executive chairman to steady the ship from 2009 until his eventual departure in 2017.
The unfortunate timing of a decision to aggressively gear up for growth coupled with the unexpected onset of COVID in 2020 again put the company on rocky ground. This culminated in the heavy reported loss of $6m in the 2023 financial year… and the subsequent return of company founder John Wilson.
Decisions were taken to chop some of the crippling overheads and to re-align the organisational structure and the marketing strategy centrally in Australia, although the company has retained sales teams in the US and Singapore.
Adding to the operational changes, TZ has also been exploring ways of offloading the manufacturing costs of some of its products to better manage cashflow and, importantly, focus its attention on growing its annual recurring revenues from the software as a service business.
A recent approach by SRA Solutions, TZ’s preferred reseller of data centre security products in Australia contemplates a licence to manufacture a variety of its products in exchange for a royalty of up to 15 per cent.
The green shoots have clearly started to show too. Gross profit margins have almost doubled to more than 50 per cent after the company elected to abandon its price matching strategy, relying instead on its value proposition.
Interestingly, after 20 years, TZ’s core product, security lockers, still appear to have enormous appeal and the acquisition of Keyvision could be the final piece of the puzzle for the company when it comes to scalability.
With a society that is rapidly embracing both security and convenience, perhaps like never before, TZ’s product suite, when combined with that of Keyvision’s, might prove to be the right product mix for the right time.
Is your ASX-listed company doing something interesting? Contact: mattbirney@bullsnbears.com.au
