FY26 Gentrack’s Show-Me-The-Money Moment

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This story features GENTRACK GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: GTK
The company is included in ASX300, ALL-ORDS and ALL-TECH

Gentrack's FY25 results calmed investor concerns with the future stock re-rating reliant on converting a robust pipeline to new contract wins, albeit delayed.

• Global software valuations slide as investors price in disruption risk
• FY25 a transition year, FY26 sets up the real proof point
• Veovo keeps delivering steady growth while utilities reposition for the next leg
• Genesis Energy’s g2.0 rollout is becoming the key reference site
• Investor Day should sharpen the market’s view on execution

By Danielle Ecuyer

SaaS stocks have been under pressure over AI impact fears

Artificial intelligence is coming for enterprise software companies, apparently, or so the narrative goes. As AI large language models become increasingly intelligent, there is a pervasive school of thought (story) that global software companies will be significantly disrupted by AI.

Who needs a company or sector specific software as a service subscription when everything can be done internally on ChatGPT or Gemini 3?

Might sound a bit far fetched at this stage. At the very least, there has been a growing tide of anxiety around the more horizontal enterprise software services.

Think big companies like Salesforce or SAP. These provide generic software solutions across multiple enterprises, as well as more sector specific software, such as the likes of schools and councils, as serviced by TechnologyOne ((TNE)).

Globally, software as a service stocks have been de-rated, largely through a downgrade in valuations ascribed. Some companies have also been hit with a double whammy of a lower valuation and hiccups around financial metrics.

The iShares Expanded Tech Software Sector ETF (US listed) is down -11% over the last month and only up 2% year to date.

Stocks like Palantir and Applovin are in the top 10 holdings and have done a lot of the heavy lifting in terms of performance, versus the likes of Salesforce and ServiceNow, which are down almost -40% and -32%, respectively.

A “transition” year added more fuel to the de-rating story

Gentrack Group ((GTK)) has not been immune from the enterprise software de-rating. This has been compounded by what analysts describe as a “transition” period over FY25 and into FY26. Moelis points to a more moderate start into FY26.

In the run up to the recent FY25 results announcement, the stock had declined to a 52-week low around $6.30 from a high around $12 in late June, before some clarity and future earnings visibility brought the buyers back out of the woods.

Canaccord Genuity believes the fall in the share price over the past six months, while the Small Ords gained 12%, is most likely the result of investor perception of slower revenue growth as well as limited new contract announcements. Reinvestment for growth was also noted as a potential negative for margins.

As highlighted by UBS, the stock rallied over 18% post FY25 result, but this only returned it to levels seen at the end of October. Management addressed market concerns by sharing more details.

By way of context, “Gentrack provides a meter data services, meter data management platform that ingests, validates, stores, and processes data from smart (and legacy) meters at scale”, as depicted by the company.

The meter data are collated and feeded into the core “meter to cash” and billing, customer platform. Billing is at the centre of Gentrack’s latest upgrade g2.0.

It manages the “full customer life cycle of utility customers from exploration, acquisition, and onboarding to consuming, meter data services, distribution management, billing, debt management, payment, forecasting, analytics and more”.

Salesforce and Einstein AI are used, and it is cloud native on Amazon’s AWS. Gentrack g2.0 is designed as the number one billing, customer relationship, customer service, and cloud provider in one single solution and is now live with Genesis Energy ((GNE)), a large NZ customer.

Latest results confirmed ongoing growth

The FY25 results showed a rise in revenue of 8% and earnings growth (EBITDA) of 18%, with an earnings (EBITDA) margin of 12%. UBS pointed to an earnings miss of -6% on its forecast, but an in line result compared to consensus expectations.

The ‘miss’ was attributed to weaker recurring utility revenues, which were somewhat countered by improved non recurring revenues, although still down -5%.

Regionally, EMEA utilities was the only contributor to revenue growth, up 13%, with APAC flat.

Higher utility costs by -NZ$4m were also a factor, arising from a rise in sales and marketing costs around g2.0 and geographic expansion.

Airports, Veovo revenue advanced 15% on a combination of growth in annual recurring revenue and net recurring revenue, or 27% growth ex hardware sales, as pointed out by Bell Potter. Veovo benefitted from further new contract wins in the UK, Middle East and APAC expansion.

Management stated the division has started FY26 with a “very strong backlog of projects and strong pipeline”.

Available cash on hand of NZ$85m also permits some optionality for add-on acquisitions. As noted at the call, acquisitions “add products and capacity for even stronger growth”.

It’s all about the pipeline and new platform success

While some investors may have taken a deep, comforting breath FY25 metrics on balance did not disappoint, the real focus was around any further pipeline announcements.

For Shaw and Partners, management offered some clarity and reassurance on the growth outlook for FY27 of over 15%. As described by the analyst, the new pipeline disclosure provided increased transparency and confirmation around the number, scale and the maturity of opportunities.

The pipeline was articulated as the same size as Gentrack’s existing recurring utility revenue. This could reflect as much as NZ$200m to NZ$400m in net recurring revenue.

For Jarden, how management executes over the next year will be imperative to confirming Gentrack’s ability and success of converting the pipeline into contracted revenue and reinforcing its competitive credibility.

The pipeline was qualified as ten customer prospects worth together 30m meter points, with estimated recurring revenue of NZ$136m. Many are seen in a good position for a 2026 decision.

Out of the ten, Jarden highlights Gentrack is the preferred provider at three of them and short listed for another three. Bell Potter notes the company is well placed at four others for 2026 decisions. Three to four wins would be sufficient to establish a strong outlook for FY27 growth.

UBS observes the pipeline is spread across geographies and market segments including business to consumer, business to business, energy, water and one Tier one customer. This analyst assumes 30% to 40% of the pipeline converts.

Such outcome underpins revenue growth of 17% in FY27, which aligns with management’s commentary.

However, there are remaining risks of churn. UK Octopus owned Kraken is becoming more competitive in both the business to consumer and business to business segment.

In an earlier report, Moelis pointed to increasing competition from Kraken Technologies in the Australian utilities software segment, alongside media reports it will demerge from parent Octopus Energy (UK), part owned by Origin Energy ((ORG)), which may have valuation implications through comparisons with both Gentrack and Hansen Technologies ((HSN)).

A further potential hurdle from industry feedback suggests to Moelis incumbent software vendors have lengthened the support period for legacy versions of their software. This takes pressure off utilities to speed up the transition to new billing platforms.

If pipeline customers are successfully converted, the company is considered as well positioned to return to over 15%-plus revenue growth in FY27.

For FY26, management expects 8%-plus revenue growth, i.e. to be higher than FY25.

Veovo is anticipated to grow at 15%-plus minimum, utilities recurring around 10% growth, and non recurring revenue should grow on new wins.

Investor day and broker views

The upcoming Investor Day, scheduled for today, December 1st, is also cast as an important date for the company to present its technology stack and offer more details and insights into its pipeline.

Broker views on the company are quite disparate and varied across target prices. Much of this relates to confidence around management’s ability to successfully deliver on its new g2.0 platform. The rollout at Genesis Energy is an important reference point for the company’s ability to implement successfully, as well as for the new platform’s performance.

Senior management are well incentivised according to Moelis under the long term incentive scheme (NZ$0.22 per share).

Amongst FNArena daily monitored brokers there are two Hold equivalent ratings and two Buy ratings, with a consensus target price of $10. Morgan Stanley is pitched at $7.70 and Shaw and Partners at $11.30.

Moelis has the highest AUD target at $11.59, alongside a Hold rating, while Canaccord Genuity with a Buy rating has the highest NZD target at NZ$14.50.

This compares to Sell equivalent rated Jarden at NZ$8.85 and UBS, Hold rated at NZ$9.65.

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