Gentrack Growth Story Under Scrutiny

Small Caps | 11:30 AM

Gentrack Group’s weaker share price reflects concern over delayed project wins and rising competition, yet brokers remaining broadly positive on the long-term opportunity.

• Gentrack Group’s interim results in line with downgraded guidance
• Pipeline delays weigh, Kraken competition ever present
• Management now prioritising growth over short-term earnings
• Ord Minnett still finds consensus forecasts too optimistic

By Mark Woodruff

The share price of utility software provider Gentrack Group ((GTK)) has fallen by more than -50% in 2026 as investors increasingly focus on execution risk, elongated sales cycles and intensifying competition, overshadowing the company’s longer-term structural growth opportunity.

Persistent negative sentiment towards software companies generally has further compounded the sell-off.

Operating across the A&NZ region, the UK and parts of Europe and Asia, Gentrack generates revenue from software licences, implementation projects, recurring SaaS subscriptions, and ongoing support and maintenance services.

A key focus for the group is its next-generation g2.0 platform, a cloud-based software offering designed to help utilities modernise billing and customer systems while supporting energy transition trends.

Meter data is aggregated and integrated into the platform’s central “meter-to-cash” billing and customer management system.

Gentrack integrates Salesforce’s customer relationship management (CRM) and customer engagement tools into its own billing and utility operations software for energy and water companies, alongside AWS (Amazon) infrastructure support.

Under the partnership, Salesforce, one of the world’s largest enterprise software companies, manages customer-facing CRM functions and digital customer journeys, while Gentrack provides billing, metering and utility operations capability.

Management describes Salesforce as both a referral source and strategic co-sell partner, with opportunities sourced independently, jointly and through Salesforce’s utility ecosystem.

Gentrack views the collaboration as a key differentiator versus legacy project-based CRM integrations, allowing utilities to adopt new Agentforce AI capabilities without major redevelopment.

Management also argues the company's meter-point-based licensing model is structurally more resilient to reductions in human call-centre staffing than traditional seat-based CRM pricing models.

Lowered guidance

Back on May 5, Gentrack disappointed the market by lowering FY26 revenue guidance by circa -8% to between NZ$229m-NZ$238m, citing a strategic decision to prioritise growth and global leadership over short-term earnings.

Based on the pipeline and market opportunity in both the Utilities division and the group’s Airports (Veovo) division, management stood by its medium-term revenue target of a more than 15% compound annual growth rate (CAGR).

For new customer wins and upgrades, the company announced a business model transition to drive higher recurring revenue and lower cost for customer onboarding.

Following a call with management at the time, the analyst at Shaw and Partners felt the recent -40% share price sell-off increasingly implied a structural slowdown, not supported by either management commentary or the current pipeline visibility.

Interim results

The interim result on May 18 was negatively impacted by the previously flagged slowdown in non-recurring revenue (NRR) and delayed project wins, Bell Potter explains, reflecting weaker implementation activity and longer sales conversion timelines across the Utilities division.

In line with previously announced guidance of around NZ$110m, revenue fell -2% year-on-year to NZ$110.1m, while a 12% rise in annual recurring revenue (ARR) to NZ$85.3m also met guidance.

Utilities revenue declined by -3%, while Airports grew 3%, or 20% excluding hardware sales. Billing software within the Utilities division generated circa 82% of Gentrack's interim revenue.

Delays to two prospects drove a material decline in project revenue, Jarden explains, with management unable to fill the gap through existing customer workflow.

Earnings of NZ$7.9m were broadly in line with guidance of around NZ$7.8m, implying a margin of 7.2% versus 11.6% in the prior corresponding period.

While the margin was disappointing, Jarden found the outcome not entirely unexpected given extended sales cycles and the high proportion of NRR within Gentrack’s business model, making earnings volatility difficult to avoid.

Management reiterated the Utilities division’s customer pipeline includes 10 opportunities, targeting three-to-four contract wins.

Underlying cash costs were higher than Shaw and Partners expected, modestly reducing this broker’s cash earnings forecasts.

The group closed its half with net cash of NZ$73.2m, although the approximately -NZ$40m of acquisitions occur post balance date.

Ord Minnett is encouraged management has confirmed no customer logo churn since FY25 results in November, with the last confirmed g2.0 contract win also occurring at that time.

Ord Minnett also believes consensus forecasts remain too optimistic regarding the timing and pace of Gentrack’s return to growth.

All up, Morgan Stanley views the sales and earnings ‘miss’ announced on May 5 as disappointing, with the inclusion of a contribution from newly acquired SaaS-based energy pricing platform Factor within unchanged guidance representing an additional modest negative.

Recent investments/acquisitions

Management made a strategic investment in Amber Electric in February 2024 as part of Amber’s Series C funding round.

Gentrack invested -NZ$12m for an approximate 10% stake and entered a strategic partnership to jointly develop and distribute energy optimisation software.

Moelis explains Gentrack’s interim profit and loss result included a share of losses from Amber.

Momentum at Amber continues to build, this broker highlights, supported by growing opportunities to connect electric vehicle battery storage systems with homes and the broader electricity grid.

Gentrack has also announced two acquisitions since April 30, with a combined estimated value of around NZ$40m.

The analysts at Moelis explain upselling opportunities support the strategic rationale for the acquisition of Factor for -NZ$24m, an AI-powered forecasting and pricing toolkit for utilities. A further -NZ$10m earn-out is attached in growing ARR to NZ$17m within three years.

While Factor is not expected to contribute meaningfully to FY26 revenue, the broker points to limited overlap with Gentrack’s existing customer base and believes the product’s relatively simple deployment model should support shorter sales cycles.

On April 30, management also entered a sale and purchase agreement to acquire airport technology and services provider Dubai Technology Partners for -NZ$17m, to be integrated into the Airports division.

Neither acquisition is attempting to ‘make up’ for a near-term shortfall in NRR, Bell Potter highlights, noting management’s confidence in pipeline opportunities within the Utilities segment over the next 12 months.

Such acquisition activity highlights to Moelis management’s focus on deploying capital into growth opportunities, while also increasing the importance of stronger second-half cash flow delivery.

Competition

When Ord Minnett initiated coverage on Gentrack in April, long sales cycles and intensifying competitive pressure, particularly from Kraken, were seen as key constraints on growth.

Kraken, owned by UK-based energy retailer Octopus Energy, is a major competitive threat because it offers a modern, cloud-native utility software platform with strong capabilities in billing, customer management and energy retail operations.

Kraken has gained momentum globally by providing utilities with a highly scalable platform designed for renewable energy integration, smart meters and AI-driven automation.

Origin Energy ((ORG)) owns circa 23% of Octopus Energy.

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