Improved margins expected as shipments of TZ Limited’s OPeL platform begin
Upgrades to TZ’s software stack will reduce software support costs over the next six months.
Access control locker software systems provider TZ Limited (ASX: TZL) has cited a slowdown in US sales in the recent quarter as customers wait for the release of its new OPeL platform.
As shipments of OPeL begin this month and sales volumes gradually increase, the company said its gross margins are expected to improve significantly.
OPeL is an open software platform for metal lockers which can utilise hardware by other manufacturers.
TZ said sales of the platform had already begun with new and existing clients adopting the product.
“ is reflected in the decline of our hardware revenues,” the company said.
“The global hardware locker market is commoditising rapidly, and this also resulted in a decline in our high-cost traditional proprietary hardware solutions and reduction in gross margins.”
TZ expects cash flow to remain negative through the next quarter as it continues a “transformation and transition” from its traditional low-margin hardware platform to OPeL.
Monthly recurring revenues
TZ’s monthly recurring revenue base (MRR) for the period totalled $280,000 and was attributed to the end of a long-term contract with Singapore Post.
The launch of OPeL is expected to drive software MRR to become a material part of the business.
The company confirmed it had started to receive purchase orders from a number of global customers and had already won new clients on the back of the new platform.
Software stack upgrade
An upgrade of TZ’s software stack is reported to be on track, with the company now well-positioned to experience a reduction in software support costs over the next six months.
The TZ Exchange Point Software Solution is expected to reach “generally available status” before year end, at which time TZ confirmed it would be ready to release a new TZ Express app for its low-end, high-volume market.
The app will allow for ongoing growth of the company’s MRR which will relieve the revenue pressure of large-scale “lumpy” project revenue.
TZ Express is expected to become the cornerstone of growing monthly run-rate revenue streams.