At 4PM AEST, ASX trading hours end. At 5:35 PM, smart locker development company TZ Limited (ASX: TZL) revealed a massive, potentially damaging, screw up with its 2022 financial report numbers. The Company reported a higher revenue and EBITDA for 2022, inflating its amounts by over $1 million!
TZ reported a profit of $42k without adjusting it to a loss of $1 million in its original report. It also reported revenue of $21.4 million and EBITDA of $1.2 million when the corrected figures are $20.3 million and $225k respectively. A failure to reverse accrued revenue led to this shocking error.
“The board is extremely disappointed to have to report this material accounting error,” the announcement said. The corrections come over a month after TZ reported its earnings report, wherein it highlighted its growth of over 100% in profit.
The results must be considered a huge loss for the Company, which used the fudged numbers as benchmarks of success. For instance, over the past year, TZ underwent a “transformative period”, especially with regard to its personnel as it hired a new CEO, CFO, CTO and Head of Marketing. As it navigated the turbulent period, in 1HFY22, it witnessed a loss of over $1 million. For the Company, the initially reported $1.2 million represented that it was doing a fabulous job of getting over the bumps. However, the actual numbers indicate that it is far from the truth, urging TZ to reevaluate its strategies. It’s a setback of the highest order.
Plus, it is interesting to see how a business whose USP is developing smart locking technologies is so lax with its own accounting (in)accuracies. After all, this is not the first time TZ has made an error with its accounting reports. In August 2022, while announcing its software licensing deal with electronics company Ricoh, it misreported a deal metric, i.e. the monthly recurring revenue. It should’ve been $26,400, but it was reported as $60,900.
It seems TZ has a penchant for exaggeration when it comes to its financial reports. And it is unlikely to bode well for the Company or its shareholders.
To address its recent mess ups, TZ’s current finance team has automated the accounting process to ensure projects that are completed, which were previously accrued, are reversed from accrued revenue, whilst being separately invoiced in full. This way, it aims to avoid any future financial errors that could end up being very costly for TZ.
Alinda is a Business Reporter for The Sentiment
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