Energy One (ASX:EOL): A Strategic Play in the Global Energy Transition with High Earnings Growth and Recurring Revenue Visibility

In the rapidly evolving landscape of global energy markets, companies that align with the dual imperatives of decarbonization and technological innovation are poised to outperform. Energy One (ASX:EOL), a leading provider of energy trading and risk management (ETRM) software, stands out as a compelling case study in this regard. With a robust recurring revenue model, accelerating earnings growth, and a strategic focus on renewable energy integration, Energy One is well-positioned to capitalize on the secular tailwinds of the energy transition.

Financial Performance: A Foundation for Sustained Growth

Energy One's financial results in 2023–2025 underscore its resilience and scalability. For the first half of FY2025, the company reported a 14% year-over-year revenue increase and normalized EBITDA margins of 26%, while Annual Recurring Revenue (ARR) grew by 18% YoY, driven by strong SaaS adoption and low churn. By the end of FY2025, ARR had surged by 22%, with recurring revenue accounting for 90% of total revenue. This recurring model provides a stable cash flow foundation, critical for funding innovation and expansion.

The company's profitability has also improved dramatically. In FY2025, net profit after tax (NPAT) rose 74% year-over-year, and earnings per share (EPS) turned positive at AU$0.079, compared to a loss of AU$0.017 in the prior year. Quarterly revenue growth averaged 19.6%, with trailing twelve-month revenue reaching AU$61.12 million. These metrics highlight Energy One's ability to scale efficiently while maintaining profitability, a rare combination in high-growth sectors.

Recurring Revenue Model: A Competitive Edge

Energy One's business model is anchored in its high-margin, low-churn recurring revenue streams. As of June 2025, 90% of its revenue was recurring, a testament to the stickiness of its ETRM platform. This model is further strengthened by a 15–20%+ annual ARR growth target, supported by a 42% increase in customer installations over the past year and a global user base of 2,000.

The company's financial discipline is evident in its capital allocation strategy. Energy One plans to distribute 40% of net profit as dividends while reducing net debt to AU$6.7 million. This balance between reinvestment and shareholder returns enhances long-term value creation. Additionally, the company's operating leverage-evidenced by 42% EBITDA margins in Australia and 27% in Europe-positions it to amplify profits as scale expands.

Alignment with the Energy Transition: A Strategic Imperative

Energy One's core offerings are intrinsically tied to the global shift toward renewable energy. Its ETRM platform enables energy market participants to manage portfolios that include intermittent assets like wind, solar, and battery storage. By automating bidding, nominations, and algorithmic trading, Energy One facilitates the integration of renewables into complex energy grids, addressing a critical pain point in the transition.

The company's geographic diversification further strengthens its alignment with energy transition trends. Europe, now contributing 56% of its revenue, has seen EBITDA margins rise from 18% to 27% in FY2025. Meanwhile, Energy One is actively exploring entry into the U.S. market-a strategic move to tap into North America's growing renewable energy sector. The company's 24/7 global operational support and investments in cybersecurity (including ISO 27001 certification) underscore its readiness to serve the evolving needs of energy markets.

Market Demand and Competitive Positioning

Third-party analysis validates Energy One's pivotal role in the energy transition. The company's platform is described as a "one-stop-shop" for managing the entire energy trading lifecycle, from trade initiation to regulatory reporting. This comprehensive approach differentiates Energy One from competitors, particularly as energy markets become increasingly complex with the integration of renewables.

Market demand for Energy One's solutions is being driven by two key trends: the need for real-time trading capabilities and the rise of decentralized energy systems. According to the S&P Global Commodity Insights 2025 Energy Outlook, renewable energy sources are projected to account for over 50% of electricity generation by 2050, creating a sustained need for advanced trading platforms. Energy One's focus on AI-enhanced predictive analytics and automation positions it to meet this demand.

Risks and Mitigants

While Energy One's trajectory is promising, challenges remain. A 4% churn rate and a slight decline in net revenue retention in Europe highlight the need for continued customer retention efforts. However, the company's low churn (compared to industry averages) and strategic investments in product innovation mitigate these risks. Additionally, the transition from founder-led CEO Shaun Ankers to a new CEO is expected to be smooth, with Ankers remaining as an executive director to ensure continuity.

Conclusion: A High-Conviction Play on the Energy Transition

Energy One's combination of strong financial performance, a durable recurring revenue model, and strategic alignment with the energy transition makes it a compelling long-term investment. As global energy systems decarbonize and renewable integration accelerates, Energy One's ETRM platform is uniquely positioned to capture value. With a clear growth trajectory and a disciplined approach to capital management, the company offers investors a rare blend of scalability and stability in a high-growth sector.