Gentrack Group Ltd (ASX: GTK) shares are having a day to forget on Tuesday.
In afternoon trade, the ASX tech share is down 35% to $3.17.
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Why are investors selling this ASX tech share?
Investors have been rushing to the exits today after the utilities software provider released a trading update.
According to the release, the company is expecting FY 2026 revenue to be between NZ$229 million and NZ$238 million.
This is lower than its previous guidance and compares to revenue of NZ$230.2 million in FY 2025.
Management advised that this softer performance reflects weaker non-recurring (NRR) revenues, which will be lower than in FY 2025, which is offsetting recurring revenue growth. The latter is expected to grow by more than 10% to around NZ$174 million.
But perhaps the main reason this ASX tech share is falling today is its earnings guidance.
The company advised that it has taken the strategic decision to prioritise growth and global leadership over short term earnings.
It advised that it is continuing to invest in international expansion and product development. Furthermore, for new customer wins and upgrades, it is transitioning its business model to drive higher recurring revenue and lower costs for customer onboarding.
This ultimately means that full year EBITDA is expected to be between NZ$13.5 million and NZ$20 million. This will be down 28% to 51% on FY 2025's EBITDA of NZ$27.8 million.
Looking ahead, management remains positive on its outlook. It believes that strong recurring revenue growth will lead to EBITDA margins improving in line with its medium-term target of 15% to 20%.
Share buyback
The ASX tech share revealed that it intends to undertake an on-market share buyback following the release of its half-year results this month.
This would see Gentrack acquire shares up to a value of NZ$20 million but not more than 5% of Gentrack's shares on issue, across a period of up to 12-months.
The company's chair, Andy Green stated:
The Board's current view is that a share buyback would be appropriate and accretive to shareholders, noting that the programme is supported by a strong balance sheet and would not undermine the company's ability to continue to fund organic and inorganic growth.
