Company websites mentioning use of Zoono, page-1167

I generally have a somewhat hostile aversion to investing in "hot thematics", such as companies which are purported to possess some sort of special solution to large problems.

And when people tells me that there is a company that has a universally applicable, eminently affordable solution to helping preventing one of the greatest existential crises to impact humanity since the Great Wars, my cynicism receptors start twitching manically.

That was my starting point with ZNO some months ago.

However, prompted by the fact that some people who I consider to be smarter than me were shareholders in the company, I started to do some due diligence on the company and its genesis, the people behind it, the industry in which it operates, is IP, its go-to-market strategy.

And, importantly, how it has dealt with going from - almost literally - little more a mere business concept 6 months ago that operated out of some guy's garage located in a far-flung geography of the world.... to an enterprise to whose door numerous very, very large enterprises are today beating a feverish path.

Six months ago the company was generating no operating cash flow.

It exited June 2020 at a monthly after-tax free cash flow rate which I estimate to be around $1m (so, annualised $12m pa).  I will eat my own children if the company books less than $15m in Free Cash Flow for FY2021, and exits the year at a monthly free cash flow run-rate less than $2m (so ~$24m, annualised basis).

At the prospective Enterprise Value of around $350m, that values the company on a FCF multiple of less than 15x.

That's the valuation domain of companies that are ex-growth.

And a descriptor that is least-applicable to ZNO is "ex-growth".


On the contrary, the company is bursting at the seams; there's probably too much demand for a company which, until only recently, could probably have considered to be part of a cottage industry.

From cottage industry to the global stage in the matter of a few months.

With little doubt, the revenue opportunity for ZNO is - at the risk of speaking hyperbole - enormous.

The real question is to what how much of that the revenue opportunity ZNO will be able to physically access, given some of the physical limitations.

The company's Revenue run rate is already around $100m.

I don't see what could prevent it reaching $300m or even $500m at some stage over the next 2 to 3 years (assuming the virus and viral-aversion/vigilance is not merely consigned to bad societal memories at that stage).

At $300m in Revenue, and 60% GP Margin (currently higher than that, but let's assume some kind of margin fade for the sake of prudent forecasting), that yields $180m in Gross Profit.

Fixed cost overheads currently run at, I'm guessing, $10m pa (including sales and marketing), but that will certainly have to be ratcheted up considerably to reflect the resourcing needs of a "grown-up" company.

Even at $20m of fixed overheads, that still yields EBITDA (and EBIT, since this is a pure "catch-and-pass' business model with no fixed assets, hence no "D") of at least $150m.

In that case, we're talking about a quite puny prospective EV/EBIT multiple of 2.0x to 2.5x.

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