The logic of your post is valid but there are few things you might have missed:
The management team has guided ~$11m cost savings from acquisition synergies still to be drawn out
$2.3m in acquisition costs from 1H is not recurring
Recurring revenue is at $42-43m and there should be some non-recurring revenue also of ~$5m (a conservative guess based on $3.5m in 1H)
All of the above together with the fact that the management team is still holding onto their guidance to be EBITDA positive in Q4 as recent as 24th May - although I am never the type to take these 'promises' at face value, I would expect that we would get at least somewhat close to EBITDA positive on a run rated basis.
After you allow for that possibility, you could even start to feel excited about the following upsides:
Step-change in growth from EVS Omnis and Water, given the additional investments into establishing an expanded sales footprint in North America, following the cash raise
Development of full cloud capability for all product offerings --> potential for improved revenue model and easier sales pitch
FY21 Q4 guidance of $2.4m new ARR
Roll-back of discounts offered to Airport clients
Envirotech is most definitely going to be a growth sector and Envirosuite is solidly placed as one of the leaders in the field. And you have a company that is very close to breaking even, a recurring revenue model, improved capital base, expanded product suite, and an accelerating sales push.
I am very happy to add to my holding at these levels. There is no other SaaS/tech company on the ASX with less than 3x EV/Sales valuation that has better fundamentals, a market-leading product, and a growing ARR.
Don't be scared off by the price chart. This is an unpopular stock right now because of the several issues it's had in the past. But none of those issues are relevant now, and once the improved narrative begins to circulate and build momentum, the price will recover faster than it's dropped.
EVS Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
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