A good result. The new brand and focus on three environmental intelligence products is very clear and I'm a fan of the direction the company is taking with a lot of reasonable tailwinds behind them.
EVS Aviation is their rock. Steady as she goes with very little churn. Reliable base arr for the company. High market penetration already though with $31.8m ARR of an estimated $194m serviceable addressable market (SAM).
EVS Omnis is like their precious toy. The original product from EVS of old. But significantly upgraded since. $14.6m ARR of an estimated $1.2b SAM. Lots of opportunity to grow and to add product functionality to meet customer expectations.
EVS Water could be the blue sky opportunity. $0.1m ARR of an estimated 2.8b SAM. Perhaps the demand and niche for the product is yet to be seen but they'll push resources into growing the proposition as outlined in the recent capital raise. North America is a big opportunity that can't be understated.
Improved gross profit to 42.4% with a goal to push this over 50% by FY23. The first adjusted EBITDA positive quarter in Q4FY21. These are good signs of an improving bottom line. It would be better if EBITDA and not adjusted EBITDA but there's a way to go.
The register looks reasonably healthy. Top 20 hold 50%. Two substantial holders in National Nominees and Macquarie. HSBC, BNP Paribas, Citicorp and UBS also hold 2-4% each. Our co-founder Robin Omerod holds 36m shares across two holdings.
On options, our "advisor to the CEO" Alberto Calderon has 10m options with a 20c strike price. Director Sue Klose has 2m options with a 40c strike price, expiry 21 Dec 2022. The infamous Mr Zhang had options issued to vest on $10m in revenue being received into the wholly owned China subsidiaries of Envirosuite by 31 December 2021. The company has assessed the probability of this occurring at 0% at 30 June 2021 and they have reversed the options expense. Thank-you PET audits. Looks like Mr Zhang has reduced his holding from 25m to 18.3m shares so will be interesting to see what he does with the rest but a relatively small holding in the scheme of it. I don't see issue here.
Revenue by region highlights how equal the split is across Asia Pacific, EMEA, America - well diversified here with limited exposure risks.
I do have some concern with operating expenses. $22m going straight to corporate. By coincidence you could say all of the aviation arr is going straight to operating expenses ($31.955m). Total cost of revenue and operating expenses of $59.935m. So there is a revenue gap to fill. Employment costs of $33m is up significantly on 2020. Can anyone shed some light on why this is? I'd like to see that come down to prove the scalability of the business model.
All in all a good result and I think Envirosuite is well positioned to take advantage of a fast growing sector over the coming years.
EVS Price at posting:
13.0¢ Sentiment: Hold Disclosure: Held
