Today's announcement was never going to answer the two questions that most interest you, and that is: 1) "what is cashflow looking like for this quarter"?; and 2) "when do they hit cashflow positive territory for the business on an ongoing basis"? That said, recent quarterly cashflows have not been influenced for quite a few quarters by announceable contract sales. They have been entirely comprised of more modest unannounceable sales and recurring revenues. So, in my book, todays announcement is a reasonable step in the right direction in so far as it implies a lump of revenue accruing in the near term, outside of recent 'business as usual'. When it will accrue and in what volume is more difficult to say. Yes, today's announcement suggests that there is likely to be a recognition of revenue for 20 new ERBs in this quarter but how much revenue is not clear. In his brief clip on the Investor Hub, Gerard Dyson said that >$500,000 is expected to accrue from the SLS contract this year, but it remains unclear whether that refers to the remainder of this calendar year or to the remainder of this financial year. Maybe he will clarify that in due course.
One of the encouraging things I've taken away from this announcement is that the contract will increase the amount of recurring revenue accruing to the company, although the annual quantum is not clear.
I agree that 40ERBs is by no means a small amount. In fact, it is a 125% increase on the existing installed base with SLS NSW. So when you say it's a 20% increase in the existing installed base, I presume you are referring to the 200 "beach devices" that Spectur has previously said it has installed around the country. However, for clarity those 200 devices included 32 ERBs installed for SLS NSW, a few ERBs installed for local coastal councils in NSW, a handful of ERBs installed by 3CT in Queensland, a swag of devices installed by 3CT in Qld and NSW for crowd counting at beaches, for coastal erosion monitoring and for other coastal environment monitoring, and the many shark alert devices installed at beaches in Western Australia.
You say that the total contract value of $1.2 million seems light "given 5 years of ongoing service and maintenance along with subscription (cloud) costs for the 40 plus 32 existing installed ERBs". Well given the lack of disaggregation in the announcement, you may be right, but I think it's worth going back to the original Spectur contract with SLS NSW announced back on 12 February 2021. That contract was for $351,811 and presumably covered all 32 ERBs Spectur has installed for SLS NSW to date. The contract also had provision for an element of maintenance and service for a 12 month period pursuant to warranty clauses. So against that background, I'm not sure I would refer to $1.2 million for supply and installation of 40 ERBs, plus service, maintenance and subscription services for 40 ERBs for 5 years, and for 32 ERBs for the remainder of the 5 year period since installation as being light.
Anyway, bottom line for me is that I'm pleased with today's announcement, but I'm looking for at least one more big material announcement during this quarter to really get the quarterly cashflow moving in the right direction. Gerard Dyson hinted at such a possibility in his short video commentary about today's announcement - but of course I won't be holding my breath.
zeno9
SP3 Price at posting:
1.9¢ Sentiment: Hold Disclosure: Held
