Hey Claud, Thanks for your analysis. Im interested in taking a...

Hey Claud,

Thanks for your analysis. Im interested in taking a position in these ICE. I wonder what your (and any other holders') thoughts are on today's announcement? I'll have a quick back of envelope crack at the numbers and would appreciate your thoughts on it.

So you have indicated the prison etc contracts are worth about $10k per site per year. Todays announcement is for $550k for a 3 year license term. Immediately this says that some contacts are higher value than others. The company's video posted above says they charge per site, per camera - so I guess there are more cameras in this new contract.

I have no idea what the commission for the Value Added Resellers (VAR's) is, but if I were to hazard a guess i'd say 30%. To be conservative I will factor in 40%. Also hardware for this sale is stated as 20% of the contract cost.


Contract Revenue $550K
Minus Hardware Costs (20%): $110K
Minus VAR commissions (40% of $440K): $176K
Which leaves a gross profit of: $264K
Annual Gross Profit $88K
Monthly Gross Profit $7.3K

Costs (basic):
Now because this software seems to be a 'one size fits all' solution, the admin and staff costs should be somewhat constant, with incremental increases for installations / deployments for new contracts. I have taken the HY expenses and doubled them to get an annual figure, and then divided that monthly, which gives us a cost base of about $295K per month.

Cashflow:For the sake of being conservative, i will not include R&D rebates for cashflow in this calculation as that won't be there forever. I will use the most recent 4C for customer receipts, purely to be conservative because this is the worst 4C of the fiscal year. Customer receipts for Q2 was $231k. On a monthly basis that amounts to $77k. So our monthly cashflow is $295k (expenses) minus $77k (customer receipts) = ($218k) monthly.

So going back to your example of how many new customers are required to be cashflow positive (you used the term critical mass) - prisons might need 400 sites, but contracts like today's would only need a further 29 similar sites to be cashflow positive / hit critical mass. And this was all based of the most conservative numbers we have. If we assume the VAR's commission is 30% then the number of sites required falls to 25.

Obviously the company can't expect constant repetitions of contracts this size, but todays contract illustrates the scalability of the product. If we mix in a bunch of prisons, utilities etc etc - perhaps we only need about 100 more sites to see cashflow breakeven. It was also interesting to see that this contract only amounts to 5% of cameras at this resort, and this is only one of the companies resorts - so there is scope to upsell with existing contracts too.

Im keen to buy in on this thesis, because many commercial / retail / public safety sites will save lots of money through using this software (theft, vandalism, reputational damage etc). I also like how the technology can be deployed quickly and without much customisation. My only worry is that the current technology is somewhat basic, it would be great to see the AI use object identification (knives guns etc) amongst other features (like marking possible events of interest on recorded video for later reference etc). I think having companies like Chubb and Prosegur as VAR's is also a massive opportunity considering their reach.

Will wait for a pullback after todays announcement - if it eventuates, but keen to hear your and other posters thoughts after today's revelations...