Forum Topics EVS EVS H1 FY25 Results

Pinned straw:

Added 10 months ago

Others have provided excellent coverage of the more notable results released recently, so i'll chime in with some brief thoughts on Envirosuite -- a company i was once enthusiastic about, but have since lost some faith. I've mostly exited my position -- it was a worthwhile ride in aggregate, but the business never lived up to its potential and made some terrible capital allocation decisions which only served to mask the performance of the only good segment they have (and what attracted me to them in the first place). Just look at the industrials segment -- it continues to do extremely well, imagine if they had just focused on that instead of buying a massive and unrelated airports business, and funded a nascent water start-up?

Still, i keep an eye on them, and it today's results only reiterate i made the right call to step away.

Management were keen to highlight being EBITDA positive, but this has been promised forever, and was only marginal. Moreover, revenue was essentially flat and customer sites only increased 2%. Its a growth company that isn't growing, essentially.

More big long term targets, most notably with ARR to double in five years, but i'll believe it when i see it. They've fallen short of previous targets too many times for me to take them seriously now.

To be fair there were some encouraging aspects of the results -- ARR saw a solid jump and margins improved.

But the big issue here, at its core, is a loss of faith in management's ability execute. oh, and more debt than cash with negative FCF...

In some aspects they look cheap (eg they are at 1x sales), and maybe i'll take an interest again if we see some sustained and profitable growth. But for now, happy to sit this out.

lastever
Added 10 months ago

I wanted to add my 2 cents about EVS after watching the presentation. I've only known them for a year but clearly, they have to move the needle for more than a few quarters before anyone will believe a word. That ARR goal he mentioned should have been kept on the vision board rather than putting it out there for a collective eye roll.

But, I felt that something has changed. The new CFO was a breath of fresh air, she went through the financials line by line, added colour and answered questions without hesitation with a straight bat. Also, at the outset they said 'we welcome questions so fire away' and then answered them all with reason rather than defensiveness.

From various metrics it looked like they really are trying to rein in costs, while letting go of the minimum of people - because the software and science is complex and he implied that the availability of various modules ultimately helps with expanding with companies like BHP (like the 'Water' module which disappeared into 'Industrial'). And, his vision has apparently been bigger than the companies wallet.

If I can indulge in a bit of my own waffle, I would say Envirosuite look like a high touch, complex software that have historically fallen into the 'nice to have' rather than 'must have' bucket. There's a mismatch between the goals of people who went into environmental science 20 years ago and finance professionals. However, despite the inevitable policy back and forth, there is more legal expectation that companies watch their emissions now AND, the technology to monitor it is better and cheaper. So, it's a slow burn but on balance it's likely to pick up, not snuff out. Now they have Hitachi, who are Japanese (a slow burn culture) AND will surely boost the effectiveness of sales given their size and strength. Hitachi also have a seat on the board.

On the plus side:

  • a bit of cost control and margin improvement
  • a CFO who looks sharp
  • reduced time to implementation
  • the first sale via Hitachi is allegedly about to drop (it better)

Risks:

  • It's all a head fake and they revert to type

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OxyBBear
Added 10 months ago

@lastever I sat in on the call and came away with the same impression as you. Yeah the CEO probably should have held back on that aspirational goal of doubling ARR in 5 years considering his poor track record and constant fluff after every poor update. So it was surprising to me that he put this goal out there which I felt was delivered with a tiny spring in his step. I guess time will tell whether this goal is achievable or becomes another own goal.

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