NEW START TIME
Apologies for the late notice, but we've had to push the start time for our meeting AVA Risk Group (ASX:AVA) back by 30 minutes.
The meeting will commence at 1:30pm AEST today, Wednesday the 7th of September.
Head over to the Meetings page to join, otherwise you'll find a Zoom link in your inbox.
Yeah I agree @Noddy74, and it's good reminder that it's better to under-promise and overdeliver when it comes to giving any guidance.
As for the R&D spend, @rh8178 , in the last FY it was recorded as $1.7m (up about 50% from FY21) -- which is about 10% of total expenses, and a little over 25% of what they spend on employee benefits.
How this evolves going forward, I'm not sure, although Rob did say that the resourcing was about right as it was, although any increased spend would likely be on the sales & marketing front.
What really struck me was what Rob was saying in regard to operating margins. He seemed to think that at the EBITDA level we'd see at least a doubling in the near term, with expectations of north of 20% over time. Which feels about right when you look at comparables, and also how they rely heavily on things like licensing and distribution partnerships.
FYI -- AVA Group is holding a results briefing at 11am AEST today.
You can register here: https://us06web.zoom.us/webinar/register/WN_GE48bRGeSUKTAD40RJELlg
We're also speaking to the CEO next Wednesday.
Thanks for all the great points, and thanks for sharing your notes @Noicewon11
Always good to have some of the tint taken out of my rose coloured glasses :)
I think it's super valuable to highlight and discuss the risks -- whatever ends up happening, it's always good to go in with your eyes wide open.
I think all the negatives raised are valid -- and i don't dismiss them at all. But, for better or worse, I don't see them as a deal breaker (at this stage).
It ultimately comes down to intent, and that's hard to measure. It's disappointing to see no material Aura IQ sales, but I'm not sure this is because of a poor product/solution or rather the realities of dealing with very large and slow moving customers, who were all dealing with Covid (and hence had site restriction issues) and having to tweak/refine the implementations (eg integrating with fire control systems and other client requests). It's a bit like doing a renovation -- you think it will take 3 months, but it takes 6 months and costs 50% more than you expected. There's nothing nefarious going on, just overly optimistic assumptions.
There's also the issue of incentives. AVA havent needed new capital for years and is self-reliant with lots of cash. That doesn't mean management wont exaggerate the business' prospects, but there's less reason to flirt with danger if they aren't looking to raise capital.
The core FFT business (ex BQT) has been lumpy, with average growth of 5% between 2018 and my conservative estimate for 2022 revenue. The roll over of the IMOD contract is what gives the spike in 2020 and 2021, but that will be largely absent in FY22. Nevertheless, this business received $10m in orders during the latest half (42% growth) and is working on other licensing deals (essentially 100% margin). Combined with a step-change in the BQT business due to the Dormakaba partnership, there's a good chance revenues will be materially higher in the years ahead. Yeah, it'll be lumpy, and it may take a year or two to gain some traction on some of the newer applications, but i think the potential is definitely there. The ROI proposition for customers seems pretty compelling, so you'd hope that a few successful deployments could see clients extend the solution to a lot of other sites.
Hopefully with the sale of the Services business out of the way, management can dedicate more time on execution.
The other part of my reasoning is that shares have fallen a bit and there's a better risk/reward proposition at the current price.
Anyway, time will tell!
