I'm not sure that it should have been marked as market sensitive (or price sensitive), but I reckon they have released it to try to highlight the potential for recurring revenue from maintenance/support contracts. This is not for the sale and/or installation of perimeter intrusion detection systems, because those systems have been in place protecting Sydney Trains’ maintenance centres and stabling yards for more than 10 years. This is a 5 year maintenance & support agreement/contract (@ $100K/year = $500K in total) .

It's chicken feed, but it's more about what this type of contract represents.

I'm thinking back to the second interview that we had with then CEO Rob Broomfield last year - the first interview/meeting was on 8th March and the second was on 7th September, and from around the 25 minute mark Rob talked about their systems being able to achieve Zero Nuisance Alarms, what many people call "False Alarms" but we're talking about stuff blown around by the wind, tree branches moving, or wildlife, or light at night from passing traffic, not people who shouldn't be there. Rob said that he could not and would not make that sort of promise ("zero nuisance alarms") on the sale and installation of a system, but he said if people were prepared to sign up for a three year support agreement(/contract), then he could guarantee that by year 2 or 3 they would be getting zero nuisance alarms. This was being achieved by AVA through machine learning, system refinement, etc., but it takes time and every site has its own issues that need to be addressed - so it takes time to see them occur and then to fix the system so it does not alarm when it shouldn't next time the same thing occurs. So that's what we're seeing here with the Sydney Trains support agreement, and the key sentence in the announcement was the shortest paragraph:

"This agreement is a further example of the Company growing its recurring revenue base via long term relationships with key customers."

So this is not a new customer, and this is not a big contract, but it's what they're trying to achieve, i.e. not just to sell and install systems, but to create recurring revenue streams from multi-year support agreements. And it's with someone we all recognise and who is happy enough for AVA to broadcast the details of the support agreement. AVA have many clients who do NOT want the details of their security systems to be made public, or even who is supplying their systems, which was also discussed by Rob in those interviews last year. They can't always name their clients, and we have seen that the ASX does not like it when companies announce contracts without sufficient details, so I would suggest that if they can't name their clients, they won't announce the contracts - unless they are monster (huge) contracts - like the IMOD contract was a couple of years ago.

Last year, in their own presentations they did disclose the following in terms of their clients and the number of systems they had deployed (this is from the September 7 meeting slides):

Sydney Trains is there on Slide 4 under FFT (Future Fibre Technologies) End Users.

I get that it can be frustrating to get very little news and then see an announcement for such a small contract in dollar terms, however I think the point of the announcement was to highlight the opportunity for recurring revenue over multiple years AFTER a system (or multiple systems) has been purchased and installed.

And they may not get many opportunities to highlight that because of confidentiality agreements they have with a number of their clients.

Disclosure: I hold AVA in my largest real money portfolio as well as here on Strawman. The investment thesis is taking longer to play out than I expected, however I don't think it's busted. I also wasn't too fussed either way about the recent small dividend they declared and paid - it's not particularly material - and they have form for distributing excess cash to shareholders in previous years.

Some excellent points @Bear77

Hopefully we see some good numbers when they report their half year in a couple months. The market, at present, clearly doesn't seem to buy the growth narrative (and hence the potential opportunity for buyers), but that could change if we see some evidence that their targets are on track.

Was it AVA that was trying to do a better job reporting sales? (I remember one seemed to be trying to do that)

I mean if all we are looking at is annual recurring revenue, $100k is more than 6% increase, which is technically substantial.

I guess that’s why the company believed this should be a price sensitive announcement.

@Bear77 well said (as always) and it's good to see the link back to company policy/direction. I think another benefit of these long term contract/installations is the data set. Rather than multiple data sets of a small sample size from a number of sites, they get a large sample size from a consistent environment, which, I'm guessing here, becomes a massive advantage- dare I say moat, when it comes to machine learning interpretation of signals through fibre. And the more large sample data sets they can accrue across a variety of sites the better.

True that @Bushmanpat however, another thing I reckon I remember Rob saying was about some companies being very paranoid (I think he used the word "protective") about that data as it relates to their sites, so AVA has to agree not to upload stuff to their own computers from certain clients' site systems - not everybody, but government departments and defence sector businesses for example often don't want that sort of data stored anywhere except under their direct control, so within their own environment, nothing goes offsite. But, yes, as a rule, even if the site itself remains anonymous, where that is required, any data that can be gathered about false alarms (or "nuisance alarms" as they prefer to say in the industry because those alarms aren't false, they're just unnecessary and annoying) can be used to improve their systems in general, and the more data across diffferent industries and geographies, the better.

AVA certainly has a huge client list, something you really only get from their presentations, however some of those names are "end users" meaning that AVA's gear ends up on their sites but is not always sold to them directly by AVA - they also use distributors in different countries. For instance, Sydney Trains was listed as an "end user" so the perimeter intrusion detection systems installed at the Sydney Trains' maintenance centres and stabling yards (over 10 years ago) may not have been sold or installed by AVA themselves - there are a number of distributors that they use for their FFT gear - shown on the left side of that slide - however it is AVA equipment/tech, so they are in a great position to upsell these multi-year support contracts, particularly for people who want to improve their systems such as by reducing "nuisance alarms". That wouldn't be all that is involved in such a contract obviously, that's just one aspect of it, but it's interesting that AVA are now selling these support contracts to people who have been using their systems for over a decade already. I just thought that some of us might be missing the underlying message behind this announcement, which I reckon is all about creating additional revenue streams that can last for years after the sale and installation of the gear has been completed.

I often feel there is a disconnect between what they announce between reports (i.e. not much) and what they report, and I'm thinking that perhaps that's to do with them not being able to announce the details of certain client wins for confidentiality reasons. And I also sometimes wonder if they are being too optimistic in their guidance. The market has not been rewarding companies for overpromising and underdelivering, or continually pushing out milestone timelines, so it's probably better to underpromise, i.e. promise what you KNOW you can absolutely deliver, not aspirational targets. Just general thoughts there that may or may not relate to AVA - I guess we'll see if they do when they report.