Did Aerometrex get a nudge that the Strawman community have been talking about them?

It seems they’re wanting to shake things up. 

Given they know investors are discounting the value of their planes; why not unstrap some cash and put it to use elsewhere? 

To me this sounds like a good idea. Another green tick in my book. Keep em coming and we might be on to something. 

Agree @JPPicard. Back when the business had a project based arm you needed your own fleet to be able to meet client demands. Now that segment has been shut down and the business has committed to the locked in capture program of MetroMap, they likely don't have the ability to work the assets properly. They will keep some planes for LIDAR and 3D capture which are still project based, but this is good to see them thinking strategically about their invested capital. If they can get the business to operating breakeven I'd love to see some cash used for buybacks or special dividends but that may not be for a year or two yet.

Last time I looked at AMX I noticed the amortisation/ intangibles are always high. I think that implies a constant cycle of using cash to keep their systems on par with rivals.

So the problem is the cycle of updating systems is too frequent, so they spend as much as they earn.

Guess that implies that competition in this sector is also quite tough.

@JPPicard I've generally found AMX management to be pretty honest with their reporting. Use of EBITDA is questionable I agree, I'll come back to that.

For ARR, I believe the simple answer is they are using the $7.3m from the 1H23 result, not the $7.6m from the FY23 result. They are transparent that their ARR is simply the recurring revenue in the last month before reporting date x 12 which I think is ok. No funky CARR involved.

Further to your valuation comment, not only is there $10m worth of cash on the balance sheet they have $16m in planes and cameras with very few offsetting liabilities. Arguably the market is valuing the operating business extremely pessimistically.

On EBITDA and on-going intangibles spend I do agree the market is right to look past it to NPAT and cash flow. That said, again I think AMX are pretty honest here. They only capitalise the image capture cost, not any software or platform development. Of course, capturing images is a constant cost to the business so excluding them is a bit of a furphy but I think it's important to understand the business model should mean that intangibles spend won't have to scale with revenue.

With MetroMap, AMX commit to capturing capital cities four times a year and large towns twice a year. This creates a pretty fixed cost base for the capture which I think the FY23 result is probably the best baseline at $5m (as AMX wound back on one-off 3D captures that were in FY21 and FY22). On my best guess of the remaining opex for MetroMap (which would have some overlap with other operating segments as well), I think as they get towards $9-10m ARR the segment is profitable and should scale nicely beyond that.

In the end I think you are right that the cash balance slightly growing in the seasonally weaker 1H is ultimately the most positive part of this update. The full report will shed more light as to how this was achieved, likely some favourable working capital and smoothing capex with equipment financing but at face value it is nice.

Also management knowing the product and strengths is all good. But how does Aerometrex try to differentiate and work against the competition like Eagleeye and Nearmap?

I find this similar to Oracle trying to set itself apart against the other cloud providers by stating Oracle DB deployments run better than on other platforms but not making much headway.

I think more work needs to be done on addressing the competition before AMX can get some meaningful progress. This again goes back to my observation of spending on new features to make AMX better but not showing much reward on the earnings part.

Quality answer from you as always @Wini  

My bad on the ARR: reading your answer caused a nice face palm; at least one of us knows what PCP means. 

There’s a few interesting things in what you said. Perhaps this was obvious to others, but it wasn’t to me given I don’t know the business; the fact they’re trading at book value if you account for the value of the planes. Clearly, as you suggest, investors don’t have high hopes for them. This is typically something that get's me interested.

I get your point @edgescape ; it is a competitive space which will drive everyone’s margins south. A friend of mine worked at Nearmap for a few years and suggested customer would shop them around on pricing, but would also value the quality of the product and speed of delivery, so there’s room to position yourself nicely if you know which lever to pull. 

I think the big point remains that we’ll indeed have to wait for the actual report to see where things land on NPAT, because earnings tend to be the drive of inflection points for businesses. When I think I’m getting smart I try to remember that one.