Pinned straw:
You beat me to it @Bear77 -- agree the update is generally positive, and while we need a solid second half for the company to land in its targeted revenue range ($36-45m), they seem to be suggesting that is very much in play with a "substantively stronger" second half. In Mal's words:
They'll need second half revenue of $22m to hit the lower end of their target range.
In the first half they have secured just shy of $20m in new sales orders (37% growth), with the second quarter representing 61% of the first half total and representing yoy growth of 39%. There's $8.9m in backlog to be fulfilled this calendar year, most of which is project delivery work -- this compares to a $5.2m backlog at the end of FY23.
This suggests (i think) that most of the sales order intake is converted to revenue relatively quickly (ie they added $19.7m in new sales orders in the 6 months to Dec 31, but the order backlog only increased by $3.7m. (someone please sanity check this assertion!).
Still, the reality is that H1 revenue is only 10% higher than H1 FY23, and is at the very bottom of the guidance they issued in October ($14.2-15.2m). The access segment had a great half but this was helped by stocking orders from their channel partners -- we'll need to see some good end-customer sales before we really know how their new Cobalt locks are being received by the market. And Illuminate was flat, albeit with a good improvement between the first and second quarters.
For me, the main game is with Access and Aura Ai-X, which has accounted for roughly 2/3rds of new sales orders. And they really do seem to be seeing some good sales traction there. Group targets aside, even if they 'only' get $18m in H2 revenue, that'll still be annual growth of 15% at the top line. (the previous second half did $15m in revenue, so I dont think that's too much of a stretch target)
Holding gross margins and fixed costs steady -- which is what management have essentially said to expect -- under that scenario you should still get an EBITDA figure that is more than double what we saw in FY23 (from cont. operations) and an operating margin expansion from 7% to ~12%.
The market obviously remains somewhat sceptical (if it wasn't the share price should be easily above 20c imo). But for me I consider the thesis still on track and shares good value. The next 6 months will be telling.
NewbieHK
@Bear and @Strawman thanks for the extensive informative updates.
The quality info really allows one to zone in on the important take away information like customer satisfaction, staffing in place, increasing sales.
The key for me is those fixed costs. If they really do have all the staff they need and can start showing more $$$ flow through to the bottom line the narrative and support could flip in one half.
It seems a bit more patience is required. However, everything is coming together, so I rather be in than out, waiting for that info because this could jump significantly on better than expected results next half.
Strawman
ugh, sorry typo -- i meant to say the main game is with Detect and Aura Ai-X (not Access)
fcmaster26
Totally agreed
Fibre optic sensing is no longer a new technology. There are many other companies offering the products & solutions identical to FFT products.
Taking TVS, an Indian company, as an example. This company pretty much does everything FFT is capable of. (They even have Aura-IQ). This company was founded in 2019 (I'm not suggesting anything), which means it's much easier to get into this industry today.
FFT used to differentiate from its competitors by offering cheap, accurate, easy-to-instal solutions. That advantage is exclusive to fibre optic detection technology.
Aura Ai-X will be the most important products in FFT's arsenal to make sure the company's leading position in the industry when everybody else can provide DAS sensing solutions.
Having market proved leading technologies, in my opinion, is much more critical than meeting the revenue guidance. It's nice to see the growth brought by Aura Ai-X and I'm looking forward to seeing more.
At this point, I don't really believe AVA is able to complete the 3 year plan (it's actually a four year plan by now). However, as long as the company is doing the right thing, I don't really how long it takes to reach the $100m goal. I know they've suggested a substantively better H2. If they completed half of the baklog, they will easily reach a $17-18M revenue, which misses the $40M goal, but is still substantively better than H1 (it's 20% growth guys!).
Let's wait for the half year report and see how the margin looks like.
Bear77
@fcmaster26 - did you mean TVS have tech that is equivalent to Aura-IQ, or that they actually sell Aura-IQ? If it's the latter, is it possible that AVA are using TVS as one of their distributors in India, so could TVS actually be selling FFT products? I say this because Aura-IQ would obviously be a trademark and would be subject to copyright. A quick google search I made just now didn't show any links between AVA and TVS, however that doesn't mean much. AVA use a lot of system integrators and distributors and they are probably adding new ones all the time - here is a slide from an AVA presso in February 2022:
Just a thought...