They're just stale orders. You can more or less disregard them.

Haven't had a chance to properly digest things today.. dealing with all manner of distractions!.. but my initial reaction is that these are weak numbers.

It's just not the kind of growth you want from what is meant to be a growth company! Even the annual growth of 12% (excluding churn event) isn't at the pace I was hoping for, and the new ARR growth has been pretty much flat for a year or so now. ie. there's no acceleration in new ARR. Worse, total ARR is down slightly (albeit due to FX movements)

Yes, there are some encouraging signs as has been mentioned, but I think the market is right to want some evidence of increasing sales traction.

[Held]

@Strawman - agreed. That was my reading. Flat-lining at best.

It will be interesting to see how this squares with cost evolution at the half-year.

@Strawman took the words out of my mouth. I was disappointed by the numbers, definitely not for the first time. I have previously described EVS as a grind, but I am a little more bearish after these figures in particular. They haven't even done that this quarter. ARR is moving sideways, not really acceptable noting the valuation, with a market cap of more than 100m. This isn't seeing the growth I would expect and I think there are some risks around their financials -- they are chewing through money and I don't see the light at the end of the tunnel for them, at least in the short to medium term. I think there are some question marks around if this business can operate sustainably. If I had to hazard a guess, I think the H1 report will be underwhelming. I am also losing faith in Jason and co - lots of fluff and promises of blue skies ahead and I am not a fan of some of their terminology/accounting habits.

For instance, 'positive Adjusted EBITDA less Capitalised Development on a run rate basis'. Give me a break.

I still like the story and think they have a real opportunity to make something of themselves, but I am seeing orange flags intensify. Consequently I have put a sell order in for more than 50% of my existing holding, I think there are better opportunities elsewhere.

What even is “positive Adjusted EBITDA less Capitalised Development on a run rate basis”?

I think this is one of the best non-measures I’ve ever seen. Adjust for much more and you may as well just report revenue … on a run rate basis.

Isn’t that what a recently departed guru would have called ‘Bullshit earning’

Losing faith here too @Rocket6

I've always liked the tech and thought it had a big market opportunity, at least for their various niches and relative to the company size. And a good regulatory and ESG tailwind (most ESG stuff is fluff, but it did drive a lot of capital allocation decisions).

Here I'm specifically referring to their Industrial segment (the Omnis product which came out of Pacific Environment back in the day) -- and that's always been the star of the show in my opinion. This segment has gone from $3m in ARR in 2018 to $22m today. They were a $12m market cap company back then which is when i started to build a sizeable position.

What happened? They acquired a bunch of stuff, had poor cost discipline and, well, just got waaay ahead of themselves. Had they focused on their core competency, I suspect shareholders would have done MUCH better.

Not that the other segments are worthless, and Aviation had some really bad luck with covid, but to my mind there wasn't much cross-sell potential and few operational synergies. Water is interesting, but at this stage of their journey they have no business in nursing a nascent start-up in house. These other segments may yet prove worthwhile in the grand scheme of things, but they needed to be more focused on their original IP and market lead.

I agree that adjusted EBITDA isn't the best metric (Munger had it right @Slideup & @mikebrisy) , but I will give credit to them for at least deducting capitalised development costs. It makes it more aligned with free cash flows, but why not just use that metric?

Anyway, I've cornered myself in the rationalisation of "well, there are issues but at least it's cheap" mindset, and "it takes time to right size a business and still invest prudently for growth" -- not too dissimilar from my journey with Catapult. That, at least, seems to have crossed the chasm and seems to (finally) be in a position to realise its potential.

But that took someone like Will Lopes to drive the business in the right direction. I'm not convinced Jason is the man for the job at Envirosuite.

Holding for now, but I'll be out if we don't soon see some real sales momentum.

@Strawman That's fair and you are right, why not just use FCF?

The answer is that if you use cash flows as the basis, then run rates will be horribly volatile, particularly if you are a small cap. From period to period the differences between payments and receipts would be very significant due to quite minor timing differences, and determining instantaneous run-rates almost meaningless as a result.

So, I guess you need the smoothing of financial metrics, and you are right that deducting capitalised development costs is a better measure than EBITDA. So, I'll row back on my earlier critical post.

ah right, a very good point @mikebrisy

And I wouldn't roll back your comments too much -- the word "adjusted" leaves a lot of room for interpretation (although from what I can see it's not too egregious..)

Deducting capitalised development costs from EBITDA is going to present something that is very close to FCF I would have thought.

The cynic in me says they presented it this way because they won't be running much capex in the next period. Nothing like front loading a bunch of expenses to pretty things up. The rem report says STI's (terrible acronym BTW – who wants to be awarded an STI!) are awarded based, among other things, adjusted EBITDA. I assume that does not include any capitalised development subtractions.

Not unreasonable comments at all @UlladullaDave, and you can almost guarantee the STI benchmark isn't adjusting for capitalised dev costs!

What exactly do you mean here Dave? Are you suspecting that the next quarter (or half?) might look good because of the way they are doing their finances?

I'm mean that they picked that mouthful of a definition because it is likely to present future results in the best possible light. I agree with @Strawman if you're going to present something that looks like FCF, why not just use FCF? A few months ago I wondered aloud on here about how the capital intensity of the business had changed because they were now having to buy the equipment for their clients to use where previously the clients paid for this upfront. Could this explain the relucatance to use FCF?

I'm not sure how to link to the exact post, but it's in this thread

https://strawman.com/member/forums/topic/7684

Maybe I'm jumping at shadows, I've just spent too long in ASX small caps. Lol.