Envirosuite is getting pounded pretty hard on tax loss selling. Quickly approaching 5 year lows.

Speaks to the sentiment investors have towards the business at the time. Board renewal will now likely align with investors holding renewal.

Commented on them alongside 4 other reports in my Substack this week.

Short thoughts:

Thinking about the churn deeper, it would seem to me that the Department of Defence’s airports may be quite different to other commercial airports (the traditional Envirosuite client), so perhaps this can help explain the churn. The product may have been less fit for purpose for a Defence base. The fact that the world’s largest airport operator Aena expanded their contract may support my hypothesis. 

In general though, the question mark on what potential future growth they can achieve remains. We see a lot of quarters coming in at $2M in new ARR, and with the base increasing, this can lead growth to the low teens soon. 

There is potential here as always:

• They appear to be improving with relevant customer-led marketing (here)
• The water segment seems promising
• ESG tailwinds and blowing harder than ever before, so I think this is one to watch despite mixed results

Let’s see how they go in full year results. In future years, the water segment’s growth will be interesting to monitor.

Is the recent dip a great buying opportunity? 

Envirosuite presented today at the NWR Virtual Investor Conference. 

Presenting for Envirosuite were Jason Cooper (CEO), Matthew Patterson (CFO) and Andrew Barron (Head of Product).

The CEO Jason opened with one customer story per the 3 segments within which they operate, giving us some details on their most common use cases. Andrew dove deeper into the 3 layers they tend to grow in each segment: comply, predict, optimise (don’t quote me on this). And Matthew went over recent results and looked at the wider market size for future opportunities. 

The biggest question to many is about growth; can they sustain an-above average growth rate expected with high-margin Saas companies? 

I was pleased to see the CEO get asked that question. They are focused on a 20% yearly growth rate. If they execute consistently on this, they will become a very dominant and powerful industry leader, and their stock will no doubt be massively re-rated. 

At current, with the recent sell off, giving us a market cap of $143M, and they expect a yearly ARR of $43M, we have a P/ARR ratio of 3.3. Many would consider that a bargain.  

Like many of their investors, I’ve not worked with product. To look at product I default to their churn rate, which at <2% is very impressive. 

There’s a lot of the future will tell us, but at current, it appears EVS might be a good case study of patience paying off in the markets.