Pointerra is seeing an accelerating pace of growth and has (hopefully sustainably) passed a profitability inflection point.
US$1.1m of contracts added in August alone - more than the entire prior quarter. That implies a very high annualised run rate, though it's worth remembering that sales cycles can be very lumpy.
Still, the market opportunity is substantial, 3DP are the leading player and have an attractive business model. But as Rapstar has pointed out, there's considerable execution risk.
My concern is that that isnt being accurately priced by the market at present, although acknowledge the exciting potential of the business (in fact, as with many here we noticed this last year).
There's a lot of moving pieces here, which makes forecasting financials super difficult. But to take a reasonably optimistic outlook, let's assume Pointerra can achieve an ACV of US$20m by FY23 (that's a high rate of growth, but off a low base). I'll assume revenue will be US$12m. In AUD that represents >100% top line growth for 3 years (not a timid forecast).
Assuming an inevitable and necessary ramp up in expenses, I'll thumb suck an NPAT of US$2.
Accounting for FX, and a modest increase in share count, and applying a PE of 50 i get a target price of 21c, or a valuation of about 14c if i discount by 15% pa.
The point here is not to say that Pointerra is worth exactly 14c, but that even under some pretty robust assumptions it's hard to argue for a bargain.
Then again, the real value of this will be if Pointerra achieves genuine long term success.
For the sake of example, let's say Pointerra mirrors Nearmap (NEA) which has similar themes and $106m in ACV and $96m in revenue. It took Nearmap 8 years to scale from $5.7m to 96m in revenues, and it is still loss making on a NPAT basis.
So let's say Pointerra does about the same and in 10 years has $100m in revenue. Nearmap trades on a P/S of 14, so if 3DP is in the same position in FY30, the share price would be about $2. If you discount that by 15% per yer you get a current valuation of roughly 50c.
Under this scenario, which is certainly plausible, shares seem super cheap.
In this example, we do rely on a P/S ratio that many would argue is very aggressive for a $1.4b compny and well above historic market levels -- even for growth stocks.
For comparison, if we use a P/S of 5 -- which is still quite decent, with all else held the same, we get a valuation of 18c.
So again, we can see that there's a huge range of potential outcomes. Even under favourable assumptions.
Of course, there is the very real possibility that sales growth doesnt eventuate to the degree expected. EG. if Pointerra has only $10m in sales in five years (which would still be impressive growth), it's likely shareholders will do very poorly from here.
So what do you do?
For those that are long term bullish -- and I am in this basket -- you really should only be investing money you can afford to leave untouched for many years. Importantly, you have to understand that there will 100% definitely be LOTS of volatility along the way.
A good analogy here might be Envirosuite (EVS) which has also done really well for Strawman members. We saw a lot of value, and managed to reap some great returns as shares re-rated from ~5c to 35c as the market woke up to the business's performance and potential.
But although the business is just as well positioned today as it ever was, shares are down 50% from their highs, at one one point hitting 8c in March. (As an aside, it's been a good opportunity in my opinion).
Things just got carried away, and those that bought with a short term, momentum only focus would have been badly burnt.
The point is that with Pointerra, you need to expect that kind of thing. I'm not trying to predict any short term moves, and not saying you should try to trade in and out -- just know that if your thesis is based on long-term success, you have to be prepared to sit through some challenging times.
For me, I've been selling down my original holding due to valuation and weighting considerations (i dont want 30% of my portfolio in one stock!). But I am happy to retain a stake given the long term opportunity, and will look to buy if an attractive enough price comes up.
I'll update my best guess valuation shortly.
Pointerra has issued 50m new shares at 5c each to raise $2.5m. It's a bit disappointing given they said only a few months back that they weren't likely to raise additional cash.
Nevertheless, there are some positives here.
The obvious one is that the balance sheet is in a much stronger position, and based on prior commentary from management this should easily see them through to cash flow positive.
Next, the issue price of 5c is a good premium to the average market price over the past 3-4 months.
Finally, and perhaps most interestingly, the shares were sold to Bevan Slattery -- someone with deep experience and success in tech companies. With this transaction, he holds 7.5% of Pointerra.
Slattery founded Pipe Networks in 2002 and sold that to TPG for $373m in 2010. He also founded Megaport (ASX:MP1), up 7x since listing.
See below for his experience (from Wikipedia).
ASX announcement here
1) ACV growth accelerates to 33% growth on Q3 to $4.0 million, as at July 30, 2020. It can be lumpy, so best looking at it on an nnualised basis. It has grown around 115% year-on-year.
2) The company is now on a cashflow breakeven runrate, based on forecast operating cots.
3) Company intends to accelerate hiring sales and software development staff, given the healthy sles pipeline, and additional funding provided by Bevan Slattery's strategic investment.
Really pleased to see the benefits of its high operating leverage going forward, which will allow the business to invest in the platform, and the sales team to build a leadership position in this potentally huge market.
When the Strawman community nails it again.. 3DP up 95% ????
Ian Olsen, MD, reported:
- Pointerra is on the cusp of cashflow breakeven at the current Annualised Contract Value, with staff costs in AUD, and revenue in USD, currency tailwinds are having a very positive impact in the near term.
- A captial raise is not anticipated to be needed, and Ian advised management will take a pay haircut if necessary to avoid such a scenario.
- Ian reports Pointerra will be highly profitable when ACV exceeds $5-10 Million.
- Accelerating interest from US utilities companies, apparently driven from WFH needs.
- Major League baseball lead is being delayed by COVID-19, but is looking promising.
- Florida State Survey is a potential $600 k ACV opportunity.
- Very little churn reported - only 1 or 2 small customers.
- Dewberry is their largest mapping customer.
- Nearmap captures pixels, whereas Pointerra captures points.
- New recruits are demonstrating the benefits in changing their clients workflows (through Pointerra) to reduce geospatial data storage and analytics costs.
Sell. 180m market cap for 4m sales. 180m gets you PPS with 50m sales and 14m EBITDA. Valuations might not matter now given all the momentum money, but you're taking on an awful amount of risk buying the stock at these levels.
A podcast interview with Pointerra CEO Ian Olson, released this morning:
(thanks to @L888 for pointing it out to me)
1) Maiden cashflow breakeven quarter, as promised. Costs actually fell, with a recuction in Admin costs, and othere costs relatively flat. It is one feature I like about Pointerra management- They are careful with their money.
2) Big wins foreshadowed, namely:
- Pacific Gas & Electric (PG & E )have completed proof of concept project, and are in teh process of negotiating an enterprise deal. They will become Pointerra largest customer. I belive Presionhawk is Pointerra's largest customer atm, at +$300 k per annum. This deal alone ispossibly a 10% boost to revenue.
- Through the P G & E deal, Pointerra has developed a relationship with Accenture, who is seeking to pursue further global opportunities through their Energy Consulting Services division.
- Precisionhawk extended their existing commercial relationship with Pointerra.
- Florida Power & Light extended the commercial agreement with Pointerra over the quarter.
3) New use cases flagged in the film and television sector for their 3D marketplace business.
4) Platform development - Further devleopment to the platform including 3D CAD in the cloud feature. Linking pointcloud to 3D CAD is the holy grail of infrastructure and precinct design - one development to watch with interest.
Pointerra will provide an enterprise sales update next week.
August Sales Update - I was wondering why there was no business update with the full year results - now we know! The separate release this morning has advised ACV grew 33% in the past month.
It was a carefully worded release, ponting out no single contract win triggered a continuous disclosure obligation.
Pointerra are now profitable on a ACV run-rate basis.
Pointera is also launching its data marketplace, which is a really interesting opportunity. This business places Pointerra as a market aggregator, bringing data vendors and buyers together via their platform, built on its unique technology. Its early days, but this could develop into a network effect driven platform - the more users and vendors on the platform, the stronger the business becomes.
Pointerra released an operations and outlook announcement in regard to the COVID-19 outbreak.
The company will be holding a shareholder webinar briefing on March 27. Details in the announcement, here.
Media coverage has started for 3DP, article from Stockhead.......
Billionaire tech investor Bevan Slattery has geospatial analytics company Pointerra (ASX:3DP) in his sights.
The company has issued a $2.5m placement to an investment vehicle controlled by Slattery, via 50m shares priced at five cents each.
Markets responded to Slattery’s seal of approval as 3DP shares climbed by more than 60 per cent in morning trade to 9.4 cents — the highest level since January 2018.
Pointerra’s core product offering is a cloud-based platform which allows 3D geospatial images that removes the need for high-performance computers to process huge amounts of data.
The company booked $530k of revenue in the March quarter, up from $180k in the December quarter.
In comments accompanying the placement, Slattery said Pointerra’s technology places it at the forefront of where the market is heading for 3D data imaging and storage.
The company derives revenue from a Data-as-a-Service (DaaS) model which is “priced based on the amount of data (in terabytes) we are hosting and the number of users each customer requires”.
It also charges for data analytics, and clips revenue on a transactional basis when it helps to match sellers with buyers of 3D data.
Slattery said 3DP has “the potential to be a world leader in this field and ultimately to help feed the geospatial systems behind industries including telecommunications, renewable energy and autonomous vehicles”.
Decided to share this graph on here. Feel free to correct or nitpick at it. Keep in mind that September's AU$ ACV value has been calculated using the exchange rate today. Also keep in mind that quarterly ACV values are usually not released until a complete month after the end of the actual quarter's end. Expect September's quarterly ACV to be a lot higher than what is shown on the graph when the final ACV is released by the company at the end of October (1 month down, 2 months to go).
Placement to Strategic Investor (Australian Tech Entrepreneur Bevan Slattery Invests in Pointerra)
- Investment secures Mr Slattery’s corporate and commercial involvement in the Company
- Placement of 50 million shares at $0.05 raises $2.5 million
- Funds to be used to accelerate Pointerra’s global expansion
1) ACV grew 15% ove rthe past three months to $3.32 M.
2) Receipts of $532k fo rthe quarter. Quarterly cash burn falls to $297k, with $2.2M in the bank.
3) Management anticipate Q4 2020 to be cashflow breakeven!
4) Management reported increase in demand in Q3, furthermore, they reported :
"Subsequent to the 23 March 2020 ASX announcement Pointerra has been approached by additional enterprise prospects from the data capture (survey), engineering/construction and asset owner/operator sectors and is presently engaged in numerous additional platform evaluation activities for new enterprise prospects, including formal Requests for Proposal (RFP) and Requests for Quotation (RFQ) responses in Australia and the US."
5) Employee incentive share scheme will issue shares at 6c per share. I think this is a shareholder friendly decision, minimises diltution, and sets a higher performance bar.
I think Pointerra has shown great cost management, and their capital light business is now showing promising operational leverage.
Pointerra have reported results for the 3 months ending March 31, 2020.
As @Rapstar has noted, there is a real disconnect between the quoted ACV figure and quarterly cash from customers. It's understandable that there would be a delay as customers are onboarded, invoiced and paid, and different payment cycles can make it difficult too -- but the lag is meaningful. For example, the ACV from Q1 (Sep 30 2020) would suggest cash receipts of $0.6m for the latest quarter (6 months later), 13% above the reported figure.
All in all, a decent result. And very encouraging that cash flow breakeven is on the horizon. If they can sustain sales momentum, the current share price will be looked back on as quite cheap.
UPDATED (thanks @RobW)
Pointerra'a 4th quarter report was encouraging.
Cash receipts grew 55% to $0.82m from the preceeding quarter, and up 290% from the same quarter last year. This was due to an increasing spend from existing customers and the addition of new customers. Pointerra again told investors to expect lumpy cash receipts due to the timing and nature of customer invoicing.
The business was cash flow positive, in the black by $220k for the quarter (and down $800k for the year). This was however aided by a $120k grant from the US govt. as part of covid stimulus measures.
Importantly, a number of enterprise proof of concepts were progressed, the most important being Pacific Gas & Electric. Both parties are working towards a full commercial agreement -- one that will make PG&E Pointerra's largest customer and "have a material impact on CV growth."
Further large enterprise contracts are expected in the coming quarters.
Pointerra also announced plans to partner with Accenture's global energy consulting team. This will hopefully prove to be a valuable channel (although likely at a lower margin).
Interestingly, the business is looking at expanding into a 3D data marketplace for the film & television sectors. Given the growing use of Computer Generated Images (CGI) in this industry, there could be a decent niche area that Pointerra can exploit without much added investment.
With $2.4m in cash at the end of the quarter, and the recemt $2.5m investment from Bevan Slattery, Pointerra has close to $5m in the bank. Although much of this will be used to expand resources, given some large contracts on the horizon and the business hopefully remaining cash flow positive (on average), any further capital raise seems unlikely.
Quite happy with this. No word on ACV, but that's expected before the end of July, as well as more detail on enterprise sales.
What makes it hard of course is that shares are on roughly 30 times the pro-rata Q4 cash receipts. But the thing is that it only takes a few big deals to really swing the dial, given we are working off an extremely low base. If they land PG&E as well as Florida Power & Light (for example), ACV could double on that alone.
So while it seems overly generous to ascribe high double-digits growth rates when doing valuations, it's certainly not implausible. In my experience, it's best not to get too fussy with price when sales are on a J-curve (just watch the underlying business like a hawk to ensure that is indeed what's happening).
ASX annoucement here
Director sale Ian Olson sells 700K shares at around 44c? mark. Still holds 8.8mil shares. Jennifer Olson holds 10mil shares no change. First thought is this is not good, but I'm not sure what to think to be honest. If I was a director and knew some big deals or announcements were going to be coming out would you not wait to sell? But it's also worth noting that the share price has had a big run up and if I'd been working hard for years to build a business, I'd also want to see that materialise into something.
Pointera allows customers to store, manages, analyse and share their 3D geospatial data.
As with the scan images that ProMedicus (ASX:PME) handle, the data sets can be very large and cumbersome. Pointera's product stores and processes this data in the cloud which enables users to access and use it without requiring a lot of processing power and bandwidth.
Technologies like laser scanning, which have dramatically fallen in price, is underpinning an explosion of 3D data sets, so there appears to be a solid tailwind.
The company reverse listed on the ASX in April 2016 (prospectus is here), following around 3 years of development as a private company. Shares were issued at 3c, and the company has undergone a couple of capital raisings since then.
Dr Rob Newman, the CEO of Nearmap, helped float the company and only recetly stepped down as Chairman due to the increasing time commitments of running Nearmap. As at the last notice, he had 13m shares and 5m options.
Pointera is unprofitable and burning through cash -- around $1.3m based on the latest quarter. It has around $1.4m of cash, enough to sustain operations for approx. a year. So it's reasonable to expect a capital raising.
That being said, the company is generating sales, and these are growing exceptionally well. As of May 2019, its annualised contract value (ACV) was $1.32m, which had grown 42% in the previous 3 months. In the most recent quarter, customer receipts were up $350%.
The company has 521m shares on issue, and 16m options. So on a fully diluted basis, at the current market price, the market capitalisation is ~$30m. That's about 17x the ACV, which is fairly high (although we must remember sales are growing very fast off a low base, so such metrics are not always helpful).
Overall, I like that Pointera appears to be fast approaching a break-even inflection point in the coming year or two, has all the lovely attributes of a SaaS business, a strong tailwind, patented tech and first mover advantage. Good to see managamenet with a very large shareholding too.
On the other hand, they are burning cash and could well need more capital in future years. Not sure of the counter-party risk, or how well they can scale without seeing a blow-out in costs.
Hard to value, but will be watching closely.
You can get a good overview from last year's AGM presentation here