7 June 2021
Settlement of Airovant Acquisition
Pointerra Limited (ASX: 3DP) (“Pointerra”; “Company”) is pleased to confirm settlement of the acquisition ofthe business assets and undertakings (“Acquisition”) of US drone-based digital asset management business, Airovant, LLC(“Airovant”), originally announced to the market on 30 April 2021.
Key Transaction TermsThe Acquisition was settled on 4 June 2021 following the completion of due diligence activities and the execution of a Business and Assets Sale Agreement (“Agreement”) between Pointerra, Airovant and the four founders of Airovant.
The Agreement and Acquisition confirmed the following key transaction terms:
1. Total purchase consideration is US$1 million. Pursuant to the Agreement, Pointerra has resolved to issue to Airovant 2,583,092 fully paid ordinary shares(“Shares”) in the Company in exchange for acquiring the business assets and undertakings of Airovant. The number of shares to be issued to Airovant is calculated based on the closing price of Pointerra shares and the AUD/USD exchange rate on 4 June 2021. 1,292,546 Shares will be subject to voluntary escrow for a period of 12 months from the date of issue.
2. Pointerra has entered into Employment Agreements with the four Airovant founder employees. These Employment Agreements include an offer made pursuant to Pointerra’s Employee Incentive Share Plan for the issue of 2 million Ordinary Shares in the Company to eachof the fourAirovant employees (8 million shares in total), with the shares vesting in three equal tranches of 666,667 shares over a three year period on the anniversary of 1, 2 and 3 years continuous employment with Pointerra.
RaaS video update on 3DP / Airovant acquisition
Finola Burke from Research as a Service interviews Ian Olson, Managing Director and co-Founder of Pointerra and Jonathan Montague, co-Founder of Airovant on Pointerra's acquisition of Airovant.
Herewith an extract following a bit of analysis on Pointerra (originally shared on HC), which may be of interest to some.
Whilst the market has regarded the latest ACV update as disappointing, there is IMO a lot to be excited about. Few will knock Pointerra as lacking 'growth' potential. The conversation is all about Valuation. I suspect had the ACV come in north of USD 8.5 m, all would have been good. Up until the end of January, ACV was 'front and centre' in terms of depicting the growth, with quarterly cash receipts somewhat lagging. The recent quarterly showed somewhat of a reversal with a step-change in Receipts and a slower increase in ACV vs the previous quarters.
This analysis is based on ACV remaining the lead indicator.
Not sure how many are considering the likely Full Year 2021 result ( 30 th June FY close a mere 7 weeks away).I believe we now have enough information to extrapolate both the likely Income, likely Expenses and arrive at a rough estimate on EBITDA for FY21.
Herewith some key ratios which to my mind support the fact that we are fast approaching a key inflection point which embraces growth in INCOME , growth in capability (with a corresponding expansion of SPEND) which should result in sustained investor confidence wrt financial performance.
Note : Period of Analysis spanning FY18, FY19, FY20, H1FY21 (see below)
Income (incl. R&D Rebates) : AUD 0.84m > AUD 0.936m > AUD 1.92m > AUD 1.594m (6 months)
Gross Profit : AUD 0.786m > AUD 0.907m > AUD 1.774m > AUD 1.463m (6 months)
. Note : Gross Margin consistently above 92%
Expenses : AUD 2.319m > AUD 2.749m > AUD 3.505m > AUD 2.472m (6 months)
EBITDA : - AUD 1.533 > - AUD 1.842m > - AUD 1.731m > - AUD 0.878m (6 months)
R&D Rebates/Grants as % of Income : 62.8% > 52.6% > 36.0 % > Not yet declared
Employee Expenses as a % of Total Expenses : 60.7% > 64.5% > 85.5% > 68.3% (6 months)
Deferred Revenue : AUD 0 > AUD 0.283m > AUD 0.811m > AUD 0.653m (6 months)
Note : Whilst not associated in any way with ACV or EBITDA near term, values becoming material for any longer term projections
Time to get back on point. Together with the knowledge that the Company has and will continue to increase it's headcount in support of growing sales and that Employee Costs dwarf all other expense items, a casual look at the trajectories (see above) on Income & Spend would suggest reaching EBITDA neutrality is highly unlikely in the near term.
Companies all use different measures to provide confidence on Future growth in Financial Terms. Contracted ARR would be considered the 'holy grail'. Total Contract Value (TCV) provides contractual certainty but the waters are often muddied by variability on contract duration.
Pointerra have chosen to use Annual Contract Value (ACV) which is generally not backed by a contractual commitment, but rather Pointerra's assessment of customers who reliably present as continuous users of the platform (via agreement opposed to contract). I suggest you refer to Pointerra's response to the ASX query back in February. The Company provided a framework which reflects the discipline/s applied in determining what can be considered as true ACV.
Now let's have a deeper look at the likely EBITDA number in the FY 2021 Financials.
The EXPENSES came in at AUD 2.472m for the HY. We know the Company are hiring, so let's apply a 50% increase to the H1 spend, that is for H2. Equates to a FY est. of AUD 6.18m (an increase of 76.3% over FY 2020).
Looking at the INCOME side of the equation, we have already banked AUD 1.594 m at the HY, with a Gross Profit of AUD 1.463 m. Rather than think of the HY on HY growth as a % in order to arrive at FY est., let's go the 'FACT' route IRO announced ACV and relevant reporting in H2, which is material (and certain). All designed to be conservative.
On the 26 Nov 2020, the Company declared the new ACV number as USD 5.82 m. On the 29 Jan 2021, they increased the ACV number to USD 6.88m. So, let's say USD 6 m at the HY. Using an ER of 0.75, translates to AUD 8 m. Let's apply half of a year equivalent for H2 ie AUD 4 m. At 93% Gross Margin, we have a gross profit of AUD 3.72 m.
Now add the H1 Gross Profit of AUD 1.463 m and our theoretical Gross Profit number as an estimate for the Full Year lifts to AUD 5.183 m.
Not finished. We know that PG&E have increased their spend from USD 35 K pcm to USD 80 K pcm, reported end Jan 2021. Assuming ramp up to new level took a while, let's only count 4 months in the Half Year. Therefore, USD 180 K ( translates to AUD 240 K). Equates a Gross Profit of AUD 223 K.
And the last addition. The Eversource paid 'Proof of Concept' trial would not have been counted in any ACV declarations (given the disciplines on ACV determination). Reported as USD 600 k spanning four months. Let's trim that to 3 months to again faciltate any delays. So, USD 450 K which converts to Income of AUD 600 K with a Gross Profit of AUD 558 K.
Now add up the Gross Profit and guess what, we are up at AUD 5.96 m
In theory AUD 220 K short of EBITDA neutrality, this essentially without counting the impact of any ACV updates released in H2 of this FY (except for the increase in Spend by PG&E). So, no provision for the annual R & D Rebates which will be claimed 30 June ( likely to be well north of AUD 700 K), any new business and/ or any expansion of use by existing customers.
Interestingly, if you have a look at the prior depreciation and amortization + the intangible asset balance entering FY21, the road to Profitability (before Tax ) may arrive sooner than we can imagine.
This is already a book, but I think it is important to realise that we wont necessarily have a cash cow from H2 CY 2021 and beyond. The hiring will continue with headcount likely to exceed 40 come Calendar year end. I trust that Pointerra will be measured in terms of beefing out the capability (Spend) ensuring that it produces a very satisfactory and timeous ROI via commensurate Gross Profit.
Based on the above, confident we will be EBITDA positive @ 30 June, that is for the Full Year FY2021. If not, I may be under-estimating the costs associated with increased hiring OR would present a question on the integrity of the declared ACV.
I invite / welcome comments on any flaws in the logic and of course, any other comments. Someone once said to me................
..." anchoring your thoughts on the prevailing share price is bad for your health". In light of the above, cannot think of a better time to ignore the market reaction. The spoils are IMO just around the corner.
As always, please DYOR, Rokewa
15% growth in ACV on previous quarter. This is 75% annualised growth rate. Certainly a slow down, from prior quarters.
Frankly, the valuation was getting rather silly. A pullback was inevitable.
30 April 2021
Proposed Acquisition of US Digital Asset Management Business
Pointerra Limited (ASX: 3DP) (“Pointerra”; “Company”) has signed a Non-Binding Term Sheet (“Term Sheet”) to acquire the business assets and undertakings (“Proposed Acquisition”) of US drone-based digital asset management business, Airovant, LLC(“Airovant”).
Key Transaction Terms
The Proposed Acquisition is subject to the completion of further due diligence activities and the execution of a formal Business Purchase Agreement between Pointerra, Airovant and the four founders of Airovant.
The Term Sheet contains the following key transaction terms:
1. Upon settlement, Pointerra will issue to Airovant ordinary shares in Pointerra to the value of US$1 million in exchange for acquiring the business assets and undertakings of Airovant. The numberof shares to be issued to Airovant willbe calculated based on the Closing Price of Pointerra shares at the date the Business Purchase Agreement between the two partiesis executed.
2. Upon settlement, Pointerra will enter into Employment Agreements with the four Airovant founder employees. These Employment Agreements will include the issue of up to 2 million ordinary shares(or equivalent performance rights,or options over ordinary shares) in Pointerra Limited to each Airovant employee, with the shares vesting in three equal tranches of up to 666,667 shares (or equivalent equity instruments) over a three year period on the anniversary of 1, 2 and 3 years continuous employment with Pointerra.
3. Total purchase consideration will comprise US$1 million in ordinary shares in Pointerra (a portion of which will be voluntarily escrowed for a period of up to 12 months from the date of issue) issued at settlement and up to 8 million ordinary shares (or equivalent equity instruments) in Pointerra issued at settlement but vesting over the three year continuous employment period.
Proposed Acquisition of US Digital Asset Management Business Pointerra Limited (ASX: 3DP) (“Pointerra”; “Company”) has signed a Non-Binding Term Sheet (“Term Sheet”) to acquire the business assets and undertakings (“Proposed Acquisition”) of US drone-based digital asset management business, Airovant, LLC (“Airovant”).
Key Transaction Terms The Proposed Acquisition is subject to the completion of further due diligence activities and the execution of a formal Business Purchase Agreement between Pointerra, Airovant and the four founders of Airovant. The Term Sheet contains the following key transaction terms:
1. Upon settlement, Pointerra will issue to Airovant ordinary shares in Pointerra to the value of US$1 million in exchange for acquiring the business assets and undertakings of Airovant. The number of shares to be issued to Airovant will be calculated based on the Closing Price of Pointerra shares at the date the Business Purchase Agreement between the two parties is executed.
2. Upon settlement, Pointerra will enter into Employment Agreements with the four Airovant founder employees. These Employment Agreements will include the issue of up to 2 million ordinary shares (or equivalent performance rights, or options over ordinary shares) in Pointerra Limited to each Airovant employee, with the shares vesting in three equal tranches of up to 666,667 shares (or equivalent equity instruments) over a three year period on the anniversary of 1, 2 and 3 years continuous employment with Pointerra.
3. Total purchase consideration will comprise US$1 million in ordinary shares in Pointerra (a portion of which will be voluntarily escrowed for a period of up to 12 months from the date of issue) issued at settlement and up to 8 million ordinary shares (or equivalent equity instruments) in Pointerra issued at settlement but vesting over the three year continuous employment period. Pointerra Limited | ABN 39 078 388 155 Registered Office: Level 4, 216 St Georges Terrace, Perth WA 6000 T +61 8 6268 2622 | F +61 8 6268 2699 |
E: email@example.com 2 Pointerra Limited Transaction Rationale Pointerra’s US operation continues to drive growth in the Company’s customer base and is well positioned to leverage the rapid adoption of 3D digital asset management technology across the key market sectors of Mapping & Surveying; Architecture Engineering & Construction (“AEC”); Process and Non-Process Infrastructure Assets; Mining, Oil & Gas; Defense; Government and Insurance. The Company also expects to benefit from investment in domestic infrastructure by US local, state and federal government agencies as part of COVID-19 economic recovery and stimulus initiatives. In responding to these opportunities, Pointerra continues to seek out and employ high quality individuals across the development and sales teams to provide additional depth and scale in US operations.
Pointerra has been collaborating and working with Airovant to service mutual customers and prospects since the middle of calendar 2020 and during this time it became apparent to both organisations that there was a shared vision for growing subscription based digital asset management platforms (using both 2D and 3D data).
During this time the alignment of culture and ambition by both organisations lead to discussions around the Airovant team joining Pointerra, resulting in the execution of the Term Sheet. The Proposed Acquisition of Airovant and the employment of the four founders will deliver a step-change in the dimension and scale of Pointerra’s US operations in the important AEC, facilities management and energy utilities markets and is expected to help shorten the sales cycle in these key market sectors, driving growth in the Company’s Annual Contract Value (ACV) metric.
The business assets and undertakings of Airovant proposed to be acquired by Pointerra include existing customer contracts and relationships as well as intellectual property in the form of technology applications for the extraction of actionable digital asset management information from drone-based 2D data.
The parties plan to integrate elements of Airovant’s existing cloud digital asset management platform (AIROPORT) and underlying 2D data analytics technology stack into Pointerra’s cloud platform, with Airovant’s IP delivering a new 2D imagery layer and augmenting Pointerra’s existing Data as a Service (“DaaS”) and Analytics as a Service (“AaaS”) solutions.
Subject to the completion of due diligence activities, Pointerra expects that the contribution made by Airovant’s business will be both cashflow and earnings accretive in FY22 and should also deliver an initial step-change uplift in Pointerra’s regularly reported ACV.
22-Apr-2021 RaaS (Research as a Service) "Flash Comment" on 3DP attached.
Poiterra released their Q3 cashflow report today/ key takeaways:
1) Record receipts of $1.374 M.
2) Cashflow positive.
3) Admin costs less than 15% of revenue - Volpara, that is where you need to be.
4) Sales Growth & Business Development
Growth in revenue from existing customers, as well as new customer onboarding. Pointerra report COVID-19 economic stimulus packages are a strong tailwind, and is accelerating innovation and the digital transformation of the AEC (Architecture, Engineering, & Construction) sector.
Reported pipeline in defence sector is building, with Pointerra engaging in 25 defence contract opportunities. I imagine thsi will take a while to convert.
3Dinsight.ai - Significant progress over the quarter, with a partnership with Here Technologies to share and access their massive LiDAR dataset. Pointerra negotiating with other cusomers and partners to grow network. Pointerrra seek to share revenue with Here Technologies (and customers & partners) from subscription style revenue model. Pointerra expect this business unit will become the largest and most vlauable part of the Pointerra platform. IMHO, THE POTENTIAL FOR ESTABLISHING A POWERFUL NETWORK EFFECT IN THIS BUSINESS IS HUGE.
5) Team growth - heacount increased from 23 to 27, mainly in sales. Pointerra flagger further recruitment over the coming quarters.
6) Product Development / R & D
A number of UI improvements, improvements in analytics in relation to rail and road infrastructure, brower based point cloud editing is now in beta mode, close to release. Automation of LiDAR capture to point cloud processing si being tested and used by some customers.
Strong pipeline of enhancements flagged.
DISC - I HOLD.
Pointerra saw ACV growth of 139% for the six months through to Dec 2021, and now sits at US$6.88m. Revenue was $1.56m for the half, up 218% off a very low base. Cashreceipts were up 132% to $1.14m.
Growth was driven by new customers and an increased spend by existing customers.
Impressive numbers, but then for a business valued at over half a billion dollars, they'd need to be. For context, that's a pro-rata price to sales of ~180x, and a price to ACV of 64x (Share price at 83c and AUD @ US79c).
It lost close to $1m for the half in net profit, with around -$800k in free cash flow. There's $4.5m cash in the bank -- hopefully enough to get to breakeven. They were profitable on a ACV run rate basis as of the latest quarter.
But to generate enough sales and deliver enough implementations to sustain the rapid growth required to justify the current valuation, the headcount will surely need to grow further. It added 8 new employees in the half, and now sits at 20 full time equivalents -- but that's still tiny.
The company also announced a soft launch of its 3D data marketplace, and hopefully that will provide another good source of revenue. It's seems clear they have an attractive offering and great sales traction overall.
Not much "colour" was added to the results in terms of management commentary, and the ACV number had already been released in January. So overall my view remains this is an exciting company for which I see big things -- but that most of the market seems to have well and truly noticed this too. A lot of growth is already factored in to the current market price.
The asymmetry I try and look for in potential investments (much more upside than downside), just doesnt seem apparent. So for better or worse, although i retain a small parcel, I'm not a buyer at current prices.
If I had a large holding, i'd be tempted to lock in some profits. Even if there is some more upside, the better part of the gain has surely been realised (then again, I said that at much lower levels...)
ASX results here
ACV (time-adjusted forward by 9 months) has forecasted trailing twelve months of quarterly cash receipts closely.
Assuming the ~9 month lag between ACV and trailing twelve months quarterly cash receipts continues, we may be able to forecast future trailing twelve months quarterly cash receipts.
I believe that this trend will continue and expect ~AU$5M in cash receipts to be received for the 01/01-30/06 period.
Working: Forecast AU$6.41M at Jul-2021 minus the last two quarters of cash receipts ($0.609M + $0.635) = AU$5.166M
Pointerra has already signaled that ~$1M of that ~AU$5M was already incoming, as at 31 December 2020 (before the 01/01-30/06 period had even started). See below:
December 2020 Quarter (Q2 FY21) Activities and Cash Flow Report 29 January 2021
"Additional A$0.96 million in receivables and unbilled customer accounts as at 31 December 2020" (See: https://www.asx.com.au/asxpdf/20210129/pdf/44s3r3kb7pn60s.pdf)
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.
After a long period of burning cash, the business is now cash flow positive on an ARR runrate basis.
Sales are growing very strongly, albeit off a small base and contract wins are lumpy.
As of Jan 2021, ACV stands at US$6.88m, up 40% since september.
The company has 670m shares on issueand 5m options. So on a fully diluted basis, at the current market price (72c), the market capitalisation is ~$486m. That's about 50x the ACV.
Overall, I like that Pointera appears to have strong product validation, good sales momentum, and all the lovely attributes of a SaaS business. There's a also a decent tailwind, patented tech and first mover advantage. Good to see managamenet with a very large shareholding too.
I've left a lot of profit on the table by selling down a big part of my Pointerra holding in the last year, but I just find the valuation hard to wrap my head around. Not that I can't see it as being evenutally validated by strong and sustained growth, but if the company falls anywhere short of that high bar, the long-term returns will likley be poor at current prices.
Disc: still hold a small amount on Strawman and in real life.
29/1/21 market update SP up 5.26% ACV stands at US$6.88 million (29 January 2021), up US$1.95 million (40% increase) from the 30 September ACV level of US$4.93 million
29 January 2021
Enterprise Sales & ACV UpdatePointerra Limited (ASX: 3DP)
Pointerra continues to grow its ACV at a solid rate, rising US$1.95m or 40% in the 3 months from September 30, 2020. That's an 18% increase since they last reported this metric on November 25 and ACV now stands at US$6.88m.
Sales came from new and existing customers, with US utilities and mapping sectors driving much of the growth. Pacific Gas and Electric alone is being onvoiced US$35k/month and that's expected to increase to US$80k/month as the deployment continues.
Pointerra also spoke of new opportunities in the defense space, and was invited to demo its capabilities across a range of US departments. Early days, but there's good potential here.
Pointerra reminded investors that the timing of customer receipts would be lumpy as new clients are onboarded and due to the different payment cycles at play.
Investments in new people and ongoing R&D efforts helped keep the business cash flow negative, with $635k in customer receipts (compared to $610k in preceeding qtr) and $578k in government grants being offset by ~$1.4m in expenses, yielding an operating cash outflow of $231k. That being said, on a ACV run rate basis, the business is profitable.
The business has $4.5m in cash left at the bank. Barring a material ramp up in costs, it should be able to avoid another capital raise.
It's very satisfying to watch the early thesis unfold. However, as much as my confidemce in the company has been strengthened, I remain concerned by the valuation. 3DP is trading at 36x ACV. Yes, ACV is at a relatively low base and has the potential to grow strongly for many years, but a lot of optimism is priced in.
Not sure if this has been added from RaaS courtesy of @glutenfree (on linked in)
Pointerra have reported ACV has grown 18% over the past 6 weeks to $5.82 M USD.
It is mantaining the strong growth experienced during Q1 2021.
DISC - I hold.
Pointerra has reported a US$0.89m increase in ACV since October 15. ACV now stands at US$5.82m.
This was due to a combination of new sales, plus an increasing spend from existing customers -- though none were individually significant.
The 18% lift over 40 days is very decent. If you annualise this, it translates to an annual increase in ACV of around US$8m.
Shares are on a Price to ACV multiple of ~45 -- which is certainly up there. What's tricky is that that will drop very rapidly if the pace of ACV growth is mainatined.
EG, Assuming ACV of USD$14m this time next year, and assuming the share price is around current levels, the P/ACV ratio drops to ~18.
You can read the update here
Delighted with the market update and 4 c yesterday. Considering where this Company is in it's life cycle, reporting 72% Revenue growth quarter on quarter provides not only a confirmation of market traction, but endorses the value proposition. Few contest the market potential for this business and IMO, above all, their value proposition will underpin future success. What's more, too early for the Company to provide any meaningful cohort analysis, but confident that growth via new signings will be materially complimented via extended usage by previously onboarded customers. Reminds me a bit of the PushPay growth story.
For those that have watched the various Ian Olson podcasts, this is not someone who will be employing new people for the sake of it. Staffing up to 19 people according to yesterday's report, so still 'lean & mean' in my book. Revenue scaling is happening right now and already the trajectories are looking super impressive. Given this is a high gross margin business, I am very confident that this Company will become highly profitable. I have the patience to match (without anchoring my thoughts on the prevailing share price).
May be in a position to have a first go at a 12 month forward valuation when they release their half year results in Feb 2021.
Pointerra are hiring a US Business development manager. The roles KPI is all about sales and business development, and it is encouraging Pointerra are investing in growing their sales piepline and opportunities.
It is a sign of confidence in the opportunity, but it will be 12-14 months before we see any results from this new sales hire.
Ok, valuation is looking very stretched. But category crushing busineses, servicing secular changes will always be pricey.
High gross margins will allow Pointerra to grow exponentially with limited capital expenditure requirements. Having a look at similar businesses, and their valuations could be instructive for investors.
To help understand this, I have looked at a company with the same high gross margins and growth rate. The company I compared Pointerra to is WIX.com. Six or seven years ago, WIX.com was growing revenue at an annualised rate of 88%, and had an EV/S ratio of 40. WIX.com has rallied over the past 4 months, and has an EV/s ration well above my table below, but I hope it gives investors an idea of how one may consider Pointerra's currnet valuation to be fair value.
As the table shows, Pointerra has to grow rapidly to justify its valuation, but the growth rates required are certainly achievable, as demonstrated by category crushing businesses. PS - I don't think WIX.com is by any means a category crusher, and is faced with strong competition, a situation Pointerra is not faced with (but may change as its success attracts competitors).
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.
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).
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.
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.
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) 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.
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
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.
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”.
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
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.
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.
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.
3DP released their HY report. After close - not a great look. Key takeaways:
1) Revenue of $490k, up from $94 k (or up 413%) on pcp.
2) R & D costs of $767k, up 37% on pcp.
3) Admin expenses of $605k up 24% on pcp.
4) operating cashflow of -$726k down from -$641k on pcp.
5) Cash in bank: $2.5M
Management reported ACV at the end of last financial year to be $1.85 million, so it is concerning revenue does not reflect the reported ACV. Management have advised this is due to delays in onboarding customers, and have warned revenue and receipts will remain lumpy due to variable payment cycles. I will give management the benefit of the doubt for the next 1-2 quarters.
ACV grew up $1 million over the half year.
3DP report they have a sizable sales pipeline in Austlraian and US, and are as a result, they are recruiting to expand their sales & product development capability.
Some questions around the business. We will have an answer by July 30.
Ok, cash receipts are very scary, dropping to just $180k. This was blamed on a delay in payment from Precisionhawk due to an internal restructure, which is now fully resolved, as well as delayed commencment of a US state mapping project.
I have learnt that there is often a 3-6 month delay in ACV being announced and the cashflow coming in the door.
I would expect Q3 receipts to be around $600-800k. If it is below this, I will begin to question the validity of the stated ACV.
There was more colour provided in the result. Including:
1) ACV from Precisionhawk looks to be around $600-800 k.
2) New US state agency, which is just coming online, has an ACV of $900k. This one contract will contribute about $600-800k in ACV over the next 6-9 months.
3) Major League baseball contract expected to be signed by April, and other US state agency projects have been flagged as in the sales pipeline, along with 5G comms infrastructure.
4)New Florida Light and Power emergency response opportunity flagged as generating significant DPaaS and AaaS revenue, which has not yet been included in ACV.
With ACV at $2.84 M, it is growing nicely, however, the receipts are not matching ACV. I am accepting management's explanation, and given there is $2.5 M in the bank, there is time to wait and see.
I am capping my positon to 2.5-3.0%, which is probably a little too high for such a high risk opportunity....
Cash receipts of only $0.18m, down from $0.31m in first quarter. This was due to their major US customer, PrecisionHawk, working through a restructure and recapitalsiation, which delayed some work for a large mutual client in Florida.
Cash outflow increased due to added US staff hires. Quarterly costs are just shy of $1m, and the company has only $2.5m in cash. And this is after the capital raise last year. The company is looking at making additional hires in the current quarter, so expect costs to rise again.
Unless cash receipts materially increase, the company will need to pass the hat around again to remian a going concern. I think it very likely we'll see another capital raise or two before breakeven is reached.
To be fair, 3DP has previously advised that cash receitps will be very lumpy in the short to medium term, due to a variety of different payment terms, and as new customers are onboarded. And that makes sense given how small the business is and the breadth of its client base. But it does make it very difficult for an outsider to gauge the "trend growth" in revenues/cash receipts. It also highlights concentration risks (eg. if precisionhawk go under, they will lose a major source of revenue)
The company reported ACV of $2.84m as of January 31 (although for some reason they always plot the ACV value for the quarter based on what it was a month after each quarter ends. Seems a bit rich..
At any rate, if we assume that's just due to the precisionhawk delay, it's an incremental gain of $430k for the quarter, and has cast doubt on my initial assumption of hitting $5m in ACV by the end of FY20.
Pointerra highlighted some larger contracts. The partnership with precisionhawk to provide inspection services to Florida Power & Light is expected to "significant and incremental" ongoing revenue throughout this year and next, with another 48 inspection task orders contracted. Each of these order total around $1m, but it's not clear what % of this is for pointerra.
The company was also approached by Major League Baseball (MLB) to assist in vizualistion efforts of MLB stadiums. MLB is expected to formerly adopt the pointerra paltform in April/March of this year and is also expected to generate "significant" revenue. Although again, that's very vague.
The deal with an unnamed US mapping customer, announced in Sepetember 2019, has now commenced. It helped contribute to the latest quarters ACV growth, but in total is expected to generate more than $600k in ACV when complete (although when that is likely to be was not disclosed). Pointerra said that there was potential for similar contracts with other US states, and that at least one was expected to commit to the platform in the current quarter.
R&D remains a major expense item, with company on an annual run rate of >$1m in related expenses. Partly this seems due to the need to create bespoke solutions at the request of clients, and while these new feautres will have broader appeal, it shows that the offering is still far from comprehensive.
All told, I remain of the view that this is still an early stage, high risk business. There's definitely huge potential, but how well the opportunity is exploited, and how effectively costs are managed remains to be seen. Even under optimistic assumptions, profitability is a good ways off, so this is very much a story that will take years to play out. In the meantime, expect huge volatility.