Apologies for this being a bit light on specifics as I didn't bring my model with me to vietnam.

ACE update with the AGM is good. Revenue on track for mid to high $50ms ($57m) and depending on the timing for when WA comes on, there is scope to upgrade closer to $60m (and with it my valuation). GMs were also strong in the 47% range and I think is higher than I model. So unless they're about to load up some more costs, they may actually grow EBITDA with the guide being flat to down potentially. Reiterated doubling of international revenue which based on today and recent disclosure is supported but customer contracts.

So overall the business is tracking well, growing well with positive operating leverage with the potential to surprise a little to the upside.

ACE announced today they won WA tender which is valued at $9.4m over 3yrs or $3.13m p.a.

My original modelling had this at between $2.3m to $2.7m p.a.

As per the tender docs I posted here, the tender is for 6 trailers, one per region stated in the release. Based on FY24 results, it implies ~$380k p.a. of revenue per trailer. That is "diluted" by the speed contract in NSW and otherwise assumed that revenue per trailer for a mobile phone capability is around mid $400k. The WA contract, which is mobile, seatbelt, speed and unregistered vehicles which implies $522k. Multifunction is also expected to be higher gross margin (I think in the 50% range).

https://announcements.asx.com.au/asxpdf/20241021/pdf/069bkqfzqm6qm8.pdf

Finally around to updating post FY24 results and getting a chat in with the co. Key points:

• US and UK to grow at least 100% each. Both back by contracts which commenced around the end of FY24 so largely bankable. US is Georgina and Arkansas whilst UK is Devon & Cromwell.
• Oz to growth ~10% without any major new contract wins. Comprises of QLD speed variation going live early FY25, Full yr uplift from additional mobile/seatbelt trailers that went live Dec 23, + BAM stuff on tailgating. Full year of SA + extra installs. NSW seatbelt switch on July 24 that could lift revs by 10-20%p.a. (Say ~$1.5m).
• Immediate major contract awards ahead is WA. Expected award this month. Initial 6 Trailers (see my straw on that preso) which based on ACE average of $380k/yr/unit ($49m rev on ~130units)(likely higher given multi-function) equates to a contract value of $2m+.
• Other incremental is ACT and SA flagging desire to switch on seatbelts too. US trials have led to funding request is upside to bolt on more deployments. QLD has more speed to outsource as well.
• Revenue growth is higher margin deployments so expect GMs to tick up however this is offset but additional cost-in which would increase as they win more major work. Full run-rate of FY24 cost in would add ~$2m to run-rate cost base. Hence why Rev and GP better tools for progress and valuation.
• Whilst UK traction is accelerating, unclear when it leads to Oz style deployments and tenders. US will be smaller piecemeal contracts without changes to automated enforcement.

Putting thing all together in updated numbers as per below:

Broad based build up demonstrating the ACE capability in the UK. What I can tell, few other systems trialled in competition. With ongoing and more consistent trial deployments this year I would like to think is building towards formal tenders and fuller roll outs next year.

Summary Contracts Announced Since IPO

·      January 2024 South Australia Government, Estimated $5m , five plus year contract for provision of fixed mobile phone detection camera installations using Acusensus “Heads-Up” solutions. https://announcements.asx.com.au/asxpdf/20240108/pdf/05z7gbm7k4rt04.pdf

·      November 2023 Transport for New South Wales, (in addition to previously contracted) from this contract variation is expected to total approximately $4.5m The initial term of the agreement was two years from 1 Dec 2019. Extension of existing Mobile Phone Detection Camera Agreement until November 2024. https://announcements.asx.com.au/asxpdf/20231129/pdf/05xy2jjl8smps0.pdf

·      August 2023 Queensland Department of Transport and Mainroads, variation of existing contract. Revenue from contract variation to total approximately $19.2m over a five year period. Extension to its existing Mobile Phone & Seatbelt Safety Technology Enforcement framework. https://announcements.asx.com.au/asxpdf/20230815/pdf/05smmz6v5zzx57.pdf

·      July 2023 Queensland Department of Transport and Mainroads, excess of $700,000 three month trail. For the provision of phone awareness monitoring and tailgating monitoring services. https://announcements.asx.com.au/asxpdf/20230726/pdf/05ryvl2t363q99.pdf

·      June 2023 North Carolina Department of Public Safety US$0.5m, the agreement has a one year term, with an option for it to be renewed for two further one year period. Agreement marks the launch of the first ongoing camera supported program in the United States to enforce mobile phone and seatbelts use. https://announcements.asx.com.au/asxpdf/20230601/pdf/05q7sb0hd3bf0r.pdf

·      February 2023 Queensland Department of Transport and Mainroads, Estimated total contract value over the initial five year term of approx $11.7m. For the provision of trailer-based road safety speed camera services using the Acusensus Harmony solution https://announcements.asx.com.au/asxpdf/20230206/pdf/45l9rp34y3y37v.pdf

Board

Inside Ownership                   Ordinary Shares    %ACE Issued          Net Value at $0.63

Ravin Mirchandani                  88,752                         0.07%                          $56K

Alexander Jannink                  3,350,000                    2.65%                          $2.11m

Sue Klose                                 25,000                         0.02%                          $15K

Mike Giuffrida                         0                                  0                                  0

Total                                        3,463,752                    2.74%                          $2.182m

Management Bio

Ravin Mirchandani -Chairman

Ravin is the co-founder and Chairman of Acusensus. He is also the Executive Chairman of Ador Powertron, a company incorporated in India that is a major shareholder of Acusensus. He is a non-executive director on the board of Ador Welding Ltd, a company listed on the Bombay Stock Exchange and is part of the Audit Committee and Chair of the Shareholders Grievances Committee. He was previously also part of the Remuneration Committee. Ravin has extensive commercial experience across a range of sectors including defence, energy, gas, manufacturing, power electronics and traffic enforcement.Ravin is a member of the Road Safety Partnership Panel for the World Economic Forum Global Road Safety Initiative and Chairman of the West India Chapter of the Indo Australian Chamber of Commerce.

Qualifications: MBA International Business from the Queensland University of Technology, B. Commerce (Accounting & International Business) from the University of Pune, India.

Alexander Jannink -Managing Director

Alexander is a founder of Acusensus and has pioneered the design, development and deployment of traffic enforcement technologies in multiple applications, markets and geographies across the globe. Prior to founding Acusensus, Alexander was responsible for research and development as the Head of Future Product Group for Redflex Traffic Systems Limited (previously ASX: RDF), leading a team of professional staff spanning Australia and the USA.

Qualifications: MBA(Exec) from RMIT University, BE(Hons) in Mechatronics from the University of Melbourne, BCS from the University of Melbourne.

Sue Klose- Non-executive Director

Sue Klose is an experienced non-executive director, with a diverse background in digital business growth and operations, corporate development, strategy and marketing. Sue is currently a Non-executive Director of Envirosuite (ASX: EVS), a global leader in environmental data and intelligence, Halo Foods (ASX: HLF), a provider of nutritional and wellness products, Honan Insurance Pty Ltd, and Stride, one of Australia’s largest mental health care providers. She was previously on the Boards of Nearmap (ASX: NEA) and Pureprofile (ASX: PPL). Previously the Head of Digital and CMO of GraysOnline, she was responsible for digital product strategy, brand strategy and marketing operations. In prior roles in digital and media companies including 12WBT and News Ltd, Sue led strategic planning and development and is passionate about helping businesses continually seek new opportunities for growth and innovation. As Director of Digital Corporate Development for News Ltd, Sue screened hundreds of potential investments, leading multiple acquisitions, establishing the CareerOne and Carsguide joint ventures, and holding multiple board roles in high-growth digital and SaaS business. Prior to her move to Australia, Sue held various digital media management and strategy roles in the United States, primarily with Tribune Publishing and as a consultant with Marakon Associates. Sue has an MBA in Finance, Strategy and Marketing from the JL Kellogg School of Management at Northwestern University, and a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania.

Qualifications: MBA (Finance, Strategy and Marketing) from Northwestern University, B. Science (Economics) from the University of Pennsylvania.

Mike Giuffrida -Non-executive Director

Mike is an entrepreneur with over 25 years of experience, having co-founded and been the CEO of a human resource technology company, Acendre Pty Ltd (now Hire Road Inc.) in 1997. Acendre pioneered using the internet as a means of delivering enterprise ‘software-as-a-service’ to organisations with the release of the first online resume builder and first online applicant tracking system software to the Australian market, before evolving into a full online talent management space. Under Mike’s leadership, Acendre subsequently established a presence in the US, including in the US Federal Government market, before leading a process to identify a majority growth investment partner for Acendre and subsequent acquisition of a US-based HR technology company. At the end of 2019, Mike led a successful transition to a US-based CEO to head up Acendre’s next phase of growth, which enabled Mike to return to Australia full-time with his family. Since his exit from Acendre, Mike has been supporting Australian technology companies in various capacities including Non-Executive Director, Operating Partner and Executive capacities.

Qualifications: Bachelor of Engineering from Swinburne University of Technology.

For those wondering what a tender scope looks like, attached is WA's tender scope doc WAPOL11823 Safety Camera Industry Briefing.pdf

ACE takes One task to court

Shares rally 10%

Now we know why they were silent on One Task

Getting the popcorn out...

[Held]

Turns out that EU contract was much more baked in than I thought it would have been given; how prolonged the process was, and; how much the co avoided talking it up or in specifics outside of saying it was transformational and could unlock the broader EU faster. I get the sell but down to 81c seems extreme.

There is a need to find out who won and reassess the competitive landscape.

Good points by @Scott already, thanks for sharing mate. I'm sharing my quick thoughts.

Overall, the results are positive, although it would have been ideal to achieve profitability. The company's EBITDA of $2.5M indicates a healthy future trajectory, especially considering that the cash position remained stable at $21M compared to the previous period. 

Furthermore, the fact that EBITDA is growing at a faster pace than revenue is a positive sign. Additionally, the pending recognition of the SA contract and a few others in AU, with the anticipation of a the potential very significant tender in Europe are expected to contribute to future growth. 

The upcoming release of the guardian product, along with secured contracts mentioned in the announcement, further supports the expectation of growth in the coming years. They offered revenue guidance of $50M, representing a 20% yearly growth rate. I think they may be playing a little conservative here.

The thesis is well on track.

The share price of this one has increased rather substantially with the broader small cap rally since I took my initial position in October last year, so not inclined to add just yet.

ACE just reported.

Result

• Revenue +25%
• EBITDA +35% to $2.5M
• Cash burn of $3.6M. Still have $21.2M in bank
• NPAT loss of $0.2M

Outlook

Full year revenue just over double half year to $49-51M. EBITDA $4-$5M.

Expenses have increased and will continue to be elevated as they invest for growth. They have taken on additional sales people in UK and US and are setting up 24/7 level 1/2 help desk.

My thoughts

I like that it has tailwinds with OS expansion looking promising. I don't know what their revenue could grow to. I feel like costs might keep increasing and they will keep the business break even for the foreseeable future. They have $21m in the bank so it will be easy to keep using that to go for growth. They are also capitalising at least some R&D.

I'm interested, but not at the current price. It's forward EBITDA multiple is 35. I'd be interested closer to 90c.

Two interesting things here, the law was passed unanimously and secondly, the fine for speeding in a work zone is higher than most other types of speeding fines in the state. The US is known for having poultry fine values for personal drivers and automated enforcement can be iffy in many places still. 

https://www.lhsfna.org/liuna-affiliates-integral-in-unanimous-passage-of-work-zone-speed-camera-legislation/

https://legiscan.com/WA/bill/SB5272/2023

https://www.courts.wa.gov/court_rules/pdf/CLJIRLJ6.2.pdf

Acusensus (ACE) is a tech co that provides automated traffic enforcement solutions with a specific focus on distracted driving/mobile phone use. ACE’s solutions are fixed camera or portable trailer based cameras which can detect a range of traffic offenses with the company’s IP in their Algos and knowhow of optimal detection set ups. Whilst ACE’s tech has been predominately used for mobile phone detection, it has been deployed for speeding, seatbelt and more recently, tailgating awareness in QLD.

ACE was founded and is lead by Alexander Jannink who owns ~13% of the company. Alex founded the business off the back of a friend who was killed by a distracted driver and whilst this as good a driver as any, Alex was formerly responsible for research and development as the Head of Future Product Group for Redflex Traffic Systems Limited (previously ASX:RDF). RDF was an Australian based traffic enforcement business which was ultimately taken over by Vera Mobility in 2021. I also note the board and management own/control ~30% of the business with the Chairman controlling ~16% via Ador Powertron Ltd.

Distracted driving is increasingly presenting as a major cause of serious collisions and deaths on the road and is becoming a new focus area globally for authorities in reducing road trauma. Use of a mobile phone whilst driving is of most concern and the key distraction type that is being legislated with the TAC stating that “drivers are 10 times more at risk of crashing if they are texting, browsing or emailing on their mobile phone” and “Taking your eyes off the road for two seconds or more doubles your crash risk. At 50kmh you will travel 28m in 2 seconds, that’s about the length of a cricket pitch”.

To date, enforcement has been challenging and considered resource intensive from a policing perspective and as such, has required technology advancements, such as that from ACE, for widespread enforcement to be possible. Technology providers like ACE not only enable broader enforcement, but they have also been used to better understand the extent of the problem through data collection programs.

ACE’s solutions come in 3 versions with:

-The flagship being Heads Up which is the fully automated captures system which can identify drivers speeding, using phones, not wearing seatbelts etc… and comes as either fix cameras or trailer based mobile units.

-Heads Up Real Time which is a trailer version which flags an infringing motorist to a police car down the road who enacts the enforcement. This solution is focused on the US market where automated enforcements can be tricky politically.

-Harmony is a basic version of the core system that offers a lower price point for speed capture solutions.

The revenue model is simple. The company wins contracts from government authorities and is paid for providing the requested enforcement solutions of the tender charging a fixed monthly fee per deployment.  The contracts are akin to a MSA which means variations and ongoing expansions of enforcement coverage can occur without retendering. Tenders are typical 3-5yrs with options to extend. As they are service contracts, ACEs own all gear, IP/data and the contracting party only tells them where to put cameras. ACE is not paid for rate of offences captured.

Since being first to go commercial with their camera technology in 2019, ACE has won multiple contracts for mobile phone enforcement in Australia as well as a speed contract in NSW. In addition, ACE has established a presence in the UK and US with regular deployments of their technology being used to collect data and test pilot the efficacy of the solution. ACE was awarded its first contract in the US in June 2023 in North Carolina and although it is a small contract, it is a stepping stone to accelerating adoption across further US states.

I believe ACE has and retains a global first mover advantage against the competition with Jenoptik winning in VIC (head to head) and Sensys Gatso winning in TAS (extension of a speeding contract), with the underlying tech for both from a small start-up called Onetask AI. Other technologies have been tested in the UK and Europe however there have been no broad enforcement contracts conducted to date in these regions. Whilst others have been used, I note that in the UK, ACE’s tech appears to be the most used and tested solution with the company having 5+ trailers on rotation across 15+ constabularies. However, ACE’s competition are larger and more established traffic enforcement solution companies thus one can’t discount their ability to close the competitive gap.

ACE IPO’d in Jan 2023 raising $20m ($24m total cash post IPO) to provide funding for long term growth and currently has ~$25m cash on hand to fund future growth whilst on a pre-capex basis, the company has lived within in means spending only the incremental growth. This provides a long runway for ACE to maintain its growth potential and see that growth compound and reflect in the share price.

As for growth, I think ACE is capable of delivering revenue of $50m+ in FY24 whilst in FY25, revenue could be close to $60m with a high case potential closer $75-80m which the high case being driven by a significant European contract win expected to be awarded in the second half of FY24. This growth will be profitable growth as well but how much flows through to the bottom line depends on how much incremental investment management decide to put into the business (i.e. major success offshore likely precipitates large investment).

I have a base case target price of $1.40/sh based on 15x (current multiple) EBITDA on FY25 ($1.97/sh on the higher case), on a fully diluted share count of ~136m. Another way to consider valuation is what is a “cash cow” which is if the company abandoned growth spend and maintained existing contracts. Based on FY24 revenue and reducing opex by ~$6m and using a 10x multiple, this gives a target price of $1.16/sh.

Between the global thematic tailwinds and the near term prospects of the company, I think the risk/reward is skewed to the upside from here.

Catalysts

·      South Australian tender award 1H CY24

·      Further NSW contract variation award 1H CY24

·      European tender award 1H CY24

·      Western Australian tender award CY24

Risks

·      Competition catching up tech wise and outcompeting in tenders which; reduces overall growth potential, and; can create pricing pressure and reduces margins

·      Contract cancellation (noting a gov can cancel a contract with 30 days notice)

·      US market risk on economic funding model beyond existing infra spending funding pool.

@edgescape I found this recently which you may be interested in. Have had a very brief look at them - didnt find a reason for the stock split and not sure why you would split to make the share price under $1. Any ideas?

Acusensus broker report OCt 2023.pdf

On a side note I believe I did see the results of their work - a mate of mine was pinged in Qld 3 times in quick succession for having his phone on his leg and not in the console of his car!

Nessy

Found the answer to the share price weakness.

Hidden somewhere near the back of the prospectus and it was quite hard to find.

I admit I missed this when I went through the doc a month ago.

Below gives an insight into how funds were raised before the IPO and prices the seed investors paid before the IPO that would not be on this list.

On average seed investors must have have paid around $2.00 per share pre split before the IPO when Acusensus was still private.

Also the aggregate summary value of all these options was not on the FRONT of the prospectus which helps the investor find out if the IPO is good value or not. However I'm not sure if it is compulsory to put that value in but all the ones I've seen have done that.

Taking a step back, I think most of the selling below $3 happened in February. So maybe it is over?

At least the subs in the above haven't sold ... yet. Only the employees, Bell potter and others not listed above.

On that note, if business momentum is maintained then maybe the selling will stop.

[held]

Talking about IPOs again and this is one where retail were the losers.

IPO prospectus

There are a few red flags I could see in the prospectus. One obvious one is Pre IPO equity vastly outnumber the equity available to retail.

The few positives about the company is the business (traffic safety camera monitoring), upward revised guidance and low market cap.

With more shares coming out of escrow in the next few months, I think it can head lower even with the revised guidance and business momentum.

Seems like the Pre-IPO holders aren't showing much conviction in the business as in February 23 the share price dived to $3 on release of the HY23 results. I'm assuming it was the Pre IPO holders since shares were removed from escrow after the release of the HY results.

There is also an upcoming stock split (5 for 1) in the next month.