21/11/22 AGM Investor Presentation

An interesting update from AER at their AGM. The ARR graph does a pretty good job of summing up the business over the last few years:

Yes, that is not a mistake the business has tacked on more ARR in the last 5 months than the last 5 years combined. After years developing their products and building towards commercialisation, the obvious question now is whether this momentum can be sustained. Commentary on that was positive, citing a growing pipeline and strong conversions.

The big blue sky for the business continues to be their Climatics product which has now been updated to Version 2.0 and launched with the first customer. The product is aimed as an audit worthy analysis for the physical climate risk for business assets. There is a chance the analysis of physical climate risk becomes entrenched in regulation, but until then it wouldn't surprise me if many large businesses incorporate it into their ESG analysis given the focus on the space. Hopefully AER has some first mover advantage and they can leverage their blue chip customer base to establish themselves.

28/1/22 Quarterly Activities/Appendix 4C Cash Flow Report

Again, no surprises from AER this quarter. A nice jump in ARR but was flagged in the prior quarter. Majority of the bump comes from a new hail alert service, GIO is white labelling the service and marketing it heavily which is hopefully a good sign other insurers will follow. Climate risk reporting continues to be the large opportunity with the next version of the software due to launch next month.

30/8/21 Appendix 4E and Statutory Accounts

No surprises from AER given it is quarterly cash reporting. Operational revenue up 11% and $500k NPAT assisted by the R&D grant. I expect the business will continue to operate around breakeven as revenue growth gets funneled back into marketing and product development.

Of more interest was commentary that they have continued to see success with their new hail and embargo services, contributing to an additional $200k in annuity revenue (~10% growth). I spoke with the CEO after the result and he confirmed the business has seen significant momentum since the start of 2021 and hopes that the launch of the new Climate Risk Disclosure Platform that can continue. Given AER's blue chip customer base from the core alerting business, hopefully they can get some early penetration with new products.

29/07/21 Quarterly Activities/Appendix 4C Cash Flow Report

Another slow and steady quarter from AER. Receipts of $700k was boosted by some one off receipts related to roll-out of the new hail forecasting service with some large customers. I suspect on-going recurring receipts is likely back in the $550-600k region.

Commentary was bullish as the recently developed Climate Risk Disclosure platform is now going to market for commercialisation. 

24/5/21 Increase in Final Quarter Customer Revenues

Not the best title for an announcement but AER has signed an extended agreement with a major insurer for $1m over three years. It is unclear how large the increase is on the prior agreement, but it does include a new hail alerting service and the company expects a $200k increase to receipts this quarter.

Judging by that increase it doesn't seem likely to be an annualised increased (~$800k) but at face value is a nice bump to receipts and means the company is now clearly cash flow positive.

29/1/21 Quarterly Report for Q2 of FY21

Another solid quarterly from AER, receipts of $503k in line with the current ~$2m ARR. Roughly $40k free cash flow but $78k in tax and Gov grants meant cash increased $116k and totalled $1.2m at the end of the quarter (with further R&D rebates to be received in 3Q I believe).

My investment thesis that the business will largely be run at cashflow breakeven with profits re-invested back into new verticals continues to play out. The major opportunity is the new Climate Risk Analysis platform that appears to be close to commercialisation with management confirming an update in the current quarter and quantifying the size of the market they are targeting.

While there are risks with any new business ventures, it should not be overlooked that AER's core business has numerous blue chip customers which makes any cross-sell opportunities much easier.

29/10/20 Quarterly Report for Q1 of FY21

A decent quarterly for AER, a good base for FY21 to build from. $499k receipts is in line with their ~$2m ARR and commentary was positive on the current pipeline to win some new customers.

Extreme weather has begun on the east coast and is always a driver of new business.

I think it is very hard for anyone to accurately predict on a macro level how long the current downturn lasts for and the long term effects of it. What we can and should do though is look at individual businesses and assess the impacts to them from the coronavirus, positive or negative.

For AER, I recently spoke to the CEO Kerry Plowright just to get his view on what impacts he is seeing on the business, right now and potentially into the future. He said they have yet to see any impacts from coronavirus with business as usual. He and the General Manager reviewed their customer list and identified two very small clients in the leisure sector who are at risk of removing their subscription, however for most clients AER's service is critical and comparatively very low cost to other areas where customers could cut costs.

On top of that, the alerting platform was originally built to handle viral outbreaks and AER quickly implemented available datasets into the platform and are now providing data to Esri who has integrated the coronavirus into their geographic information system. At the time Kerry said there were only a handful of clients subscribed but it is a very low cost vertical and may grow if the outbreak is unfortunately unable to be contained.

29/01/20 Quarterly Report for Q2 of FY20

Another solid quarter from AER building the base for what will hopefully be an explosive end to FY20. For the core alerting business inquiries were a record high for the quarter after the catastrophic bushfires. I expected this to be the case after tracking website hits.

Confirmation that Esri integration is complete with pricing agreed and sales materials provided to Esri BDM's is great news.

While the actual result was satisfactory, the business looks to be set up for a strong inflection point moving forward.

30/7/19 Quarterly Report for Q4 of FY19

Cracking quarterly from AER with record receipts of $554k resulting in operating cash surplus of $32k. 15% QoQ receipts growth and leaves the company on an ARR runrate of ~$2.2m.

Management commentary was positive, stating they had signed several new customers while retaining existing subscriptions (even expanding with some clients).

EWN integration with Esri and MDS is now complete and marketing with both services is beginning to ramp up with management stating storm season in 2Q20 a key driver. Interestingly, management also commented they were approached by a government department about licensing their messaging service.

30/1/19 Quarterly Report for Q2 of FY19

AER reported their 2Q cash report. It was weaker than expected with cash receipts of $332k sharply lower than the $474k in the previous quarter. For an annuity business with monthly billing this decline is alarming, however the company did note that the Christmas/New Year period resulted a delay of receivables payments with an increase of $110k over 1Q. Nonetheless, I suspect there has been some small customer churn that was not replaced due to management's focus on the Esri integration.

As forecast in the previous quarter, cash costs spiked $95k to $520k, largely due to extra costs incurred in the Esri integration, however these are now complete and forecast costs for 3Q are $70k lower at $450k.

While the total cash outflow of $218k is not ideal, adjusting for the delay in receivables and one off cash costs of Esri integration and cash flow was essentially neutral for the quarter which is a key part of the thesis for the investment as AER manages their cash flow for growth (essentially increased receipts being used to fund new growth initiatives).

AER CEO Kerry Plowright recently co-hosted a webinar for ESRI clients on the value of the Early Warning Network data API. It provides a good overview on the business and the value it can offer to customers:

https://esriaustralia.com.au/our-people/kerry-plowright-spd-3387

5/12/18 EWN Partners With Esri

As flagged in their quarterly report in October, AER announced a partnership with Esri, the world's leading provider of Geographic Information System (GIS) software. Esri has a 72% market share in Australia.

This represents a step change for AER who previously attempted to market their own software solution to customers. This ended up competing with already installed GIS software such as Esri, but now that competition becomes an opportunity as they leverage Esri's established customer base with valuable data. 

No financial information was disclosed, but I suspect the partnership is based on a revenue sharing agreement for customers who access AER's data API. Comments were also made that the potential for Esri users to use AER's established notification system is being explored.

30/10/19 Quarterly Report for Q1 of FY20

A decent quarterly result from AER with a third consecutive positive cashflow quarter, albeit a small inflow of $13k. While receipts of $505k were lower than the $554k of 4Q19, there were some one off revenues received last quarter.

A new insurance client was added in the quarter which is positive as insurance clients are AER's largest segment, making up 30% of revenue in FY19.

Importantly though, management stated that the long awaited implementation with Esri is due to launch this quarter, with several clients already targeted as key customers on the Esri platform who could get value from AER's data now available.

I also attended the AGM this year which was very valuable, Kerry and the team were very accomodating with a small product demonstration of how the AER data is being implemented in the Esri software and some examples of how their product drives value for customers. Overall the mood of management and the board is very positive with a lot of expectations for the Esri agreement to drive the scale that AER is capable of. More importantly, I got a lot more confidence of the value of the AER offering to Esri and believe this is a true partnership between the two businesses, not just a reseller agreement where Esri has no incentives to push the AER dataset.

24/04/19 Quarterly Report for Q3 of FY19

A very solid quarter from AER, who reported record cash receipts from customers of $482k, though admittedly helped by collections deferred from the weaker quarter previously. Operating costs were back to normal at $437k after the increase in costs associated with the Esri integration in the previous quarter ($522k).

Commentary also remained positive, with several new clients won during the quarter such as New Zealand Steel, Incitec Pivot, AFCD Port Logistics and DHS. This new business is accretive as all major existing clients renewed their agreements this quarter.

Impressively, growth continues to remain largely organic as the company confirmed that the Esri partnership is still in its early stages and limited to a select number of clients. Feedback has been promising and the company expects full launch and rollout in the future.

25/10/2018 Quarterly Report for Q1 of FY19

AER reported their 1Q19 quarterly cash report. Receipts were $474k, up 8% on last quarter and 44% on last year. For the second quarter in a row AER was cashflow breakeven, albeit very small ($8k). This fits in with the company's short term strategy of essentially managing growth to the cost base. Impressively, the company looks set to grow revenue even stronger than the 30% last year.

In the management commentary, they noted that the first quarter is traditionally their weakest, but they had received increased enquiries due to recent extreme weather. This bodes well as we come into the fire and storm season.

However, the comment regarding a commercial partnership with technical integration into a leading GIS platform could be major news. The GIS partner reaches three quarters of the Australian/New Zealand market and would allow AER to leverage their dataset with no additional costs and clip the revenue on the GIS customer. Management expects a further update shortly.

Tiny SAAS business that offers risk management software for businesses and people potentially exposed to damage from natural disasters. Core product is the Early Warning Network, a comprehensive offering that allows customers to receive customised alerts and warnings when a potential threat could impact their business, employees or property.

Revenues are 94% monthly subscription based, with growth of 27% in FY18. Management stated they believed this growth was "modest" with ambitions for higher growth in FY19. All FY18 clients have been retained with several new clients onboarded in 4Q18 (including AER's first international client in New Zealand) providing the platform for this growth.

International growth is a focus for management, they have stated numerous times the cloud based SAAS model allows them to scale internationally with no additional resourcing (other than potential sales staff). The other focus for growth is the monetisation of the company's rich database of geographical information through established networks with reseller, revenue share and partnership agreements.

FY18 represented AER's first profitable year of $50k (this did require an R&D tax refund of nearly $500k), with 4Q18 being the company's first operationally cashflow positive quarter of $15k. Given the expected revenue growth with the scalability of operating expenses, I expect the company to grow their operational cashflow and potentially be profitable without the R&D tax refund in FY19.

The profitability was largely driven by an operational review in mid-2017 which saw the company re-focus on it's core EWN product and align it's cost base to annuity revenues. By the end of FY18, monthly cash expenses were more than halved to roughly $100k. Monthly annuity revenue has now grown to $1.4m, exceeding the relatively fixed monthly cash cost base. AER's balance sheet remains extremely clean with no debt or intangibles and over $1m in cash.