I first came across AVA through strawman, and really only got properly interested after the recent company meeting a month or so ago. My interest and valuation revolves around this slide and the associated commentary from management about their buisness units. They think they can increase revenue by 2-300% while only increasing the costbase by 50-70% over the next 3 years, if they can do that then they should be worth a lot more in the future than they are now. But the question is how much more!
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So far for FY23, they have upgraded guidance for H1 for revenue to be between $13-15M and have said that Q2 was better than Q1 and H2 is expected to be better than H1. So I am running a high and low scenario for FY23 - Low: $30M revenue and High $40M (probably a stretch but possible). Projecting further out I just guess $60M for FY24 and $80 for FY25 to be a bit conservative, but these are really just ballparks for now.
I am assumming a Gross margin of 65% (historically ranges between 65-75%) and their cost base to increase from $10-12M currently to $18M in FY24 and $24M in FY25. Closer to a 100% than the guided 50-70% increase to be conservative.
I have struggled to find what proportion of their EBITDA falls though to NPAT. From the 2022 annual report they have:
-$2.5M of debt and I am assumming 5% interest- so repayments come in at $125K/yr, largely immaterial to the calculation
-$17.5M unutilised tax losses are available for use. Based on them making $10-15M EBITDA then the tax bill will be around $3-4M, so will take a few years to use up the previous tax losses. They also have some foriegn tax credits ($10M) but I have ignored these for now.
-Depreciation and amortisation in 2021 and 2022 for the continuing operations was $1.8 and $1.7M respectively. I am assumming these will be similiar in FY23 and will scale at a similiar rate but will revisit this when the next report is released.
So from my best estimates in FY23 the ITDA should add up to be around $5M, based on what I think EBITDA will be means that to get from EBITDA to NPAT is between 50-70% conversion rate give or take, so I will just work with 60% for all years.
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The numbers look pretty reasonable for 2023 and value really depedns on whether they hit the low or high side of revenue numbers. Going forward I don't have high confidence in these numbers but I think the ballpark they re in is about right and if they keep delivering in there day to day buisness units and also get a few more of the 90% margin licence deals to come in like they have spoken about then the 2025 numbers don't seem to crazy.
Maintaining costs and scaling revenue what a combo!
I would appreciate people tearing this apart and telling me why some of my assumptions or what I have done is garbage