New CEO incoming after Wayne Arthur's resignation some weeks ago. The company also proposed to change its name to Beonic recently (which is worse than the current name and an unnecessary exercise in my view).

Given the abject performance over the past couple of years, Billy Tucker has a low bar to clear. Of course, he's being very generously compensated for the size of the company he is at the helm of - fixed rem alone is $440k p.a.

growth in share count

284.8m - 2018FY

311.1m - 2019FY

370.1m - 2020 FY

407.7m - 2021 FY

Turning into a classic frustrating negative cashflow situation. 

Things may change, but as it stands Skifii is becoming a great case study of poor leadership with capital allocation. 

What made me hesitate the most before investing into this company was this strange behaviour I should certainly have questioned more heavily when I saw that Directors & Management granted with their yearly 1c options. There’s a lot of questionable stock renumeration in small caps but I hadn’t seen one quite like this before. I should have just treated this as unacceptable, seen the lack of incentive for leadership to drive better cash management and walked away. Instead I rationalised the software was great and and overlooked this. I've learned from that mistake.

Now the merry-go round continues; every quarter they continue growing their ARR but seem less promotional about outpacing that growth with new record cash outflows. $2.9M in the last quarter. They present in section 8 this means 2.7 quarters of funding still available, but they likely will not draw debt at this point, and in any case they won’t last to the end of the financial year.

When they find themselves faced with asking Shareholders that supported them in their last capital raising at 16.5c only six months ago for more money that might be the breaking point.

Skyfii Q4 FY2021 Quarterly Presentation Recording

SKifii continues to deliver and grow at an aggressive Saas pace of 40% yearly on ARR. In their presentation, they note ending the year at $14M ARR (unaudited). The important thing to note is that the acquisition of Crowdvision is what makes the figures look particularly rosy.

Listening to the recording of the call, the important question came up at the end: “Removing the Crowdvision acquisition, what’s Skyfii’s QoQ growth?”

The answer from the CEO and CFO was that they decided to take the hit on churn in Q4 and deal with the credit notes. If you take that out, the Skyfii core business was marginally down. That’s why questions are so key from investors.

I was pleased to hear the truth as always, and to me the reality stands that the compare against the past quarter was also a tough one given they have a fairly massive Q3.

On Valuation

With an Enterprise value of 42.37M, that puts them EV/ARR of 3. For a business growing at this pace, in my opinion, we’ve got a very reasonable valuation. See my valuation and price target against the company.

Their EBITDA is down from last year given their acquisition of CrowdVision.

On Execution & The road to profitability

Their execution in the past 1-2 years tells me they will continue to focus on aggressive YoY growth, which leaves us in limbo as to when to expect profitability. The CEO indirectly addressed this by saying (my best effort to quote him, this isn’t entirely accurate) :

FY22 is a year of investment. They have invested in recruiting for 19 new roles. Most in seat before 1st half of FY22, mainly across sales and marketing.

Analyst guidance says they will impact their EBITDA. Are looking for growth. Are looking for 17-20M ARR.

FY23 is the year where they will demonstrate operation leverage.

Essentially, we’re not unlikely to see profitability next year as they continue to invest in growing the business. With a great product and great opportunity to move further to market leader, my view is that this is the right decision.

In Summary

• I’ve seen good execution from them this last year in a difficult COVID period.
• I’m pleased with the CARG growth we’ve seen from them.
• The management team are focused on the right things and delivering.

DISC - Holding

Link to recording:

https://skyfii.io/wp-content/uploads/2021/08/q4-fy2021-quarterly-conference-call.mp3

Link to slides:

https://newswire.iguana2.com/af5f4d73c1a54a33/skf.asx/2A1313344/SKF_Skyfii_June_2021_Quarterly_Investor_Presentation

29/4/21

SKYFII MARCH QUARTERLY BUSINESS REVIEW CONFERENCE CALL & Q&A RECORDING (Q3 FY2021) (attached)

https://skyfii.io/wp-content/uploads/2021/04/q3-fy2021-quarterly-conference-call.mp3

This aligns with their Q3FY21 Presentation

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02368687-2A1295080?access_token=83ff96335c2d45a094df02a206a39ff4

It is quite long and a bit clunky but they do have a bit of info for those with the patience to listen

Disc: I hold & topped up yesterday

Skyfii delivers 104% growth in operating EBITDA

H FY21 Financial Highlights

•  1H FY21 Total Operating Revenues of $7.4m, up 9% versus 1H FY20 driven by strong underlying business performance, new customer wins across multiple verticals and the success of Skyfii’s OccupancyNow™ solution.
•  1H FY21 Operating EBITDA of $1.6m, up 104% on 1H FY20 reflecting the continued focus on profitable growth.
•  Annualised Recurring Revenue (ARR) exited 1H FY21 at 1 $11.5m.
•  Strong balance sheet with a cash at bank of $3.4m at 31 December 2020 ($2.1m at 30 June 2020) provides flexibility to continue to drive growth as well as new product development.

DISC: I hold

19-Jan-2021:  Canaccord Genuity: Skifii (SKF): Estimates Revised: North America gaining traction; A$11.5m ARR (~4x FY21e EV/Rev)

Analysts:

1. Owen Humphries | Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.2.9263.2702
2. Seth Hoskin | Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | +61 3 8688 9146

• Rating: BUY (unchanged)
• Price Target: A$0.30 (unchanged)
• SKF-ASX Price: A$0.21
• 52-Week Range (A$): 0.27 - 0.21
• Market Cap (A$M): 72.2
• Shares Out. (M): 343.8
• Dividend /Shr (A$): 0.00
• Dividend Yield (%): 0.0
• Enterprise Value (A$M): 70.1
• Cash (A$M): 2.1
• Long-Term Debt (A$): 0.0

--- click on the link above for the full CG report on SKF ---

[I do not hold SKF shares.]

1/4ly Report Q2 2021 & Conference Call

*Operating Rev $ 4M ~ Up 15% (v Q12021)

*Recurring Revenues $2.8M ~ Up 25%

*ARR ~ $11.5M ( Annual Recurring Revenue (ARR) based on contracted recurring revenues as at the end of Q1 FY21 - inclusive of temporary suspensions as a result of COVID-19 & contracted revenues from the acquisition of Blix announced 16th September 2020)

*Cash at Bank 3.4M (at 31/12/2020) ~ up 27%

*Debt Facility $2M ~ $1.5M undrawn

Disc: I hold

https://skyfii.io/investor/announcements/

Skyfii delivers 25% growth in Recurring Revenues as demand for people counting technology grows

Q2 FY21

Highlights

? Recurring Revenues for Q2 FY21 of $2.8m, up 25% vs Q1 FY21 (inclusive of the Blix acquisition)

? Total Operating Revenues for Q2 FY21 of $4.0m, up 15% on the prior quarter (Q1 FY21)

? 1H FY21 Operating EBITDA of $1.5m, representing a 13% increase when compared to 2H FY20

? Annualised Recurring Revenue (ARR) exited Q2 FY21 at $11.5m

? Total Cash Receipts of $3.4m, up 10% on Q2 FY20

? Cash at bank of $3.4m (as at 31st December 2020) up 27% on Q1 FY21, with additional access to a $2m loan facility, of which $1.5m remains undrawn

? Blix acquisition, completed 14th September 2020, has delivered new business wins with Asics, Good Feet & Jo Mercer retail apparel brands

? Strategic partnership with Boingo delivered a five year deal with Metro Washington Airports Authority (USA)

? Strong North America growth securing new contracts with Omaha Zoo, Retail Business Services, Mark Anthony Group & Trent University

? Strong customer retention with key renewals completed with David Jones (AU), The Kooples (FRA), McArthurGlen Retail Outlets (UK), SFMOMA (USA); JCPM Group (BZL), Nuffield Health (UK); AB Nordiska Kompaniet (EU)

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02331632-2A1275653?access_token=83ff96335c2d45a094df02a206a39ff4

DISC : I hold in RW & Strawman

18-Sep-2020:  Canaccord Genuity: Estimates Revised: Skyfii Limited: Tuck-in acquisition of Blix ($1m ARR), and return to pre-COVID growth (>+10% qoq revg)

Analysts:  

• Owen Humphries | Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.2.9263.2702
• Seth Hoskin | Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | +61 3 8688 9146

Rating: BUY (unchanged), Price Target: A$0.30 (unchanged), Share Price: A$0.20

Tuck-in acquisition of Blix ($1m ARR), and return to pre-COVID growth (>+10% qoq revg)

• SKF announced the acquisition of Blix, an Australia-based venue analytics business that specialises in servicing SMB-format retail venues (primarily auto dealerships). Blix has ~50 customers, including Porsche, Volkswagen, Hyundai, Toyota, Country Road, Swarovski, and Watches of Switzerland. SKF expects Blix to report a post-covid annual recurring revenue (ARR) of ~$1.1m and EBITDA to be positive in 12 months, representing an all-in acquisition cost of ~1x ARR ($0.3m upfront, $0.7m deferred [cash or scrip]). While highly accretive at face value, SKF is expecting to crosssell various parts of Blix’s CountSmart technology to its existing global customer footprint.
• As with all enterprise sales, SKF’s sales momentum slowed in 4Q20a with its key customer segments (shopping malls, airports, stadiums and QSR’s) materially impacted by covid lockdowns. However, the company is expecting to return to its previous growth trajectory (pre-COVID 16x quarters of sequential +10% qoq organic growth) and recently noted its sales pipeline has returned to pre-covid levels (Mar-20 qualified/advanced pipeline $19.3m). We expect this growth to be complemented by further strategic bolt-on acquisitions, with SKF retaining an active global M&A pipeline.
• The company released OccupancyNow, which enables customers to leverage SKF’s technology to manage covid/re-opening. It is an automated occupancy and social distancing management tool and has already secured a major North American grocery chain as its first customer (>2000 potential venues).
• SKF's outlook remains positive and it is expecting to deliver “significant double-digit [organic] growth and a positive operating EBITDA result” with “FY21 starting with significant momentum”. SKF exited 4Q20a ARR with >$10m, which is derived from customers (>900x paying customers, >10k venues, >40k devices) subscribing to SKF's IO platform, which currently incorporates information from over 25 data sources (WiFi, people counters, thermal imagery, infrared, POS, etc.) to provide information on visitor information, sales conversion, staff optimization, customer flow and weather impacts on sales.
• In our view, SKF generates software-like margins and, as such, we believe the stock should be compared to its domestic software peers. On a 3.8x EV/FY21e revenue multiple, the stock remains an outlier, as cloud technology/growth stocks multiples continue to expand globally (US SaaS peers, 11x FY21e EV/rev, +18% revg [CapitalIQ]). Aproaching and passing the critical $20m ARR milestone (FY22), coupled with potentially further accretive bolt-on acquisition in FY21, should see a continued multiple rerating in our view. BUY rating and $0.30ps target price reiterated.

--- click on link above for more ---

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (TSX: CF)  The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein.