Nice update today.

Glad I topped up IRL yesterday at ~$4.58 as the price fell back into and successfully tested the now-strongish support zone of around $4.38-$4.75, which is also C79's 52-week lows. With no news driving the price falls to 52-week lows, it seemed like a good risk to take.

Big ticks this Quarter - (1) 4 new lease agreements signed (2) 2 units deployed (3) 9% uptick in sample volumes (4) 1st US-based installation, one more WIP in Alaska - all are signs of increasing technology penetration and global reach

Highlights

• Two units deployed during the Quarter, including the first unit at the Barrick-Newmont NGM complex, marking Chrysos’ first USA-based installation. A total of 31 units now deployed. 
• Four new lease agreements signed during the Quarter comprising two new agreements with SGS in Africa and Australia, and two new agreements for deployment into African-based laboratories, bringing the total number of contracted units to 54. 
• Unaudited Revenue of $13.7m, reflecting 2% growth Quarter-on-Quarter (QoQ) and 54% growth Year-on-Year (YoY). 
• Sample volumes totalled 1.3m, reflecting 9% growth QoQ and 30% growth YoY, with latent capacity available to capture industry cycle upturn. 
• Well-funded to support continued PhotonAssayTM unit growth, with cash position of $47.5m as of 30 September 2024 and $95m in undrawn debt available. 
• Continuing revenue growth, along with ongoing market penetration across key mining hubs, sees the business on track to achieve its FY25 guidance of $60-$70m of revenue and $9-$19m EBITDA 
• 13 units ready to be shipped and installed in support of Chrysos’ FY25 deployment schedule, including two new units that passed factory acceptance testing during the Quarter. 

Price Action

Price yesterday testing again the floor around ~$4.38, on no news, which is the 52-week low - now unjustifiably so given today’s update.

Over and above the usual familiar results content that C79 puts out, picked up a few interesting points in the Annual Report and Rem Review which gave me confidence that C79 were/are very much focused on the deployment issues and the operational risks around counterparties, risks of conflicts etc.

Thesis and high-conviction very much intact!

Disc: Held IRL and in SM

FY24 felt like a year of customer, deployment and operational consolidation/reality check/learnings followed by a deliberate re-base lining of market expectations of the pace of deployment to ensure a more sustainable cadence vs the FY23 over-excitement of “straight-line”-like deployment plans. This is a good thing from a long-term investment perspective.

Despite this, C79 grew significantly in terms of revenue (69%) and EBITDA (156%) and Photon Assay technology uptake via growth in samples undertaken.

Starting to see more traction in securing sales for new units - 4 new sales, post EOFY - very good to see - this also spreads out the customer base and allows for acceleration of parallel installations

No funding issues in the horizon - strong balance sheet, cash $61.1m, undrawn debt of $95m, ensuring funding for ~39 units

14 units ready-to-be-deployed removes any supply chain risk for FY25 deployments

FY25 guidance is for (1) 25% to 45% YoY revenue growth and (2) a potential doubling of EBITDA

Review of Annual Report provides evidence that the Board is very focused on the deployment of units, CEO was not awarded STI’s relating rate of deployment units. While you would expect this focus, good to see clear evidence in the Annual Report.

Expecting a controlled, deployment-focused FY2025 which will then translate directly to revenue and EBITDA growth - this will be much more sustainable going forward - “steady high growth”

Upside could well come from (1) a faster rate of units deployed as the company learns and adapts to the site-related challenges faced in FY24 (2) Continued traction in samples as technology uptake further embeds, directly leading to Additional Assay Charges

FINANCIALS

• Met Mar 2024 Revised FY24 Forecast of $48m-$58m, with total revenue at $48.1m, 69% growth on FY23 but note that PhotonAssay Income was only $45.4m, short of guidance - this impacted the STI’s of the Executives
• EBITDA of $9.0m met revised guidance of mid-to-lower of $7m-$17m range, 156% growth on FY23
• Gross Profit Margin 76%, EBITDA margin 19.8%, up from 13.1% FY23
• Operating cash-flow positive: $3.6m
• Operating expenses grew 49% reflective of expanded global footprint, but revenue continued to grow faster than expenses
• Headcount has grown from 116 to 163, commensurate with a growing, hub-centric global perational footprint

BALANCE SHEET, FUNDING

Cash $61.1m, $95m CBA debt facility undrawn - enough funding to deploy about ~39 units 

DEPLOYMENT

• 9 units deployed and 2 units re-deployed in FY24 - met revised guidance but far was only 50% of initially planned 18 units, total 29 units deployed
• 14 units ready to be shipped and installed to support FY2025 deployment schedule
• Continued Management and Board focus on deployment:
• No STI incentive relating to the deployment rate of units was awarded
• Note below in Chairman’s Statement

NEW SALES

4 more units contracted post period - good to see some traction in new sales - ongoing focus on diversifying the customer base to accelerate installations.

Deepening relationship with one of the world’s biggest lab, SGS, following last year’s partnership with Barrick Gold

OPERATIONS, TECHNOLOGY UPTAKE

Sample volume growth continues to grow indicating increasing uptake of Photon Assay technology - 4.31m samples in FY24, 29% increase over FY23

22 consecutive quarters of record sample volumes

Unit costs have decreased by 10% YoY - impact of hubbing strategy, increased in-house maintenance, less reliance on 3rd party providers - reflected in gross margin of ~76%

Non-APAC revenue now 55% of revenue, up from 33% in FY23 - reflects increased global market penetration

EMERGING RISKS

Counterparty risk - non-performance of counterparty, concentration risk around counterparty, operating in some jurisdictions which are at a higher risk of geopolitical unrest, bribery, corruption, modern slavery and crime

Risks of Conflict - Chrysos operates in countries adjacent to or where conflicts may occur between nations or other entities, encompassing the possibility of diplomatic breakdowns, territorial disputes, ideological conflicts, and resource competition that may escalate into armed confrontations. This means Chrysos’ ability to control and operate its assets in these territories may be impacted, which may, in turn, lead to impacts on profitability and loss of assets.

FY25 GUIDANCE

Total Revenue range of $60m to $70m - between 25% to 45% growth from FY24 $48.1m

EBITDA range of $9m to $19m - between 0% to 110% growth from FY24 $9.0m - this is a wide range

My thoughts on C79's Appendix 4C and the Friday SM Meeting:

SM MEETING SUMMARY

• Reinforced thinking that long-term opportunity ahead and strong moat for C79 ahead is very much intact - disruptive technology that is defining the new sampling process standard, free run due to no competition, long TAM ahead, clear evidence of increasing adoption
• But the reality is that this journey to market and industry domination is not going to go in a linear straight line - time and effort is needed to keep pushing the technology forward, to overcome the deployment challenges etc - walk away with the sense that C79 management is acutely aware of, and is under no illusion of the effort and focus required - have to readjust expectations of this operational reality
• Need to reduce expectations of the share price and be more patient as the market also adjusts to this reality and C79 works through the operational realities - my expectation was that the deployments will march forward in a straight line which is clearly not realistic

APPENDIX 4C

Positives

• 2 new units deployed
• 2 new contracts signed - the first additions since 1QFY23 - big thesis tick!
• $13.5m revenue Q4, total revenue FY24 = $45.4m vs $26.8m FY23, 69% FY revenue growth - steady quarterly revenue increase trajectory since FYY23
• Non-APAC revenue > 50%, growing nicely in EMEA and America’s
• Continued growth in samples processed, 27% YoY - 22nd consecutive quarter of PA volumes - continued increasing uptake of the new PA technology
• 14 units ready to be shipped and installed while customer base and site selection has been broadened to overcome site-related deployment obstacles/bottlenecks - underpins FY25 deployment schedule
• $156m of cash and debt available to fund future deployments - at $4m per unit this is funding for ~40 units
• Decisively operational cash flow positive this quarter

Disappointments

• Only 2 new units deployed this quarter - as per revised management guidance, but slower than initial FY24 expectations

Takeaways

In taking a step back and looking at the last 2 FY's, there is:

• A very clear and steady step increase in quarterly revenue
• Continued positive increase in Samples Processed as Photon Assay uptake increases globally
• The number of units deployed per quarter has only been 2-4 per quarter in FY23 which has continued into FY24
• Available Funding has improved via Debt Facilities and the recent Capital Raise
• Cashflow from Operating Activities has also steadily improved

I think the mistake that management made was to set up overly unrealistic expectations of a rapid deployment of units. This may got the market overly-excited as revenue and EBITDA would similarly follow and the market got ahead of itself. Since management tempered expectations earlier this year, the market and share price has similar cooled.

Interestingly also, since 2QFY24, management has no longer provided clear guidance on how many units it intends to deploy in the upcoming quarter and FY and has now switched focus to revenue, EBITDA and industry technology uptake metrics.

But taking this step back and in digesting Dirk's comments in the Friday SM meeting, other than the earlier unrealistic expectations, I remain very comfortable that C79 is actually travelling very nicely and that my thesis is actually very much intact and is currently playing out.

The only change is in my expectations is that the deployment of new units will continue to be a steady 1-unit-at-a-time march, rather than a multi-unit rapid deployment that I thought would be the approach a year or so ago.

FY25 GUIDANCE

• FY25 revenue guided for $60-70m, between 32%-54% growth YoY
• This back-of-envelope forecast of units that are likely to be deployed in FY25, based on the revenue guidance, suggests that a cadence of 2-3 units per quarter is more realistic.
• This cadence is roughly consistent with the 14 units currently already ready for installation, taking away one big "controllable risk" of missing guidance
• FY25 revenue guidance could thus be conservative as there is upside from (1) additional units deployed (there ARE available units on hand to achieve this) and (2) further sample growth

ACTION

The C79 price is now in the middle of a decent buying zone and will look to be topping up on weakness below $5.00 in the coming weeks. Will keep some powder dry to top up further if the price falls below $4.00, although I can't quite see this happening given that the FY24 results to be released should not provide any surprises following the recent Appendix C.

Reviewing the C79 chart position:

• Bounced nicely from the 61.8% Fibonacci level of 5.07, which looks to also be a reasonable medium term support level
• 6.06 is likely to provide some resistance in the short term, followed by the 200 SMA around 6.68 currently
• A decisive crossing above 6.06, then the 200 SMA therefter, would be very nice to confirm the start of a new short term uptrend

Timing is interesting as we are not far away from a Trading Update, then the Appendix 4C. The price feels like it is "neutrally positioned" for the results given that C79 has downgraded guidance for the number of deployments in FY24, and hence revenue.

Any negativity against guidance could see a drop towards 3.96-4.27 (I would be topping up at that level). A better than expected deployment update could see it spike upwards towards ~7.29. If it goes as guided, the price will probably bounce around ~6.00, I suspect

Discl: Held IRL and in SM

SUMMARY

• Headline revenue numbers look good QoQ and YoY but are disappointing against guidance and deployment plan - only 3 units deployed thus far and total units deployed for FY24 is only 9 vs planned 18, a 50% miss
• New contract signed, bring total contracted units to 50
• Continue to be impacted and delayed by site deployment issues but what is positive is (1) the high rate of C79 Factory Acceptance Testing units - 11 are ready for deployment (2) labour costs this quarter have come off 20% QoQ, suggesting that issues are indeed on the customer end which C79 cannot throw labour at to mitigate (3) diversifying of the customer base allows for acceleration of unit deployments in CY25
• Buoyant gold price is expected to drive an increased number of samples
• FY24 guidance updated - revenue has been lowered to $45m but EBITDA of $8.5m remains within guided range - both are impressive YoY growth numbers, but are disappointing against earlier guidance
• As units are already contracted, the delays in deployment is a timing rather than permanent difference - each deployed unit adds ~$20m projected Lifetime revenue - This is perhaps a customer-end reality check as to what is practically deployable in an FY
• Price weakness is an opportunity to top up

GOOD

• Added 3 deployed units, 2 new and 1 redeployment - 1st deployment into Europe (England)
• 1 additional unit contracted, total contracted units now at 50 - MSALABS for deployment of a second unit to Barrick Gold’s Kibali mine
• Topline Revenue of $12.9m continues to grow, 28% QoQ, 92% YoY
• Continued growth of samples processed, sustaining of Additional Assay Charges (AAC) revenue - 29% YoY growth, 3% QoQ, 21st consecutive quarter of PhotonAssay volumes
• Unit costs continue to decrease from hubbing strategy and deeper engagement in maintenance by C79 team members - gross margin 70-80% achieved
• Projected LifeTime return of more than $20m per unit creating an infrastructure-like asset fleet
• Well funded to support unit growth - $70m cash, $95m CBA facility untouched
• Good manufacturing progress which C79 controls - 11 units past Factory Acceptance Testing, pending customer site readiness, 5 units manufactured during quarter
• Employee costs have decreased $1.2m, or 20% QoQ - perhaps reflecting reduced size of flexible labour as deployment obstacles are client site related vs C79 controllable?
• Cash collection back to positive this quarter vs negative in Q2, continues to operate cash-flow positive this FY

NOT GOOD

• Only 3 units deployed in Q3 means that efforts to clawback delays in deployment have not been sufficiently successful to bring the delayed schedule back on track
• Final deployments for FY24 are expected to total 9 new units and 2 redeployments, bringing Chrysos total number of operating units to 29, an increase of 45% on FY23 but vs FY2024 target of 18 units

RISKS

• Risk of deployment challenges at mine sites impacting the overall FY24 deployment plan and delaying deployments into FY25, have clearly manifested 
• The 50% miss in deployed units is disappointing - while a miss was clearly telegraphed, the extent of the miss is higher than expected
• Will impact FY25 guidance as 18 deployed units per year appears overly bullish.

GUIDANCE FY24

BETTER FINANCIAL GRANULARITY

• 12M rolling unit revenue is ~$1.8m
• 12M rolling unit cost is ~$450k 

Had a quick look through the C79 preso pack for a Site Visit in PER, released today. There are some new slides which provide more insights on the PhotonAssay technology, the ESG benefits and the typical economics lifecycle, which I found very useful.

Discl: Held IRL and in SM

How Does PhotonAssay Work

Hitting samples with high-energy X-rays, PhotonAssayTM causes excitation of atomic nuclei allowing enhanced analysis of gold, silver, copper and other elements in as little as two minutes.

Speed and ESG benefits of PhotonAssay are quite stark.

Unit Economics

This is a really good slide on the per-unit Capex spend cycle which will improve the understanding of the cashflow profile and underlying economics.

Future Opportunities

Not the immediate focus. Lots of yet-to-be-tapped pathways for future growth once the gold-related TAM shrinks over time.

My notes from the Investor call this morning and the announcements. Overall, nothing really new as most were already revealed during the release of the Appendix 4C in Jan. Its all about getting the FY24 deployment of 18 units back on track.

• 27 units deployed in total, 4 new units in 1HFY24, 3 post the period vs planned 18 for the FY - to make up for this, need 6 units deployed in Q3 (of which 3 is already deployed), and 8 in Q4
• Risk continues to be flagged that 18 units may not be fully deployed this FY, with some pushed over to early 1Q25, so nothing new - it was mentioned that overlapping deployments is no longer an issue
• Issues around contractor availability experienced in 2Q have mostly gone back to normal, continued to engage the customer in planning early to mitigate risk of delays
• 27 deployed units provides a baseline annualised MMAP of $50m per year

Expense watch items:

• Depreciation & Amortisation - jump from $3.8m 2HFY23 to $5.3m was raised on the call - no concerns, step-up is in line with increase in deployed units, depreciated on a 10 year straight line basis. D&A expense is not linked to revenue and is all related to PhotonAssay, no other assets
• Employee cost has gone up from $7.9m to $10.1m, H-on-H and 86% up on pcp - expanded deployment capability and building of in-house maintenance capability, offset by a drop in Maintenance Costs from 1HFY23 of about $0.5m, aligned to Group’s strategy of global growth
• Management is finding ways to provide better visibility of the savings arising from operational leverage from the global hubs strategy
• -ve working capital of ($2.8m) is a timing issue between receivable collections and payment for purchases of parts etc - no issues of note with both customers and suppliers

Discl: Held IRL and in SM

Built the attached xls to line up the Statutory P&L and the Management View side-by-side as I found myself getting knotted up with the movement in the numbers from Half-to-Half, Qtr to Qtr and some of the numbers in the preso. Building the sheet also forced a deeper dive into the P&L which I found very helpful.

My notes, including points raised on the brief-as-usual investor call this morning. I have had direct experience as a customer having customer-end contractual responsibility to prepare a site for a big installation of equipment by vendors - power, network, fire suppression, level concrete floors etc.. So I relate very much to the challenges that C79 are having at mine-site deployments and believe they will be sorted/pre-empted as C79 gains more experience deploying at mine sites.

Discl: Held IRL and in SM

SUMMARY

• Revenue MMAP and AAC and samples processed growth momentum continued, very strong funding position for future deployments
• Barrick Gold partnership a big endorsement for the PA technology, de-risks the technology for other miners who are “not early adopters but are fast followers”
• Manufacturing remains on track
• Emerging risk that 18 planned units may not be fully deployed in FY2024, with some units likely to be finalised in 1QFY25 - startup issues - mine site readiness, contractor availability issues encountered as C79 transitions from lab-site installations to mine-site installations, learning from these early experiences to adapt and mitigate these risks for future deployments. Not great, but deployment issues almost always pop up when changing deployment environments - see this as a temporary issue that will be ironed out in the current and upcoming deployments. 
• FY24 revenue guided to the lower end of previous forecast, EBITDA in the middle to lower of previous forecast - this appears to be a timing issue, not a step down, not great but no concerns
• A good result despite the flagging of the risk of delays - much prefer the upfront flag than a nasty surprise later
• Remain bullish - will look to top up if the price falls further 

GOOD

• Topline Revenue continues to grow, 13% QoQ, 88% of Q2 revenue is predictable and sustainable minimum revenue
• Continued growth of samples processed, sustaining of Additional Assay Charges (AAC) revenue - 12% of Q2 revenue, grew 3% QoQ
• Very strong cash position following Capital Raise and additional $65m debt facility with CBA, $180m to fund upcoming deployments
• Added 2 deployed units, 1 deployed post quarter, 2 installations currently in process
• Manufacturing remains on track

WATCH ITEMS

• Cash collections fell QoQ, marginal negative working capital for the quarter - seasonal, timing difference in collections from the holiday season, no concerns, continues to operate cashflow positive year to date and expect this to remain for the rest of the FY
• Employee costs continue to grow - 47% growth to $5.9m from $4.0m in 1QFY24 - grew in line with global expansion strategy and increased operational structure required to deliver additional PA units

NEW RISK

• Encountering deployment challenges at mine site deployments as C79 transitions from lab-based installations to mine site installations, a new deployment scenario - may delay some deployments into Q1 FY25 
• Mine sites have not been as ready as the lab sites for deployment to commence, causing delays - building to house the units, properly concreted, availability of suitable power, contractor availability challenges
• Learning from these early deployments and partnering earlier with clients to ensure site readiness does not hold up deployments
• Also impacted by the African rainy season
• Benefits of working directly with miners far outweigh the delays

GUIDANCE FY24

Lower-end of forecast range of $48m to $58m - adopting a conservative approach and flagging the emerging risk that 18 units may not be deployed in FY24, some of these deployments may only be finalised in 1QFY25, expect to increase deployment at the tail end of the FY

Confident with retaining FY24 EBITDA forecast of $7m to $17m, middle to lower of that range - expecting operational efficiencies from operational hubs, costs are saved when deployments are delayed

OTHER POINTS

• MSA Lab units are likely to be deployed into Barrick mine sites
• Mine site deployments give C79 direct access to the mines, opportunity to expand use of technology within the mine
• Continue to work with Barrick on global deployment
• Deployments are typically 8 weeks, a maximum of 12 weeks to become fully operational
• Mud map of potential adjacent use of PA technology - not much focus on this now as the focus is very much on deploying the machines, but as more units are deployed at mines, C79 interacts more with mine site personnel, this could be a nearer term growth opportunity to look out for

SECURES ADDITIONAL $65m DEBT FACILITY

• $65m loan with Commonwealth Bank, adding to its $30m facility with the bank
• Paid down outstanding $8m on the original $30m facility
• Together with new loan, has (1) total debt available of $95m (2) $75m from recent capital raise and (3) strong cash balance from operating cash flows.

Can't help but feel that some big announcements are in the pipeline following the recent partnership announcement with Barrick Gold as this amount of secured funding allows from some big things to happen ...

Discl: Held IRL and in SM

Following the post from @Bear77 on the soaring gold price, the ABS released this quarters Australian Mineral Exploration spend today.

Gold exploration spend is on a roll which can only be good news for C79 as additional sampling over and above the minimum contracted photon-assay unit monthly cost is all upside revenue and profitability.

ABS Mineral Exploration Spend

Discl: Held IRL and in SM

Australian Super has been busy accumulating 1.47% of C79 between Aug 2023 and mid-Nov 2023 at very attractive prices ranging from $4.91 to $6.29.

Ah ... if only I had bought more back then ...

Discl: Held IRL and in SM

Having gone through a flurry of capital raises over the years, I finally looked up ASX Listing Rule 7.1 which governs capital raises and learnt something new. This is probably nothing new for the more experienced members, but posting in case it helps anyone - it certainly opened my eyes!

Am forced to enter a company name for this post as there is no "general" category ...

To raise more than 15%, rule 7.1A kicks in and is significantly more onerous:

Full document: https://www.asx.com.au/documents/rules/gn21_chapter_7_restrictions.pdf

Takeaways for me:

• If a company has not requested for a 7.1A Mandate at an AGM, then the max dilution for any capital placement/raise during a FY is 15%
• For every AGM notice, at least read the special resolutions and look for a 7.1A mandate - this is especially relevant for the WSP AGM Notice - I missed the 7.1A Mandate resolution as I ignored the notice - not a smart thing to do!

Like many retail investors, I am admittedly wired up to "dislike capital raises", almost by default. However, having experienced 4 capital placements in the last 2-ish months, I can sense my thinking and emotions gradually changing to not instinctively dislike, but to assess each raise on its own merits.

Being the cricket tragic that I am, to use cricketing analogies:

• ALC and WSP was not great - "fairly severe batting collapse after a good solid start by the openers, required run rate is accelerating to worrying levels"
• AD8 and now C79 - both feel like "a good understanding and use of the conditions, opening partnership is flourishing and platform is being set for a huge innings and subsequent win .."

The C79 Placement

• 11.4m shares at an offer price of $6.60, a 7.7% discount to the last closing price of $7.15 on Fri 3 Nov 2023 - I was expecting a $6.50 raise, at the time of writing, C79 is trading ~$6.70-ish, so pricing seems good
• New shares represent 11% of existing shares on issue and was not underwritten
• Placement raises C79’s funds available to $108m - $75m Placement + $33m Cash, excludes untapped debt facilities

Use of Funds

• Support the deployment of new PhotonAssayTM units - ~90%
• Development of (1) PhotonAssay Gen II (2) Application Development (3) Supply Chain resilience - ~10%
• Includes, subject to the provision of new debt, the potential expansion of manufacturing capacity beyond 18 units per year over the medium-term - this would result in a positive step up of earnings growth
• Strengthen the Company’s balance sheet, which in turn is expected to assist with its discussions with lenders, ensuring that it is best placed to optimise its capital structure moving forward. 
• The Company is already in a position of generating positive operating cash flows from its existing 22 deployed units and therefore funds raised from the Placement can be applied primarily towards growth. 

My Thoughts

• Clearly defined and focused use of funds for Deployment Growth and Development of Improvements - a good place to be as the units deployed moves closer to positive operating cash flow
• The recent Barrick & MSALABS partnership provided strong technology validation and appears to be a pivotal moment which will now drive momentum acceleration of deployment, manufacturing and further Gen II improvements - funding is now in place to drive that momentum via the placement, which will inevitably be followed up by increased debt facilities on more favourable terms
• No additional sales have been formally announced, but appears inevitable
• The placement reflects management’s long-term 360 degree thinking and business confidence

Things are coming together very nicely for C79 - sales conversion, deployment momentum, product improvements, improving of manufacturing capacity, supply chain resilience.

Discl: Held IRL

Very positive ASX announcement this morning. The market was and still is clearly excited (as am I!):

What is Significant

• Barrick Gold is the 2nd largest global gold producer
• The partnership is a big tick to (1) the PhotonAssay technology itself (2) increasing momentum in the transition from FireAssay to PhotonAssay among the major gold miners (3) the embedding of the PhotonAssay technology within Barrick’s significant global operations
• The partnership will be a really good mine-site platform with operational scale for further R&D to expand the scope and effectiveness of the PhotonAssay units - “Development has continued with copper assaying and innovations in sample logistics and robotics, extending the capability, safety and productivity of the entire system.”

What Is Unclear

• Whether the “10 more units” ... is (1) over and above the 49 units already deployed or contractually committed - this would be a very decent dent in the TAM OR (2) is already part of the 49 and the partnership deepens/embeds the already-existing relationship into something more tangible but does not result in new unit contractual commitments.
• There is mention of due diligence, so it could mean that this announcement is step 1 of 2 steps, with a potential future step 2 announcement to announce the actual contractual commitment once due diligence is completed and the actual sales deal is done

Have written to C79 Investor Relations seeking clarification on this topic - I suspect the wording was left somewhat vague given that the deal (if there is to be a deal), is very much in the mix, but not committed yet. This may explain why this was not price sensitive news today.

Discl: High Conviction Holding IRL

Attended the C79 call on their 1QFY24 Appendix 4C. It was the usual short call as C79 has a standard set of clear slides with changed numbers each quarter ... a good thing!

Built a simple xls to summarise the key metrics from the 4C that I need to watch, based on the various discussions here. Rather than take a YoY comparison, which for C79, is really no longer impressive or relvant, really, as it is marching forward in a clearly defined trajectory, have taken (1) a forward looking view against the mid-point of FY24 guidance, where the guidance was provided (2) QoQ trend for those metrics which provide a "rule-thy-world with PhotonAssay" perspective eg. Samples processed and (3) QoQ trend of key watch areas - funding and employment cost.

It does give a more balanced perspective of the risks as @RhinoInvestor rightfully pointed out, vs merely focusing on the wonderful by-definition revenue % increases, which masks future issues. The call with Dirk also provided valuable background context which makes these figures that much more meaningful.

Discl: High conviction holding IRL

GOOD

• Solid result, key operational and financial metrics on track
• 2 units deployed, 4 units are currently being installed (3 in Canada, 1 in Ghana) - on track
• Successfully re-deployed one unit - a technical first, proving that the units can be moved, learnings etc
• Sample volumes continued to increase QoQ from 978k Q4FY23 to 1.0m this quarter - revenue upside but also an indicator of the uptake of Photon Assay technology
• 15% increase in gold exploration in 4QFY23 over 3QFY23 - augurs well for growth of samples, and hence AAC upside revenue in the coming quarters as this is what drives the range variability in the FY revenue guidance
• Revenue increase is as expected - $8.8m revenue is ~16.6% of the mid-point of the FY24 Revenue Guidance of $48.0m to $58.0m
• Well funded - $54.5m available funding, $33.0 of which is cash at bank - noted comment that “broader debt discussions progressing” which was also mentioned in the Investor call
• In response to a question around the sales approach between Labs and Mines, Dirk reiterated that C79’s focus at the moment is to convert the mining industry to Photon Assay technology, so the Lab vs Minesite equation is less important as the TAM of Labs and Mines is already very concentrated

NOT SO GOOD

Nothing to not like

TO WATCH

• Employee cost has gone up $0.6m QoQ to $4.0m, which is 29.9% of total FY23 employee cost - watch the QoQ increase in this cost
• Available funding has dropped $19.8m from Q4 - the drawdown feels a bit higher given (1) back-end nature of capex payments (2) 3 units deployed this Qtr (3) 4 are in deployment - need to watch this vs funding-related announcements

My notes from the very good conversation with Dirk Treasure, Founder and CEO of C79. I walked away with a much deeper understanding of the business, financially and operationally, which has made me further appreciate the quality of the business in terms of TAM/customers, moat and economics.

One new risk that crystallised for me is geo-political risk. Some of the units are being deployed in nasty reas of the world - if trouble brews, the carefully laid out deployment schedules and associated revenue impacts will be impacted.

Discl: My conviction on C79 has increased further and I topped up IRL a bit after the meeting as the price dipped closer to $6 today. In topping up, I was taking a leaf from Ian Cassel's wisdom where he said that he has fared better when he averages UP on his high conviction companies then averaging down. Have held C79 since Dec 2022, price has done very well since, so averaging up is not as painful now vs starting a new position altogether.

HISTORY

• Bought IP and the background know-how of that technology - C79 packaged and commercialised the technology
• Analysis is a non-discretionary spend for the mining industry
• Incumbent technology is Fire-Assay, 2,500 years old
• Photon Assay (PA) is a faster, greener, safer, more accurate, more precise X’Ray-based technique, larger sample, non-destructive

OVERVIEW OF PHOTON-ASSAY UNIT

• System has 7m x 6m footprint, weighing 80-90 tonnes - fixed infrastructure at site
• System can do 40,000 samples per month, size of a reasonable-sized mine, 15-20% Additional Assay Charges extra per month upside
• Lease-take-or-pay model, pay on a per-sample basis, pay roughly aligned to what they are paying for FA today but with all the benefits of PA over FA
• Deals have a fixed lease cost with a minimum contracted sample volume, then additional per-sample charge once contracted volume is exceeded 
• Lab deals have tiered rates, higher volume, higher discounts to incentivise the customers to run more samples - intent is to incentivise labs to move from FireAssay across into Photon Assay to improve Lab profits as volume increases. Lower price per sample for C79 but higher overall revenue for the unit is higher
• Running costs are generally fixed - higher the sample volume, higher the revenue, higher the profitability of the unit
• $3.7-$3.8m capex to build 1 unit
• Once deployed, Annual ROIC is 50-80%, with payback period of between 1-2 years
• 20 year lifespan - refurbishment is expected after 10 years, and is depreciated over 10 years - aligns to very long life of a mine site

TOTAL ADDRESSABLE MARKET

• 610 TAM is the ACTUAL addressable market, made up of 2 parts
• Labs that run a Fire Assay business with volumes at least that of 1 PA unit - 200 customers, hub-and-spoke approach
• Mining companies which can benefit from equal or better economics from use of PA technology, onsite - 410 mines
• The more Labs and Miners use the Photon-Assay technology, the less technology risk there is for new customers - feeds into sales cycle
• 1st unit took 3- 5 years to sell
• Volume has since leapfrogged as PA is used by 3 of the 4 big labs and the top 2 gold miners - global adoption of the technology
• XRF - not a competitor - their machines can analyse base metals and have been around for a long time, but they cannot analyse gold quantitatively

PATENTS, TECHNOLOGY/IP MOAT

• Main patents run to 2036 but incremental improvements have also been patented, meaning that there will be a raft of patents that will run quite a bit past 2036
• Keep a very close watch on competition - see nothing on the horizon
• Alternative technology options during the patent protection period will likely be inferior, plus, it will take at least 6-7 years to get the technology to the point of inflection point of global mass adoption of PA - this is the time it has taken C79 to get approvals, certification, ISO accreditation etc
• C79 sees itself within mining and within the assay-space, being an analysis company that has novel, new ways of undertaking analysis
• Need to be in a dominant market position that when new technology emerges, the competition is competing with C79’s PA technology, not archaic Fire-Assay
• Horizon 2 opportunities to leverage very deep counterparty relationships and deep company knowledge in the nuclear physics space

SCALABILITY

• Company has doubled in size every year in terms of revenue, headcount, units deployed
• C79 thinks of growth in terms of 3 growth pillars:
• Manufacturing capability/capacity, capex
• Demand/Pricing - control demand through pricing
• Operational Capability - focus of last 18M 
• Market is very concentrated to the 4 Lab companies and top 2 miners - each customer thus has the potential to be a repeat customer - want to give customers the best experience, need ecosystem in each operating region to support this - people on the ground, sales capacity, marketing etc - build the foundation for future growth 
• “Clustering Strategy” - position the units as close to each (200-300km) other to optimise the support team for that location to support other deployed units in the area
• Headcount trajectory - based on 3 scenario’s:
• Open New Region - most complex, need headcount to establish
• Open New Country - need country-specific administration support for payroll, tax etc.
• Incremental growth, each additional unit in established country - 1-2 direct FTE per unit, maintenance engineers
• Trends move from headcount growth related to the number of units to incremental growth for everything else, apart from the growth per unit
• Do not expect to double headcount this FY, but expect fair amount of increase in headcount still because of increase in manufacturing capacity

FINANCING

• Current ~$70m will see C79 through to FY25
• Tier-1 Australian bank has appetite to lend a fair amount of money after looking at Tier 1 counter-parties, contract risk etc - have access to that debt channel on an ongoing basis
• C79 is a cashflow positive business excluding growth capex - all the cash generated is going to growth capex

R&D IMPROVEMENTS

• Do not need to grow the TAM at the moment as it will take ~30 years to work through the TAM at 18 units per year - within the TAM how do you upsell, cross-sell, increase profitability
• Focus is on iterative improvements to ensure that the PA technology remains the absolute best in what C79 does ie. analysing gold
• Then looking at adjacent's, analysing other elements in and around the analysis of gold - currently can analyse copper, silver and moisture (for quick turnaround of process control samples), looking at other elements that co-present geologically that could benefit the customer

UTILISATION OF TECHNOLOGY

• Prospectus forecasted FY23 utilisation at 55%, final FY23 utilisation was 56%, in line with expectations 
• Ramp up period when rolling out new units in new regions - low utilisation, creeping up to higher utilisation 
• Do not expect miners to reach 100% utilisation on mine-site units - these are treated as critical mine site infrastructure - miners have much better visibility of future volumes from longer-term planning of say drilling campaigns - focus is thus on revenue/return on unit instead of utilisation. Miners generally have a lower committed sample but higher price per sample. More consistent revenue model where utilisation is not as important
• With labs - expect much higher utilisation but lower price per sample, utilisation is also overlayed by macro factors - increase exploration spending drives more samples through labs etc
• Returns end up being roughly on par between the 2 customer groups
• There is thus a fixed downside from take-or-pay, but have exposure to increased exploration spend through the increase of samples through labs

MACRO INFLUENCES

• Mining exploration has trended upwards, influenced by the price of gold, exploration volume has increased
• Exploration spend in Australia is trending upwards again after contracting about 30% in the last 18 or so months - despite this, PA sample volumes have grown via increased PA adoption above and beyond the amount that industry spend has contracted

DEPLOYMENT CYCLE

• 18M out - order long-lead-time equipment
• 12M out - order machine
• Factory Acceptance Testing, then 1M shipping, 8 weeks installation
• A lot of capex payments are back-ended - only pay significant chunk of the capex cost when the units commence earning revenue

RISKS

• Biggest risk and focus area - building the right team of people around the world to support customers where there is no competition. 
• Want to grow as fast as possible, but in a sustainable manner around the world, in some challenging regions

KEY TAKEAWAY THAT MARKET STRUGGLES WITH

• Market struggles to wrap its head around the longevity of the units deployed, the creation of a 20-year long-term annuity revenue stream for each of the deployed units - ~$2m profit per unit deployed per annum over 20 years step increase
• Essentially becoming an infrastructure asset post deployment, but earning very good returns on those assets

Did a bit more work this evening and updated the C79 cashflow outlook for FY24

Made the following changes to the cash flow xls of 3 weeks ago:

• @RhinoInvestor is correct around the capex per unit. It is looking to be ~$4.16m. Used the Appendix 4C full year capex for PPE, divided by the 11 units deployed during FY23.
• Went through each of the 4 Appendix 4Cs to work out how many units were deployed in FY23 - 10 units in FY23 itself, 1 was due in 1QFY24, have simplistically assumed that they will have spent capex on 11 units, not just the 10, in FY23.
• Added a line for the baseline MMAP cash inflow for the 20 units deployed in FY23 - this is $31.2m
• For FY24 cash outflows, took the full year FY23 Cash Outflow from Operating Activities in the Appendix 4C, bumped up by 10% - C79 expects operational leverage as more units are deployed, not sure how good this estimate is
• Took the exact Cash Balances from the 4C - Bank Balance + Term Deposits
• C79 has available unused CBA Bank Facility of $21.5m as at end FY23.

The cash position at end-FY24 is now looking to be a SHORTFALL of ($1.3m) vs the earlier calculated cash surplus of $29.8m.

There will be ~$20.2m of debt still available at the end of FY24. This can fund ~4.9 FY25 deployment units, which given the FY24 plan, is ~1 Quarter's worth of FY25 deployment.

Funding is thus in place for ~42.9 (20 FY23 + 18 FY24 + 4.9 FY25) of the 49 contracted units.

The CBA facility size thus seems to make good sense, noting that it is contracted when the interest rate cycle has been on the up. A new loan facility sometime mid-FY24 is probably on the cards when the interest rate cycle should hopefully be on its way down. This should cover FY25 + new contracts beyond the current 49.

I do not see any capital raise occurring due purely to operational funding gaps. Indeed, given the high visibility of revenue, costs and funding needs, it will probably be a huge management red flag if they do not get the funding right ...

An opportunistic capital raise, similar to AD8, could be something to look out for in 3Q/4Q FY24, if the share price spikes to say $10-12 from the current ~$6 as a cheaper/more effective way of raising capital vs debt. This could be based on a better-than-expected revenue trajectory and/or a surge in newly contracted sales or expanded breadth of use of the Assay units.

Am happy that I now have a simplistic cash flow model against which to track the cash position during FY24!

Hope this makes sense.

Remaining very bullish on C79 and looking for the opportunity to top up.

@RhinoInvestor , your post got me thinking a bit more deeply about the cashflow for C79 and challenged my bullishness! I knocked up a back-of-envelope cash flow xls to clarify my thought process, hoping it helps answer some of your questions/thoughts.

• The Capex for each unit was derived from the 12M Capex in the Appendix 4C - for 18 units, the calculated Capex is about $39.2m, which sort of lines up with the FY23 Growth Capital Expenditure below which was for 20 units, so I think this $2.17m capex per unit feels "about right"

• I assumed how many units will be deployed by month to make up the 18 planned units in FY24. The deployment is back-ended to make it more cashflow conservative, capex is spent in the month of deployment, and MMAP flows the month after @ $130k per deployed unit - the cash inflow increases each month depending on the number of new units deployed
• Cash Inflow from Ops - I took 3QFY23's Net cash inflow of ~$1m per Q - this is a proxy for cash flow in from the already-deployed 20 units less operating expenses - noting 4QFY23 was net outflow of ($0.6m), but allows for increases in Additional Assay Charges etc.

This super raw calcs point to the min cash surplus end-FY2024 to be shy of $30m, meaning, there should be no need for further drawdown of the CBA facility in FY2024.

Extrapolating into FY25, the Cash surplus of $29.8m should fund roughly 13.67 units in FY2025 without the need for debt. As of now, C79 has 11 units contracted to be deployed in FY2025 (49 contracted less 20 deployed less 18 FY24). Assuming no further sales (highly improbable), C79's cash balance will fund the remaining 11 units for FY25 without resorting to debt.

The $21.5m undrawn facility will, on its own, fund slightly under 10 units. If these 10 units were contracted for delivery in FY2025, total units that need to be deployed in FY25 will be 21 - more or less the same as FY23 and FY24, very much in the ball park.

So, as of now, it appears that it is not unreasonable to conclude that C79 is well funded up to end FY2025 to deploy 21 units through a mixture of debt and cash. With locked in contracts, clear visibility of revenue and cash inflows that stretch into FY25, with funding available for 10 new contracts, I think this is as certain as it will get that C79 will have no reason to capital raise.

I think the key point is the progressive increase in MMAP which flows through as soon as a unit is deployed, so each deployment results in a contracted step up of revenue and cash flow. This is what makes C79 highly attractive in my view.

Completely happy to be corrected on the thought process and assumptions. It helped clear my head a bit anyway!

Discl: Held IRL, looking to top up on weakness

A good set of results from C79. My conviction has increased with each quarter and will be looking to top up on weakness.

Discl: Held IRL (trade did not close on SM)

GOOD

Financials

• FY23 Revenue and EBITDA Prospectus forecasts achieved
• Revenue of $26.8m (vs $26.6m Prospectus forecast); +89% growth on FY22 ($14.2m)
• Total revenue was comprised of Minimum Monthly Assay Payments (MMAP) of $21.3m (FY22: $10.6m) and Additional Assay Charges (AAC) of $4.3m (FY22: $2.9m), with the balance made up from other revenue including the supply of consumable sample jars. 
• EBITDA of $3.5m (vs $3.2m Prospectus forecast); +70% growth on FY22 ($2.1m)
• Reflecting Chrysos’ expanding deployment capacity and global footprint. 

Cash Position

• Well positioned for ongoing global growth with $53.4m cash in bank and access to $21.5m of undrawn capital from Chrysos’ debt facility with the Commonwealth Bank of Australia (CBA)
• Operating cashflow positive during the year with $4.7m in Net Operating Cash Flow, enabling reinvestment in growth, and the ongoing global deployment of PhotonAssayTM units.

Operations

• 21 PhotonAssayTM units currently deployed, following the installation of one unit in Ghana in Q1 FY24
• 11 new contracts signed in FY23, deepening customer relationships while retaining deployment timing flexibility - total 49 contracts
• Average PhotonAssayTM unit Utilisation was 56%; above Prospectus forecast of 55%
• PhotonAssayTM unit deployments contracted out to 2025
• Chrysos continues to cluster its operations in key regions, with co-located units leading to improved cost efficiencies.

FY24 Guidance

• Total Revenue range of $48m to $58m - wide range is due to variable Additional Assay Charges
• EBITDA range of $7m to $17m - Clustering strategy expected to decrease average unit costs over time
• At least 18 PhotonAssayTM units forecast to be deployed in FY24 - Supported by enhanced deployment and manufacturing capability

NOT SO GOOD

Nothing to not like - it was a solid result and guidance, with a good degree of certainty of being achievable

WHAT TO LOOK OUT FOR

• Position with debt drawdown from the current $8.5m already drawn down to date - cashflow positive in FY23 of $4.7m, additional deployments will add to cashflow, reducing the need to draw down further debt
• PhotonAssay units is driving further site-based improvement opportunities which increase sample volumes - extent of these improvements on sample volumes/revenue and average unit utilisation in FY24
• Proportion of Mine-Site wins vs Lab wins in new contracts

SUMMARY

Solid result with good forward visibility

It is all about deployment excellence in deploying the new PhotonAssay units - everything else follows from that - good momentum and track record thus far inspires confidence

C79 came out of a 2 day Trading Halt followed by a 1 day Voluntary Suspension in response to the ASX Speeding Ticket as the price rocketed from from a close of $4.95 on Wednesday, 9 August 2023 to a high of $6.10 on Tuesday, 15 August 2023 following daily increases starting on Thursday, 10 August 2023.

Was super pleased with this price rocket as I topped up at $4.95 on Wed 9 Aug ...

No new news or announcements in C79’s response to the ASX speeding ticket. Not unsurprising as C79 is well capitalised, so there was little risk of a capital raise or share placement.

2 points that I took away from the announcement, that I did not fully appreciate before, in italics:

• Historically, the Company’s units have mainly been deployed to laboratory customers. Recently, the Company’s focus has shifted towards deployment at mining sites and the Company is discussing proposals to this effect. The significance of direct deployment to mining sites is that it demonstrates gold miners’ increasing confidence in the Company’s PhotonAssayTM technology over traditional assay methods (such as fire assay). Increased engagement with direct to mine site customers has the ability to significantly accelerate the rate of adoption of PhotonAssayTM.

Any minesite deployment/re-deployment or sales win will be more positive news vs a laboratory-win.

• AustralianSuper confirming that it had acquired a substantial holding in the Company (see “Becoming a substantial holder” released to ASX on 7 August 2023)

Further buying in to C79 of larger funds, which will increase coverage of C79

SUMMARY

Remaining very bullish on C79.

My review and summary of C79's Q4FY23 result announcement of last week. Text in italics are my comments, the rest are extracts from the Appendix 4C announcement and preso.

Discl: Held IRL looking to top up this week and open position with SM

KEY TAKEAWAYS

• Good robust revenue, TCV and samples processed QoQ and YoY
• FY23 Prospectus targets met
• Momentum in deployment of new units continued per plan in Q4, plan for deployment of 18 contracted units in FY24 is very much achievable due to (1) globally distributed deployment teams running in parallel (2) manufacturing and supplier capabilities are geared up for an 18 unit annual delivery target. Contracted unit pipeline extends into 2025
• Costs are largely driven by future growth and new deployments, costs are only marginally related to the volume of samples processed by PhotonAssay units - costs appear controlled and within expectations 
• MMAP revenue rises in a stepped manner with each unit deployed, with revenue upside from Additional Assay Charges when sample volume rises - baseline MMAP revenue for FY24 is $31m from 20 units deployed thus far, good visibility of revenue improvement with opportunity for upside from AAC - EBITDA forecast range is primarily driven by revenue
• Net operating cashflow positive - strong cash balance, $53.4m in bank with further $21.5m bank facility to support deployment plans
• Little to not like with how C79 has progressed in FY23 and where it is going in FY24 ...

Summary of Announcement and Presentation

• Strong momentum continued, with Unaudited Total Revenue1 of $8.6m in Q4 FY23, reflecting 27% growth Quarter-on-Quarter (QoQ) and 83% growth Year-on-Year (YoY)
• FY23 Unaudited Total Revenue in excess of Prospectus Forecast at $26.8m
• FY23 EBITDA is expected to surpass the FY23 Prospectus Forecast of $3.2m and will be announced with the Annual Results
• Total of 49 contracted PhotonAssayTM units including 20 currently deployed, with the next unit, located in Ghana, expected to be operational in Q1 FY24
• Q4 FY23 sample volumes rose to 978k representing a 20% increase QoQ and a 50% increase YoY
• Positioned for ongoing global growth with $53.4m cash in the bank as at 30 June 2023, and access to $21.5m as committed debt funding by the Commonwealth Bank of Australia (CBA)

Deployment Progress

CashFlow Summary

• During Q4 FY23, the Company recorded cash receipts from customers of $6.6m, compared to $5.6m in Q3 FY23. 
• Q4 FY23 net operating cash outflows totaled $0.6m, while full year net operating cashflow remained positive at $4.2m.
• During the Quarter, some revenue included the conversion of previous receipted client deposits being applied against invoices. 
• The Company also finalised inventory movements, which were outlined in the previous Quarter’s 4C.
• Staff, corporate and administration costs remain in line with Prospectus expectations, reflecting Chrysos’ increasing headcount to support growth. 
• Chrysos Corporation ended Q4 FY23 with $53.4m cash in the bank. 

FY24 Guidance 

• Additional Assay Charges, which are incremental to contractually-committed Minimum Monthly Assay Charges, contribute significantly to the wide scope of this guidance
• Costs are largely driven by future growth and new deployments, costs are only marginally related to the volume of samples processed by PhotonAssay units - EBITDA forecast range is primarily driven by revenue
• As Chrysos continues to cluster units and leverage its global deployment, support and maintenance teams, the Company’s average unit-by-unit costs are expected to decrease. 
• Globally distributed deployment teams has given the business confidence in its ability to deploy units in multiple regions simultaneously, confident it can install at least 18 units during FY24 to bring total number of units deployed to a minimum forecast of 38 units

My notes on Chrysos Corporation C79. Nice to see the connection between XRF and C79 in the XRF investor packs and in the XRF chat this week. The price has tipped past $4.00 from a low of around $3.00, not too many weeks ago. C79 was also included in the All Ordinaries index on 20 Mar 2023 - the upward movement in price and trade volume in and around this date was quite noticeable.

Disclosure: Held IRL

BUSINESS

1. Global Provider of novel assay services through proprietary PhotonAssy techology
2. PhotonAssay is best in class gold assaying with significant measurable benefits over traditional fire assay methods
3. Vision: To become the world’s leading provider of innovation assay services and technologies

INVESTMENT THESIS

1. Strong Technology Moat

Assay expenditure is a non-discretionary operating cost for gold miners - embedded in the mining value chain as sampling is required at each step of the chain

• Significantly speeds up sampling of gold samples vs traditional Fire Assay methods - from 3-4 hours to 2-3 minutes
• Lower costs to operate
• ESG - no hazardous waste, lower CO2 emissions
• OHS benefits - this will become important over time:
• 
  

• No known competitor other than traditional Fire Assay methods of sampling
• First mover advantage and IP protection rights

2. Large & Unpenetrated TAM - Good and Visible Growth Runway

• Contracted 49 of TAM 610 units - 8% penetration
• Combo of Off-Site Laboratories and On-Site Laboratories
• Long term runway to growth as manufacturing capacity is 18 units per year in FY23 - at this rate, require 31 years to capture all of TAM

3. Good Revenue and Earning Visibility

• Unit commitments extend out to 2025
• Fixed base cost + Per Sample revenue model - revenue quality is visible and secure as base cost locks in base revenue
• Revenue upside via increased unit utilisation - some exposure to the gold mining cycle
• PhotonAssay unit deployment is starting to grow exponentially

4. Cash Flow Positive, Well Funded

• Net Operating Cashflow positive
• $81.1m cash in bank to fund growth

5. Future Growth Opportunities

• Additional deployment opportunities on deployed units
• Multi-commodity assaying

RISKS TO THESIS

• Development of rival sampling technology that offers similar time, cost and ESG benefits, either in gold or other base metals - this would diminish the strength of the moat
• Slowdown or issues with production of Photon Assay units
• Systemic operational issues on deployed PhotonAssay units

WATCH AREAS

• Need to watch impact of Gold cycle on variable revenue
• Earnings “certainty” and “finite” TAM means that revenue can be largely predicted - need to watch for step increases in sales of more PA units and whether to Off-Site Labs (less favourable) or On-Site Labs (preferable) to watch impact on share price