I caught the first half of Envirosuite's presentation, but had to duck away before the Q&A.

General vibe is that it felt very scripted, and Jason can come across quite salesy.

The numbers themselves were decent, not spectacular. EVS is a business that does seem to be grinding forward, just not at the clip I initially thought might have been achievable. Still, they are tantalisingly close to break even, a milestone that seems to always be just 6 months away...

Good to see gross margins improve, and the focus on better quality revenue seems to be paying off a bit, without sacrificing too much top line growth. (Although more site and revenue growth would be nice)

They are dropping the 'adjusted EBITDA' metric, which excludes share based comp, one-off restructure etc and will be reporting straight EBITDA going forward. This was negative $200k in the half.

The more telling operating cash flow was minus $1.8 million, though there's a sizeable working capital adjustment due to receivables from invoices issued at the end of the half, and an inventory build-up to support expected sales. Normalised for that op CF sits much closer to EBITDA at -$300k.

But if you add back capitalised development costs, which I think is appropriate, and am glad they call this out, cash flows were -$4.5m. And I think the market will be much more concerned with seeing this metric go positive, as opposed to just EBITDA.

ARR growth was (as already reported) pretty ordinary due to a 'strategic rationalisation' of low margin contracts, but the new ARR run rate is at about $9m for the last 12 months. If they add that again this year with minimal churn we would see a good return to growth. Moreover, given the gross margin, it'd essentially put them on a CF+'ve footing. Or at least get pretty close.

According top Jason today: ."we are confident on our ability to achieve a positive Adjusted EBITDA result less Capitalised Development costs on a run rate basis during FY24.”

So we'll see.

The company is reasonably well capitalised, with $5m cash and bunch of undrawn lending capacity. I think a further raise in unlikely, and management know it wouldn't be well-received at present. (But I wouldn't be surprised if they wanted to shore up the balance sheet at some stage if sentiment and share price improves.)

So the big IF here for me is whether they can indeed build up some more revenue momentum and support operations without much change in the fixed cost base. The second half is traditionally their strongest, so will be interesting to see how they go.

You can read up on some of the operational updates in their presentation

Held.

Inside Ownership       Ordinary Shares    Net Value at $0.09

Jason Cooper              1,150,000                    $103,500

David Johnstone         7,033,016                    $632,971

Sue Klose                     1,000,000                    $90,000

Stuart Bland                650,194                       $58,517

Colby Manwaring        272,846                       $24,556

Total                            10,106,056                  $909,545

*Note Inside Ownership of % of total share below 1% of total shares on issue so not included in table above.

Summary Management Bio from EVS webpage.

Jason Cooper – Managing Director & CEO

Mr. Cooper joined Envirosuite in July 2020 as chief operating officer, was appointed as Chief Executive Officer in March 2021 and appointed Managing Director March 2022. Since joining Envirosuite, Mr Cooper has been instrumental in driving the strategy for the Company during the backdrop of the COVID-19 pandemic. In this time, he finalised the integration of the major acquisition, commercialised EVS water nationally and internationally while driving growth across all product lines and regions.Jason is a highly regarded and well-respected industry leader with more than 20 years’ experience in the technology sector. He has had broad experience working in senior executive roles in both multi-national and start-up environments. During his career he has held senior roles across sales, operations and general management in the Silicon Valley, London, and Melbourne. Jason holds an executive MBA in Entrepreneurship and Innovation from HEC, France.

https://www.asx.com.au/asxpdf/20220223/pdf/4568f802457f05.pdf

https://www.asx.com.au/asxpdf/20210226/pdf/44t454mg5smsvq.pdf

David Johnstone – Non Executive Chairman

David is an experienced executive and chairman who has been actively involved in business for more than 35 years, successfully starting, owning and operating a vast range of businesses. David joined the Board as a non-executive Director in February 2014 and was appointed Chairman in September 2016.David also Chairs Cooper Investors, a specialist equity investor group with in excess of $12bn in funds under management, and Sports Club HQ a technology company that specialises in managing the Registration and Competition Management data requirements for Sporting clubs and associations. David is also a non-executive director of Southern Cross Partners and is an Advisory Board Member to NexPay. David has also served as both a director, non-executive director, Chair and advisor to both public and private companies in the technology, communications, finance, wealth management, insurance, risk management and sporting sectors.

Sue Klose – Non-executive Director

Sue Klose is an experienced non-executive director and executive, with a diverse background in digital business growth and operations, corporate development, strategy and marketing. Sue was previously the Head of Digital and Chief Marketing Officer (CMO) of GraysOnline and Director of Digital Corporate Development for News Ltd. 

She is currently a non-executive director of Nearmap (ASX: NEA), Pureprofile (ASX: PPL), Halo Food Co. (ASX: HLF) as well as a number of unlisted groups.

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. 

Stuart Bland – Non-executive Director

Stuart has over 30 years’ broad commercial experience primarily in global SaaS businesses undergoing high rates of growth. His industry experience includes technology (fintech, knowledge management), defence, sport, telecommunications, biotechnology and wine. 

Stuart’s executive experience includes 14 years as Chief Financial Officer at Iress Ltd (ASX:IRE) and Chief Financial Offer roles at Melbourne IT Ltd and Panviva Pty Ltd. Stuart is currently a member of the Advisory Board to Cablex Pty Ltd, as well as consulting to a number of other Boards.

Colby Manwaring – Non-executive Director

Colby is an experienced board member and executive with a proven track record of driving growth in technology companies in Australia, UK, Spain, and several USA locations. Colby’s most recent executive roles included CEO of multi-national infrastructure analytics software company, Innovyze, which subsequently sold to software giant Autodesk in 2021 for $1Bn USD ($1.55Bn AUD), where he continued as a Vice President.  Colby has successfully aligned organic growth initiatives to product and people resources to deliver balanced growth and profitability outcomes. He has also led buy-side and sell-side M&A initiatives for six businesses, in addition to advising on due diligence and integration planning of over 30 others. Colby is a licensed Professional Engineer and holds a BS and MS in Civil and Environmental Engineering from Brigham Young University, as well as a Minor of Engineering Business Administration from the Brigham Young University Marriott School of Management.

In the afr today...

Smith also likes air pollution and noise monitoring software provider Envirosuite. Its enterprise value is just one times its annual sales, and Smith says it’s the market leader in its space.

“It’s just in profitability for its mining and airports businesses, but there’s a water business losing money, so the water losses are distracting the market, but that’s easily fixed,” he says.

There's probably not much behind today's 13% pop in EVS, but I'll take it!

I did see that the new director Colby Manwaring has been issued 2,000,000 options.. That feels generous, but I take some solace in that the strike price is 20c and they expire in 3 years.

Frankly, if he is ever in the money with these, I don't think current holders will be too upset, and perhaps it reveals something about the board's expectations (although, we'll see whether or not they prove to be realistic).

Envirosuite held a webinar today after their AGM. The recording will be available on their website soon.

Nothing much new really, although Jason did mention they expect to hit $100m in ARR in the not too distant future (they are at $60m at present). I pressed him on this in the Q&A, and he didn't want to commit to a timeframe. He also said that achieving profitability was the primary focus at this stage, but that $100m was "in sight".

Someone asked when they expected to hit positive EPS and he said they didn't want to commit to anything just yet, but that they may make an announcement in the coming year. The intention it seems is "soon", but i'll be happy enough with a decent momentum in positive cash flows.

Overall, the messaging is that they have sustained growth, while transitioning to a more sustainable financial footing, and are experiencing good tailwinds in all geographies and sectors. Aviation, in particular, is showing some good signs of life as customers come out the other side of Covid. Regulation and ESG factors are big drivers, and this is true also for all segments. Water remains the potential "moon shot" within the business -- the target market is certainly massive, but time will tell if we see any sustained traction.

The share price seems insanely low if you put any stock in what management are saying. And, I suppose, given the company is currently valued at $78m, you can infer that the market doesn't currently hold a huge amount of faith.

Frankly, one of my biggest concerns is the lack of any material inside ownership. If the opportunity is so great, you'd think senior management and the board would be tipping in some of their hard earned money.

For better or worse, I remain a bruised but optimistic shareholder. So long as ARR continues to march upwards, ideally with some acceleration, and if they not only sustain positive cash flows but also deliver expanding operating margins, then I'm staying the course.

Last week I sent emails to Envirosuite, Pointerra & Kogan asking them in this day and age, why couldn't they include virtual attendance at their AGM.

Envirosuite replied very promptly, saying that they provided virtual attendance at their AGM's during Covid but it proved not to be very popular, but they would consider it for next year.

Well, it looks like they've brought that consideration forward as they are providing a virtual presentation with Q&A on Wednesday 29th 3pm (AEDT).

The recording will be available on their website afterwards if you're not able to dial in.

As for Pointerra & Kogan, I'm still waiting for an email response.

I was a previous holder of EVS however sold out some time ago based on disappointing revenue growth and an apparent inability to control growth in expenses. I have not followed EVS since.

I followed the forum post link by @Remorhaz and watched @Strawman call EVS a buy.

I thought it best to go back and take another look at EVS.

Revenue growth FY23/FY22 8.3%.

Loss before tax has remained in the -$11M to -$12M range since 2021.

Q1FY24 ARR growth 10%.

The Q1FY24 Outlook Statement (below) was as vague as they come:

So, after adjusting the EBITDA and capitalising expenses and based and the exit ARR for FY24 they should be cash flow positive.

They had $8.2M cash at 30 June 2023. Capitalised development costs of $5.8M in FY23 increasing at 55.4% pa over 2 years. The cash balance will get very slim unless they can cut costs or greatly increase revenue.

My valuation model indicates EVS as currently overvalued.

I don’t see EVS as a company you need to be invested in at present. There will be plenty of time to jump in later if they manage to improve the financials.

FY24 Q1 SALES UPDATE

$3.7m Sales up 9% on PCP,

Company ARR grows 10% on PCP to $60.6m

Key Highlights: 

• New Sales of $3.7m, including New ARR of $2.0m and Project Sales of $1.7m. A strong result in a seasonally softer quarter impacted by northern hemisphere Summer holidays
• Total ARR grows 10% on PCP to $60.6m (16% growth excluding one-off churn event reported in FY23 Q3)
• EVS Aviation achieved New ARR of $0.6m, with several customers taking up additional solutions during the quarter, including a significant expansion with a key aviation customer in the UK
• Strong contribution from EVS Industrial, particularly from the Americas region, achieving New ARR of $1.1m with the addition of several new customers, including a significant oil shale enterprise in Europe and premium copper producer Capstone Copper in the US
• EVS Water achieved New ARR of $0.3m, up 45% in Total ARR on PCP, including the signing of an Enterprise Agreement with Ion Exchange, a leading water treatment solutions company in India
• Envirosuite reaffirms its outlook to deliver positive Adjusted EBITDA less Capitalised Development on a run rate basis during FY24
• Churn over the last twelve months (LTM) of 8.1% includes a one-off churn event reported in FY23 Q3. Excluding this one-off impact, churn LTM would be 2.1%, consistent with the long term average

ASX RELEASE

6 October 2023

Funding facility secured to support growth

Highlights:

• Funding facility secured with Partners for Growth to provide up to $7.5m
• Supports funding of bundled Software and Hardware contracts
• The Company is funded to pursue its organic growth objectives
• Leading environmental intelligence technology company Envirosuite Limited (ASX: EVS) (Envirosuite or the Company) is pleased to announce that it has secured a debt finance facility (Facility) with Partners for Growth (PfG)i. The Facility will support certain contractual arrangements where Envirosuite allows customers to bundle their instrumentation requirements together with their software and support components into the recurring payments over the contract term. The Facility is also intended to provide funding to support the Company’s working capital requirements. The Company reaffirms its outlook to be adjusted EBITDA less capitalised development positive on run rate basis during FY24.
• CEO & Managing Director, Jason Cooper commented,
• “We’re pleased to announce the Facility, which strategically aligns with our core business objectives: driving growth, creating long-term customer value and leveraging the increasing opportunity to bundle Software and Hardware into our Industrial customer contracts. The availability of the Facility to fund the bundled contracts adds to the Company’s contracted and recurring revenue profile and is the best strategic match for the Company’s purposes. With the Facility secured, we currently have no plans to raise further capital to fund our organic growth towards sustainable free cash flow generation.”
• Key terms of the Facility:

 Limit Interest rate Term Purpose

$7.5m

The greater of the 3 month BBSW rate plus 7.75% pa and 11.75% paii

3 years from 5 October 2023

Growth and working capital in the normal course of business, including funding trade finance and equipment finance investments

    The terms of the Facility are summarised in Annexure A in this announcement – see overleaf – aside from which there are no further material items that need to be satisfied or approved prior to drawdown.

Authorised for release by the Board of Envirosuite Limited.

For further information contact: Adam Gallagher

Company Secretary

E: adam gallagher@envirosuite.com M: +61 428 130 447

1 Envirosuite Limited Level 30, 385 Bourke St

Melbourne VIC 3000

(ASX: EVS) ACN: 122 919 948 www.envirosuite.com Phone: (02) 8484 5819

ABOUT ENVIROSUITE

Envirosuite (ASX: EVS) is a global leader in environmental intelligence and is a trusted partner to the world’s leading industry operators in aviation, mining & industrial, waste and water.

Envirosuite combines leading-edge science and innovative technology with industry expertise to produce predictable and actionable insights, that allows customers to optimise their operations, remain compliant and manage their environmental impact.

By harnessing the power of environmental intelligence, Envirosuite helps industries grow sustainably and communities to thrive.

www.envirosuite.com

Envirosuite had some decent numbers for the 4th quarter of FY23.

Full announcement here

Highlights:

• Total ARR up 12% on the pcp, and at a new high following the dip in Q3. (That was a result of a "churn event" -- the loss of 3 Aus. Dept. of Defence sites using the aviation product.). Excluding the loss of that client ARR would have been up 20% according to the company.
• A little annoyed at the communication here tbh. Last quarter they really downplayed the loss of that client and said it only impacted ARR by 1.2% and was not material. Now we have a full quarter without those sites, it seems they were worth about $4.2m annually (If ARR would have been up 20% excluding the loss of those sites, as they suggest, we'd be looking at $63.6m in total ARR vs the reported $59.4. Or maybe they stripped out the contract value from the pcp? either way, it seems bigger than was originally suggested). Look, it's not a deal breaker, but I think the communication is lacking here.
• New sales of $6.8m for the quarter, which is up 13% and a company record. $3.1m was new ARR -- a welcome lift from the flat pace in recent quarters, but in line with what they did in the pcp.

• A record quarter for EVS Industrial, thanks to expanding relationship with BHP. Obviously a lot of potential to expand further with this client, which is also a great reference client, so encouraged by this. The industrials segment showed the best growth and for me has always been the best part of the business -- i wish they had simply remained focused on that. This segment represented 55% of ARR growth, and was up 19% on the pcp.

• Churn remains low (excluding the DoD contract) at 1.9%
• A small win in the nascent water segment of $0.2m ARR, the first for a few quarters. Total ARR from this segment is now $1.4m, up 40% from pcp
• Aviation looks to be doing well in the middle east. 7 new airports added in the quarter. The carbon emissions modelling product apparently getting some interest as companies look to improve their ESG credentials.

EVS reiterated its target for "adjusted EBITDA profitability" for FY24. That was negative $500k at the half, at which point they had just under $12m in cash.

Shares are on about 1.9x ARR. If the underlying growth can be sustained anywhere near the quoted 20% level, and if they can realise some decent operating leverage (there's been some tentative progress here), then shares are probably good value.

There's a briefing at 10:30am AEST if anyone's interested (click here)

Disc: held

Noting two on market purchases for Envirosuite directors recently.

CEO Jason Copper and outgoing Chairman David Johnstone picked up $10-12k worth each at about 8c/share.

It's always nice to see insiders buying on-market with their own funds, but if I were cynical i'd say it feels more about market signalling than simply the private investment decisions of Jason and David.

These are tiny transactions. Jason is on a fixed salary of $363k, plus 50% extra under a STI. As far as I know, this is his first on-market purchase (the current 1m shares held were granted as part of his remuneration package). I mean, great to see him buying on-market, but $12k is pretty weak.

David already owns close to 7m shares, so it's not going to move the dial either way. It is a nice sign given his intention to step down later this year, but would have been better if it was a more meaningful swing of the bat.

I'm probably nit picking here, and not suggesting any grand conspiracy at all. But if this were purely about directors buying shares because they consider them cheap, then at least make it worthwhile for your own sake. It's like me picking up an extra $500 worth -- what's the point?

If part of the rationale was to show confidence to investors, which is what it feels like, then such tiny amounts ain't going to do it.

I don't pretend to know their personal financial situations, but had we seen transactions of at least $50k or more, i'd take more notice.

The Chairman David Johnstone is stepping down and the company is planning on renewing the board, although to what extent is not clear.

As of August 2022, the board looked like this:

David has served as the Chair for almost 7 years and has been with the company since 2014. Back then, shares were 7c each and the company was called Pacific Environment. It was a fair bit smaller then, generating $12m in revenues BUT far more profitable with $1.3m in NPAT.

At the time, it was largely an environmental engineering consulting firm and they were still developing the software side of the business. They subsequently sold the consulting arm and focused entirely on the SaaS offering.

Today, it has over $57m in annual revenue and no profit. But at the same time, shares on issue have grown 12x (so sales per share have gone backwards). Retained losses on the balance sheet have also ballooned $50m from 2014 levels.

The market cap has grown from $7m to $110m, but the share price has increased from 7c to 9c since 2014, (passing through 29c along the way when the SaaS growth narrative was running hot).

This is a good example of a company that has gotten a lot bigger, but hasn't delivered much value for long-term shareholders -- at least so far. A great reminder that growth can be very expensive and not always value accretive to shareholders.

Of course, that was then, this is now. While it's taken nearly a decade to transform the business, it does now have much more reliable revenues, top line growth is much stronger, the market opportunity larger and the (potential) economics better.

But given the long and winding journey, why would you be leaving now, just when breakeven is in sight and there's some momentum in sales?

David has about 7m shares (0.5% of the total company) so maybe the larger shareholders have initiated this? The Omerod family still control a stake (i think about 2.5%) but Ellerston Capital is the main shareholder with a 7.9% stake, and have been increasing their stake over the last year or so -- maybe they have been agitating for change? (fwiw, their micro cap fund has outperformed since inception)

I remain of the view that there is a solid little business somewhere here -- but it's also true that the capital management hasn't been great (I've never been a fan of the reverse takeover of the Airports business), and like a lot of tech growth companies, costs could have been better managed. The newish CEO Jason Cooper has been only been on board for about a year, so cant really lay much blame at his feat.

Worth also noting that Tim Ebbeck was only on the board for 6 months before leaving to "focus on other commitments". A very short stint.

Of the other directors, the longest serving is Hugh Robertson who has been there since 2018 and easily holds the most shares out of all board members (22m shares). The others have relatively insignificant holdings and have been there for 1-3 years.

Anyway, today's news could be good or bad depending on how you look at it.

Is this a change that is badly needed to bring in more experienced and capable directors? Ones that will enable EVS to better realise its potential?

Or is it a sign of disunity? Or a lack of conviction in the future from someone who has been on the inside for almost a decade?

It's virtually impossible to know from the outside, but on balance I think it'll be good to see a change. No offense to David, but he's had almost ten years, and the execution hasn't been fantastic.

ASX Announcement

Board succession planning for FY24

29 May 2023 - Leading environmental intelligence technology company, Envirosuite Limited (ASX: EVS) (Envirosuite or the Company) is pleased to advise the commencement of a planned board renewal process that is expected to complete by the end of H1 FY24

At the commencement of the process, the longest-serving member of the Board David Johnstone has advised that he intends to step down from the role of Chairman at or by the 2023 Annual General Meeting subject to a suitable successor joining the board

Chairman, David Johnstone said,

"It has been a privilege to lead the board through so many years and significant events and see the Company grow into the leading international environmental technology company that it is today. The business is now at a scale and juncture where we are attracting significant commercial and corporate opportunities globally

Similarly, our positioning has attracted potential board candidates with the talent, industry knowledge and experience to lead and support the executive team in the next stage of our growth and by opening the Chair role I want to ensure that the strength of the Company and its prospects continues to be reflected in the board”

The Company expects to make further announcements on its board renewal process in due course

I don't really have experience with how these things normally work so unsure whether to take this at face value or a euphemism for something more sinister?

DISC: Held in SM & RL

Commented on them alongside 4 other reports in my Substack this week.

Short thoughts:

Thinking about the churn deeper, it would seem to me that the Department of Defence’s airports may be quite different to other commercial airports (the traditional Envirosuite client), so perhaps this can help explain the churn. The product may have been less fit for purpose for a Defence base. The fact that the world’s largest airport operator Aena expanded their contract may support my hypothesis. 

In general though, the question mark on what potential future growth they can achieve remains. We see a lot of quarters coming in at $2M in new ARR, and with the base increasing, this can lead growth to the low teens soon. 

There is potential here as always:

• They appear to be improving with relevant customer-led marketing (here)
• The water segment seems promising
• ESG tailwinds and blowing harder than ever before, so I think this is one to watch despite mixed results

Let’s see how they go in full year results. In future years, the water segment’s growth will be interesting to monitor.

EVS’ total ARR (annual recurring revenue) grew 15% in Q3 on pcp to $56.2m. Q3 new sales were $4.2m, up 14% on pcp. The company said it remains on track to achieve its target of transition to Adjusted EBITDA profitability during FY23.

EVS Aviation • Total ARR of $34.5m, up 8.5% on PCP (21% on PCP when excluding Australian DoD impact), with New ARR of $0.9m for the quarter.

• Abnormal churn increase in Q3 primarily due to the cessation of revenues for three of five sites currently contracted with Australian DoD. o Services going forward are for a different scope compared to the services that Envirosuite historically provided at these sites, and the services Envirosuite provides to other customers. o Envirosuite is contracted to provide services to the other two sites until at least FY25. o There was zero churn in Q3 aside from this in EVS Aviation.

• Multi-year €8.9m ($14.3m AUD TCV, $4.8m ARR) renewal and expansion of marquee European customer Aena, the world’s largest airport operator by passenger volume. Under the expanded agreement, Envirosuite will now provide its InsightFull community engagement solution at three major Spanish airports as part of Aena’s requirements under European Directive 2003/4/EC.

• New opportunities in China with a newly signed customer to be delivered with a local Chinese systems integrator, with several other opportunities in progress

In answer to @Strawman 's question, overall the meeting commentary isn't adding much to the written release - beyond lots of positive talk about "opportunities" and "prospects", with lots of words like "huge" and "significant".

Both Jason and Justin stated that they see no need for a capital raise and that they remain on track towards profitability this year. Justin stated that he has a high focus on "contract-to-cash" to ensure the receipts flow.

There was some reference to their under-estimating procurement timescales on new deals. One reason cited was concern in Europe over energy costs. Based on the what was written and said, then H2 should be a very strong one for new sales. If it is not, then that would indicate that Jason is look at the business through rose-tinted spectacles.

They are very excited about the reported national airspace deal, as they think this is setting a new approach to how countries are looking at managing their airspaces. We'll see.

I agree with @Rocket6 's characterisation of progress at EVS as a "grind".

I have recently exited my RL holding at $0.135 in the belief that SP will not move materially until there is some demonstrated momentum. Of course, things can change quickly with one large deal or a strong quarter. I'd certainly be happy to jump back on board and EVS moves to my Priority Watch List.

I will align by SM position provided there isn't any SP deterioriation throught the day. (Which this post presumably doesn't help!)

Disc: Held on SM; Not Held in RL

Catching up with quarterly reports, starting with EVS.

I have used the word ‘grind’ to describe EVS in the past, and this report is no different. In total, 2m of ARR was added in Q2, while new project sales were 1m.

It was a strong quarter for aviation – a record for the business in fact – with 1.4m added. This was somewhat fortunate, because Omnis growth was only 0.6; a disappointing result considering its strong last few quarters. Even worse, EVS Water recorded no ARR growth. That said, management notes that several major client ‘prospects’ approach final stages of due diligence, and are forecast to close in H2 FY23. They reference a POC with Evoqua Water Technologies, and three new SeweX sites being delivered to Watercorp in December 2022. They also note they have increased the speed at which SeweX can be deployed for new customers, and introduced new functionality for larger, more complex sewer networks. All good signs, but we need to see some of the alleged demand/pipeline converted into sales.

More broadly, we are told that ‘several large deals progressed to near completion in Q2 are anticipated to be signed in Q3. Based on this, Q3 should theoretically be a strong one.

Management provide us with some insight into cash burn. EVS ended FY22 with 16.2m in the bank, and we are told that cash on hand was 11.9m at the conclusion of H1. Based on this it appears cash burn (in H1) was around 4.3m.

On the face of it, H1 figures don’t look like they will be particularly impressive. We are still seeing steady enough growth – and small steps are clearly continuing to be taken in the Water and Omnis segments – but as with previous years the growth is more of a grind than bottom left to top right. Further, they are still churning through cash. I maintain that patience is required here, but I am looking to see an improvement in H2.

Registration for the Envirosuite Q2 FY23 Sales Update

Envirosuite Limited intends to host an investor briefing following the release of its Q2 FY23 Sales Update on Wednesday, 1 February 2023

The webcast briefing will be held at 10:30am AEDT and hosted by CEO, Jason Cooper and CFO, Justin Owen

Please register to join the webcast via this link: https://events.teams.microsoft.com/event/d1983326-5327-46c1-868e-d8abe40f9465@5597ad34-a305-4edb-8df7-696be8094b6d

https://cdn-api.markitdigital.com/apiman-gateway/CommSec/commsec-node-api/1.0/event/document/1410-02552715-72DB38KMHCR500PDIDO2I98O6U/pdf?access_token=00070zWJwprCfVhgaNZzZ3lIpRHk

Product demo session next week. Could be worth an hour.

Disc: Held IRL and SM

Highlights

• Record new sales in Q4 of $6.0m up 27.7% on PCP with strategic customer wins and expansion from existing customers across all three product suites
• Q4 sales comprised of $3.1m new ARR up 34.8% on PCP, and $2.9m in Project Sales up 20.8% on PCP.
• Strong land, expand and scale performance with 20 customer sites added in Q4, of which 10 new sites are from existing customers
• This takes total ARR up to 53m, up 14% PCP.
• Churn remains low at approximately 2.5%.

Impact on product suites

• Aviation – 85% increase in new ARR QoQ
• Water – 12.9% contribution of new ARR in Q4
• Omnis – 1.4m in new ARR and responsible for over 50% of the group’s new ARR in FY22.

The above breakdowns were provided by the company. It annoys me that they swap and change the metrics for all suites. Keep it simple management, we don’t need the fluff! The below provides more indication of their progress this FY:

I largely agree with @Strawman. All in all, a strong quarter for EVS – saving the best for last. This will provide some much needed % increase for the FY22 report. All three product suites reported increases to ARR, with Q4 being the most successful quarter across the board.  

Omnis continues to carry the business, with Q4 being another impressive quarter. Aviation was the big surprise – Q4 figures were almost more than Q1, 2 and 3 combined. Hopefully this is the turning point for renewed optimism and confidence in the aviation industry. But alas, I am with Strawman once again – this is the least exciting of the three suites and will likely see the least growth over the next five years. Water continues to grind away, with more wins secured across Q4. I was initially disappointed to see the water figures but reading the report and putting it in perspective I have had a change of heart. I don’t think it will take long for this part of the business to scale, provided they continue to win new contracts and perhaps more importantly enhance their reputation in the industry. They appear to be doing this, and to their credit they continue to expand every quarter. This in itself demonstrates progression -- good things take time! I recommend those interested in the business read the update in full, particularly the water update – they are clearly establishing somewhat of a foothold in the industry (with some impressive wins) and that is great to see. Pleasingly, these customers are increasingly government or community related – councils, cities, townships, primary water suppliers etc – sticky customers that won’t go out of business.

Interestingly, as Strawman notes, management pointed out some cross-selling benefits that were evident this quarter. The example provided was water combining with Omnis to deliver a solution for a Spanish water organisation and the US City of Kalamazoo. This validates the land and expand strategy and could potentially lead to some serious scale benefits.

Looking forward to getting stuck in to the EOY financials. Without any unexpected surprises, EVS will probably get a pass mark for FY22.

Looks like a decent 4th quarter report from Envirosuite.

It was a record final quarter, with $6m in new sales -- a 27.7% lift from the same quarter last year (which had a record $4.7m in new sales). Roughly half of this was new recurring revenue (ARR), the other project sales.

Project sales are a good indicator of future ARR, as clients first buy instrumentation (low margin) and then are invoiced (high margin) subscription fees over the length of the contract.

It was also encouraging to see that half of the new sites added were from existing clients, which helps validate the value prop of the offering and also the "land & expand" strategy.

For the full year, Envirosuite won $8.6m in new ARR, taking the total to $53m, which is a 14% lift. Of the new ARR for FY22, over a third was secured in the final quarter -- so hopefully we're seeing an acceleration in sales growth.

I'll let you read the full announcement for all the details (you can find it here), but it was also great to see growth across all segments (Aviation, Omnis & Water). Indeed, the nascent, but very high margin and large market opportunity Water segment, surpassed $1m in ARR. The amount of new ARR for Q4 in Water is already around 1/3 of what the more mature segments were able to secure. And there's supposedly good cross-sell potential with Omnis customers here too.

Speaking of Omnis, it's really gaining good traction -- over half of new ARR secured for FY22 was from this segment. A new and improved platform and ongoing ESG drivers bode well for this segment.

Finally, Aviation seems to be bouncing back after the Covid set-back. It generates the lion's share of revenue for the business, but is also the slowest growth area..And, for me, the least exciting. Still 7% annual ARR growth (constant currency) isn't terrible.

As far as an outlook, CEO Jason Cooper (who we spoke with in September last year -- see Meetings page) said that "the momentum we have built in FY22 will continue into FY23 and beyond".

At the current price (16cps), and with 1,259m shares on issue, EVS has a market cap of $200m. That's 3.8x ARR, which doesn't seem too onerous at all (if indeed sales momentum can continue). It is of course still a loss making company, but at the half year had $23m in cash and an annualised operating cash and (roughly) negative $7m in free cash flow (annualised).

Will be interested to get more details when the FY results are released.

Hard to find anything really concrete in today's update, which was marked as market sensitive (see here) but also states that the contracts referred to are not financially material.

Ok, so some new customers, and new sites. That's great -- but off such a low base, and with all that was said in the last update, it would be surprising if that wasn't the case. Don't get me wrong, I'm glad to hear it, but it doesn't really seem announcement worthy.

It said revenue per site was ahead of forecast. That's great -- but what was the forecast, how much ahead are we? It potentially shows that company expectations were initially conservative (which is good), but the observation is off a very small sample size and it's probably too early to draw any material conclusions.

The announcement says it is "nearing its initial commercial objective of achieving $1m in total sales". Again, good news, but how near is near? From what I can see they were at 0.4m in ARR at the end of H1, and at $0.6m at the end of Q3. So if we assume "near" means 0.9m and ARR = sales, that's $300k in added sales in about 2 months. and an acceleration of what we saw from Q2 to Q3. Maybe we could assume an annual run rate of $1.8m?

Again, not saying this is bad news, just very vague. And relative to the current ARR of about $50m not overly significant (well, at least not yet).

Look, it seems like an excellent product. And it's fantastic to see some good early traction -- especially with early adopters seemingly happy to further roll out their use of the product. The addressable market is huge, and as a high margin software product the impact to profitability could be very substantial over time. Indeed, CEO Jason Cooper said that the product "could be a substantial future contributor to group revenues and earnings". So i'm certainly encouraged by the news. It was just too vague for my liking and I find the new CEO to be a lot more promotional than his predecessor, Peter White.

Not surprised the market price hasn't moved in reaction to the news.

EVS Water Update

EVS Water has gone global with new customers in Australia, Asia, Europe and USA

New sites approved by Water Corporation WA

Revenue per site ahead of forecast

Set to scale as a proven, pure software, high-margin product suite with rapid deployment to any location

Major partners and customers incorporating EVS Water in their market approach

459gx4zrwqvhmj.pdf (asx.com.au)

A reasonable 3rd quarter for Envirosuite (ASX announcement here), with the business reporting $49m in ARR as of 31 March, 2022. That's a 15.3% lift from the 3rd quarter last year (see here) -- but unchanged from the preceding Q2 (more on that below).

Adjusting for FX movements, the ARR was $50m, and on a year-to-date basis new ARR is more than 23% higher than in the previous year (although that was a period impacted by covid, so it's likely just as much a bit of a catch-up as opposed to a structural acceleration in new sales).

However, i feel the company hasn't been as straightforward as I'd like. The reality is that, on a statutory basis, ARR is unchanged from where it was at the end of Q2 (see below) -- re-framing things on a YTD basis isn't unreasonable, and yes, all the relevant data is presented in their update, but it does stick in my craw a bit when the numbers are always framed in the most favourable light. Just give us the facts in a consistent manner!

It's essentially a story of FX movements -- the AUD has gone from rough 69c to 75c between Dec 31 2021 and Mar 31 2022 -- so please just tell it like it is rather than finding the most attractive comparisons.

Anyway, it's good to see the Water segment accelerating sales, and the contract with PUB Singapore bodes well. North America accounted for 40% of new ARR and it seems there's a bit of traction in that market.

At the current price of 16c, EVS is trading on 4x ARR. or 4.6x on a fully diluted basis. The current run rate based on the most recent quarter represents around 10% annual growth -- that's OK, but frankly if that doesn't accelerate in the year ahead it's going to be difficult to consider shares as good value..

Q3 Sales Update: Strong momentum continues

Total new Q3 sales orders of $3.7m, including new ARR of $2.0m

New ARR YTD of $5.5m up 23.6% on PCP

ARR of $50.0m on a constant currency basis

Significant and strategic customer wins across all 3 product streams

Low churn maintained remaining at approximately 2%

Strategic initiatives to provide for continued growth in scale and margin

4584h5jy63kcqw.pdf (asx.com.au)

Have I been living under a rock? Looks like I missed this – it wasn’t announced by ASX, presumably due to their announcement crackdown put in place to prevent ramping. Apologies to those that were already aware, but I figured it was worth posting.

In late March, EVS signed a contract with Singapore’s national water agency to implement its Water Optimiser as part of its broader water management practices. It is a 16-month contract term. The company reported that the SaaS-based terms of the deal will yield a ‘material increase in the annualised recurring revenue of the high margin EVS Water business’. The deal is the largest contract signed to date for EVS’ water solution.

For those that aren’t aware, the company’s Water Optimiser assists clients with being able to determine the optimal dosage for coagulants – compounds which removes impurities such as bacteria or dirt – to maintain water quality. The data is provided to clients in close to real time. More here.   

A few thoughts:

• As we know, Singapore is innovative and often world leading. It is a good sign that a country that looks years ahead has chosen to adopt EVS capabilities.
• Further validation of EVS’ water solution. Even if the value of the deal is relatively small compared to EVS’ total revenue (although this is not yet known), continued validation is important.
• A material increase in EVS’ water platform is presumably still a very small amount given the low base – I am also guessing this is why the announcement wasn’t officially released on the ASX and marked price sensitive.

The company should be releasing their quarterly in the next week or two; their last update was a little disappointing so it would be nice to see some additional growth reported – particularly within their water division. 

I just listened to the webcast.

A question was asked "when would the company become EBITDA positive?"

The MD answered that they were planning on reaching this goal at June 22 but now it has been pushed back 12 months which I assume means June 23.

I seem to recall June 21 was once their target but I may have that wrong.

Otherwise nothing of note ( to me) that hasn't already been noted here in straws.

@Slats has already provided the detail of the first half result, so i'll just add a few thoughts.

First, while it's good that most metrics all moved in the right direction, the pace of growth isn't as high as i'd like to see and looked to have slowed a bit in the latest half.

ie:

• ARR was up 15.3% from a year ago, but only 5.3% from the preceding half.
• The number of sites increased 16% from a year ago, but only 4.8% from the preceding half.

To be fair, the first half is usually weaker than the second, and the company said there were supply chain issues that impacted installations.

Growth in statutory revenue was better when comparing halves -- up 7.2% from the preceding half, vs 13.8% from pcp -- although a big chunk of this was non-recurring in nature.

I'm being a bit picky here, but it's worth highlighting. I'm starting to think the acquisition of the aviation business was probably unnecessary, and they would have been better to focus on their core Omnis (and now Water) offerings.

Aviation represents almost 2/3 revenue, and has pretty reliable recurring revenues, but the growth potential here is much more limited. The growth achieved here in this latest half is -- it seems -- largely the roll-off of discounted pricing that they offered customers during covid. Taking a broader view, there's been little growth since they took over (but the timing of covid and its impact on airports may be a reasonable mitigating consideration). There are probably some advantages in being a larger business in terms of putting EVS in play for larger investors and access to capital, but overall it's a drag on growth in my opinion. It just masks what's going on with the other segments.

The attraction for me has always been Omnis, and it's this division that has the best growth. In the latest half, sites increased 25% from pcp, and ARR was up 33.5%. The economics are better for this segment too. And the nascent water business likewise shows some real promise, but it'll take some time before this segment is a meaningful contributor -- especially given its size in relation to aviation.

Still, it's really good to see the gross margin improve and the operating cash flow picture get closer to break even. The performance within the Americas was especially notable with a near 30% lift in sites and a 37% rise in ARR. It's a huge market, so great to see some good momentum.

At the current price of 18.5c, and with 1255m shares on issue, that's a market cap of $232m, which is 4.5x revenue and 4.7x ARR.

I missed the results call this morning, so keen on any observations if anyone was able to attend. But on balance i remain bullish on Envirosuite -- but if we are to see any material market re-rate, they really need to demonstrate some improved growth and a continued and meaningful push to cash flow positive.

CEO to join the Board as Managing Director

Key Highlights: 

• CEO Jason Cooper to join the Board as Managing Director
• Complements recent significant additions to the Board and Executive

23 February 2022 - Leading environmental technology company Envirosuite Limited (‘Envirosuite’ or ‘the Company’) is pleased to announce the appointment of the Company’s Chief Executive Officer, Jason Cooper as Managing Director effective 1 March 2022 (Appointment).

Jason joined Envirosuite in July 2020 as Chief Operating Officer, was appointed as Chief Executive Officer in March 2021, and has now agreed to join the board as Managing Director of the Company.

During his tenure to date, among his many achievements, notably Jason has: 

• Led the finalisation of the integration of Envirosuite’s major acquisition through 2021 with the backdrop of the pandemic
• Commercialised EVS Water
• Reset and positioned the product suite for scaling across EVS Aviation, EVS Omnis and EVS Water
• Delivered strong growth and retention in key markets and products
• Recently added high-profile executive appointments in addition to shaping a high-calibre global management team.

Pursuant to ASX LR 3.16.4 the Company confirms that there are no changes as a result of the Appointment to Jason’s existing remuneration arrangements as CEO.

Half Yearly Report and Accounts

Key Metrics

Annual Recurring Revenue = $49.0m (+15.3% PCP)

Client sites = 391 (+16.0% PCP)

Statutory revenue = $26.8m (+13.8% PCP)

Gross profit = 48.4% (+16.6% PCP)

Adjusted EBITDA (loss) = $(2.0m) - Improved 44.9% PCP

Key Highlights

• Total revenue of $26,817k of which 80.5% is recurring, increased $3,252k (13.8%) over 1H FY21 (PCP) predominantly due to strong growth in project revenue in the America’s and strong Annual Recurring Revenue (ARR) sales over the prior 12 months converting into booked recurring revenue during the current reporting period.
• Gross profit (statutory) continues to improve with gross profit of 47.5%, showing steady growth from 44.0% in prior period and 40.6% in PCP.
• Operating expenses increased 7.0% over PCP as a result of investment in EVS Water, Product Development and transformation project costs including the transition from private data centres to AWS and a new ticketing system.
• Adjusted EBITDA loss of $1,964k represents a significant improvement over $3,562k loss in the PCP due to revenue growth. Adjusted EBITDA is lower than the prior period due to the additional operating expenses incurred in investing in EVS Water, Product Development and transformation project costs.

Strong ARR sales wins over the past 12 months in the America’s and EMEA have driven the increase in recurring revenue of $1,509k (7.5%) compared with PCP. Recurring revenues for the current reporting period were impacted by global supply issues causing delays in project implementations.

Revenue growth of $3,248k (13.8%) compared with the PCP included strong growth in non-recurring revenue (up 50.0% against PCP) mainly in the Americas within Omnis and Aviation. Revenues in Asia Pacific were lower in the current reporting period than in PCP, predominantly due to PCP including significant low margin non-recurring revenues in China that were not repeated in this current reporting period.

New Aviation sites won in the prior period drove an increase in Aviation recurring revenues of $1,085k against the PCP. Non-recurring Aviation revenue has also seen growth when compared to the PCP as the effects of COVID on the Aviation industry started to reduce and client project spend has started to increase

New Omnis sites won over the past 12 months have driven Omnis recurring revenues up $380k (6.6%) compared to the PCP, however the impact of these new sales wins was reduced due to supply chain issues impacting the delivery of instrumentation and associated revenue recognition. Non-recurring revenue in Omnis was significantly up on PCP (24.4%) due to material deals in the mining industry in South America.

While revenues from Water are minimal in the current reporting period, there have been significant new ARR sales wins during the current reporting period, with revenue expected to materially increase over the next 12 months.

EBITDA is a non-IRFS measure and is calculated by adding back depreciation, amortisation and interest from net loss before tax. Adjusted EBITDA also adds back share-based compensation expense, foreign currency gains and losses, and transaction and integration costs (which are seen as non-recurring) and excludes the impacts of adopting AASB 16, as the application of the standard results in operating expenses being excluded from EBITDA.

For the half-year ended 31 December 2021, the Group reported an Adjusted EBITDA loss of $1,964k, an improved result over the $3,562k loss incurred in the PCP due to strong revenue growth. Adjusted EBITDA was down on the prior period ended 30 June 2021 due to costs associated with investment in EVS Water, Product Development and transformation project costs.

Cash and Cash Equivalents increased by $6,074k during the current reporting period, predominantly due to a capital raise in December 2021 for $10,469k ($9,946k net of transaction costs) of additional equity to fund further expansion of EVS Water. The remaining decrease in cash related to:

• $1,562k from operating activities
• $1,087k cash used in the acquisition of intangible assets which relate to capitalised product development costs
• $800k in payments for Property, Plant and Equipment
• $423k other cashflows

Total cash used in operating activities when adding capitalised development costs and repayment of lease liabilities (“Adjusted Operating Cashflow”) was an outflow of $3,559k, this is down from $3,882k in the prior period and $5,064k in the PCP, showing consistent improvement in the cash management of the business.

The Group has a healthy balance sheet following the cash raised during the current financial period, the lack of debt on the balance sheet (other than lease liabilities) and the strong management of Adjusted EBITDA and operating cashflows during the period.

The Directors continue to monitor the impacts of the COVID-19 pandemic on group operations and respond appropriately to risks identified.

New Board appointments

EVS has appointed two new independent non-executive directors in Mr. Stuart Bland and Mr. Tim Ebbeck, effective from 1st March 2022.

Stuart Bland B.Ec., MAppFin, FCA, GAICD

Stuart has over 30 years broad commercial executive experience, primarily in global SaaS businesses undergoing high rates of growth. His industry experience includes technology (fintech, knowledge management), defence, sport, telecommunications, biotechnology and wine.

Stuart’s executive experience includes 14 years as Chief Financial Officer at Iress Ltd (ASX:IRE) and Chief Financial Offer roles at Melbourne IT Ltd and Panviva Pty Ltd.

Stuart is currently a member of the Advisory Board to Cablex Pty Ltd, as well as consulting to a number of other Boards.

Tim Ebbeck B.Ec., FCPA FILM, GAICD

Tim has over 30 years of board, executive, and advisory experience across a range of industries including technology, public sector, media, sport, professional services, energy and finance.

Tim’s executive experience includes roles as Chief Executive Officer at SAP (ANZ), Chief Executive of Oracle (ANZ), Chief Commercial Officer of SAP (APJ), Chief Commercial Officer of NBN Co, as well as Chief Financial Officer of Unisys South Pacific and TMP Worldwide.

Tim is presently Non-Executive Director of ReadyTech Ltd (RDY.ASX), XPON Technologies Ltd (XPN.ASX), and The Yield Technology Solutions. He is also a Board Member of the NSW Health Central Coast Local Health District.

Envirosuite, Chairman David Johnstone said,

“Stuart and Tim bring significant additional expertise and experience to the board with their respective and complementary backgrounds and I am very pleased to welcome them to the excellent group of people that we have across the Company.

The building out of the board complements the recently announced key executive appointments, as the directors and management continue to work closely together to capitalise on our many growth opportunities.” 

This video was recorded and posted on YouTube on 25-Nov-2021. It discusses the value proposition that Envirosuite provides for Airports globally:

Our software is increasing airspace tolerance everywhere I EVS Aviation - YouTube

"We've been committed to improving community relations through better airport environmental management for over 30 years. As the world’s leading supplier of solutions and services for airport noise management, we understand that accurate data integrity and noise measurement is essential for airports to demonstrate compliance with local regulations and provide precise information to maintaining trust within the community."

"EVS Aviation offers world leading, comprehensive airport environmental management software. Our flagship ANOMS software provides deep analytics on top of rich datasets, deliver insights that reduce environmental impact, while improving operational efficiency."

"EVS Aviation provides solutions for airports to transparently communicate environmental exposures and management activities to communities. Our software enables airport teams to work directly with all stakeholders to build trust and airspace tolerance."

"Harness powerful insights to help you maximise capacity utilisation of your airport infrastructure and reduce operational costs such as decreasing runway occupancy or optimising pavement maintenance and de-icing procedures."

Learn more:

➤https://envirosuite.com/platforms/avi...

Connect with us:

➤LinkedIn: https://www.linkedin.com/company/envi...

➤Twitter: https://twitter.com/envirosuite_ltd?s=21

➤Facebook: https://www.facebook.com/envirosuite/

About Envirosuite:

Envirosuite (ASX:EVS) is a global leader in environmental intelligence spanning more than 15 countries and is a trusted partner to the world’s leading industry operators in aviation, mining & industrial, waste and water. Our proprietary software combines leading-edge science and innovative predictive technology with industry expertise to produce actionable insights, allowing customers to optimize their operations, whilst remaining compliant and managing their environmental impact.

Click here or on the link near the top of this straw to watch the video.

Disclosure: I hold EVS shares both here and IRL. My thoughts are that airports should be getting on with implementing software suites like this now, while things are quieter due to the pandemic and travel/border restrictions, rather than wait until they are super-busy when all restrictions are removed. It's a similar situation to the one that Catapult (CAT) have described where sports teams globally are using the downtime (suspension/deferral of leagues and matches) to use Catapult's gear and analytics to make changes to training schedules and support individual players more to enable them to outperform when things get back to normal and matches/games are back on.

Of course, this video only describes one division of Envirosuite, their Aviation division, and EVS are so much more than that, however it's good, as a shareholder, to get some perspective on what they offer and what their selling points are.

Click here or on the link near the top of this straw to watch the video.

Envirosuite has appointed Justin Owen as its new CFO (ASX announcement here).

He was formerly at Whisper (ASX:WSP) where he was their CFO from June 2020, before announcing his departure only 10 months later (see here). That's a very short tenure.

From what i can see, things at Whisper appear to be going ok (at least at a top line level), although it's still very much cash flow negative.

Maybe there just wasn't a good cultural fit, perhaps he wasn't excited about the company's prospects, or maybe just some personal stuff was happening at home -- who knows?

At Whisper he was on a base package of $330k, and took home $450k in FY21 when you include short term incentives. Whisper is comparable in size to Envirosuite, so i wonder if the package is similar? The company hasn't disclosed remuneration details.

EVS's former CFO, Mathew Patterson, was appointed the role in Jun 2020. Another very short stint, although his position was always temporary, being brought on as a secondment from Macquarie to act as CFO for EMS, which Envirosuite acquired in early 2020. His take home pay in FY21 was $440k.

I guess I have no real point to make here -- just adding some details after taking a deeper look at the CFO appointment today.

EVS today reported ARR of $49m, with $1.8m in new ARR for the quarter -- up 64% on the previous corresponding period (but up only slightly from the $1.7m new ARR reported in Q1)

Frankly, it's a little underwhelming given they reported ARR of $48.6m at the end of Q1 (see here). Given the reported new ARR, they must have lost around $1.4m due to some churn (which they say has been stable at 2% over the past 12 months), but also discounts to aviation clients and FX movements.

Total new sales orders were a record $4.6m, of which $2.8m was non-recurring project work, which is up from $4.1m in Q1.

It was encouraging to see a doubling in ARR from the new Water offer -- although that's off a very low base. But with 10% of new ARR coming from this segment, it shows how this could grow to become a far more important generator of company earnings.

Just some initial thoughts.

If anyone was upset at not getting an opportunity to participate in the recent capital raise. Today is your chance to top up at the same price the insto guys did.

The recent CR was for insto's only. Retail holders (ie you and me) got diluted by the raise, but by how much?

1,201,066,920 shares on register. 52,345,620 new shares issued. That's a dilution of 4% that a retail holder needs to top up to keep the same equity in their holding.

or,

1,201,066,920 shares on register + 167,303,932 options + the new 52,345,620 CR shares = dilution of 3.8%. So roughly the same top up required.

Follow up on my straw from yesterday, with EVS announcing this morning that they have raised $10.5m to accelerate the growth of EVS water. The capital will be used to invest into further growing the direct sales team, with a specific focus on the Optimiser and SeweX products. Additional product and technical roles will be utilised to support future developments. EVS are going to create further strategic partnerships to support implementation and success for this portfolio.

Envirosuite Chief Executive Officer, Jason Cooper, said: “This capital raising is about growth. The EVS Water business is on the cusp of a tremendous market opportunity as the benefits from our Environmental Intelligence technology platform are recognised more and more by Governments and corporates seeking to improve the well-being of their citizens and customers, and by key global industry service providers like GHD who recognise the benefits of our products. We are tooling up to meet that opportunity. That we have been able to raise capital in a highly sought-after Placement at a materially superior price than the previous tranche of growth funding is indicative of the trajectory of the business and investors’ appreciation of the opportunity that lies before us”.

Envirosuite raises A$10.5 million to accelerate EVS Water

• Placement attracted strong demand from both existing and new institutional investors
• Funding will be used to accelerate Envirosuite’s investment into growing sales in the high-margin EVS Water business to support accelerated incremental growth in the next 12 months
• The Placement raised ~ A$10.5 million at an Offer Price of A$0.20 per New Share

According to AFR, Envirosuite is raising $10.5 million from institutional investors to help expand its water treatment technology platform.

The offer is priced at 20 cents per share.

Details from EVS announcement:

Request for Trading Halt Envirosuite Limited (ASX:EVS)

(Envirosuite) requests a trading halt in respect of its ordinary shares pursuant to Listing Rule 17.1 with immediate effect.

For the purposes of Listing Rule 17.1, Envirosuite provides the following information:

1. The trading halt is requested as Envirosuite expects to make an announcement to the ASX in connection with a proposed capital raising by way of an institutional placement (Placement).
2. Envirosuite requests that the trading halt continues until the earlier of Envirosuite releasing an announcement in relation to the completion of the Placement, or the commencement of trading on 3 December 2021.
3. Envirosuite expects that the trading halt will be ended by Envirosuite making an announcement to the ASX in relation to completion of the Placement.
4. Envirosuite is not aware of any reason why the trading halt should not be granted, or of any other information available at this stage that is relevant to the trading halt. Should you require any further information, please do not hesitate to contact me.

On behalf of the Board of Envirosuite Limited

Envirosuite has entered into a strategic agreement with GHD which will see the group implement and scale EVS's water solution, as well as refer clients to EVS.

GHD is a global engineering and construction services company with 200 offices in 5 continents and over $2b in annual revenue. They already use EVS's Water Plant Designer product as part of their processes and will provide technical support for clients using EVS Water Products where process engineering services are required. GHD will also support R&D efforts to assist with product improvements.

In referring customers to EVS, GHD will assist in delivering key components such as configuring digital twins and reviewing configurations

It adds a valuable new sales channel and allows EVS to scale its water products much more efficiently. It's also a potent validation of the water product set. The agreement is not likely to make a material contribution to EVS for the current financial year, but thereafter should help them better target the $2.8b serviceable addressable market.

Overall, I take this as very good news. You can read the ASX announcement here

Strategic agreements with GHD to implement and refer EVS Water

HIGHLIGHTS

Two strategic agreements with GHD for Envirosuite’s EVS Water to:

Implement and scale the solution for water facilities.

Leverage GHD’s global network to refer EVS Water to prospective clients.

Facilitates a step-change in the roll-out of Envirosuite’s pure SaaS, high margin product suite into a $2.8bn serviceable addressable market (SAM)1.

I watched most of the company presentation today. Nothing new of note from what I could see. The company still seems focussed on both the expansion of new customers and increasing the ARR for their existing customers. A lot of talk in regards to figures from last financial year and their contract with NASA. Everything going in the right direction in my opinion.

Presentation was very minimalist and didn't seem like the company had anything they were trying to hide or not address. Looking forward to seeing how H1 FY22 has been for the company and how many new customers have been brought on, what this has done to the ARR and also how they have been able to grow their current customers and clients ARR.

DISC: Held.

#ASX ANNOUNCEMENT - Supplementary Information: Envirosuite executes MoU for strategic partnership with Aeroqual

05 November 2021 - Further to the announcement yesterday, we would like to provide additional information relating to the Aeroqual MoU

As announced on 4 November 2021, Envirosuite and Aeroqual have entered into a Memorandum of Understanding (MoU) in respect of a strategic partnership between the parties for a global business development of joint market operations (the Announcement). The MoU is a statement of intent between the parties and the commercial terms are not legally binding (except as otherwise outlined below) until the parties enter into a formal agreement.

Envirosuite released the Announcement in order to inform investors of the MoU and the potential new partnership that between the parties. Envirosuite acknowledges the requirements under ASX Listing Rule 3.1 and section 4.15 of Guidance Note 8 with regard to announcements and confirms as follows:

The terms of the MoU

The MoU sets out the terms of the proposed deal to enter into a strategic partnership agreement between Envirosuite and Aeroqual. As previously outlined in the Announcement, the MoU outlines the framework to support global business developments activities and explore integration of technologies for delivering air quality monitoring solutions (Deal).

The MOU sets out the principal terms and conditions on which Envirosuite is willing to enter into the proposed Deal subject to the agreement and signing by the parties of a formal binding agreement (Formal Agreement) in due course, with a target signing date on or around April / May 2022 (Target Signing Date).

The MoU is binding on the parties with regard to costs, intellectual property, providing notices to other parties, non-solicitation of employees and customers, confidentiality and announcements. Otherwise the MOU is not intended to be legally binding.

Significance of the MoU

The proposed Deal is significant as it could provide both parties greater access to market opportunities in their respective segments, drive revenue and increase customer traction.

Consideration that could occur as part of the MoU and the source of funding

The MoU does not create any financial or funding obligations on either party at this stage. Financial or funding arrangements may arise upon further discussions and entering into the Formal Agreement.

Any material conditions that need to be satisfied before the MoU becomes legally binding

The parties will conduct their respective due diligence and negotiate in good faith with a view to executing the Formal Agreement as soon as possible, and in any event by the Target Signing Date. Either party may, by notice to the other, terminate negotiations at any time (such termination not impacting the binding clauses).

Any other information relevant to shareholders

The Non-Solicitation period for employees and customers is for a period of 12 months from 27 October 2021.

DISC: Held in RL & SM

9:16am. 04-Nov-2021. @jwrostagno27 has already provided the details of this morning's announcement from EVS, however I just wanted to highlight that Aeroqual also has the United States Environmental Protection Agency (EPA) as a customer, which is very significant, since they set the bar for Environmental compliance in the US, and do the testing and enforcement of the laws. The full announcement by EVS can be read here.

I note that they appear to have released the same announcement twice - once at 7:56am and again at 8:41am, so I'm linking there to the second of those - in case there is any difference between them.

While an MoU is just a letter of agreement, rather than any sort of binding contract, this is still positive news for EVS and shouldn't do their share price any harm at all. They continue to have good momentum - since those 9 cps levels in June, they closed yesterday at 22.5 cps, so that's 150% up from 9c. Not bad in less than 5 months.

Disclosure: I hold EVS here and in RL.

Envirosuite executes MoU for strategic partnership with Aeroqual.

Envirosuite has announced that they have executed a memorandum of understanding for a strategic partnership with Aeroqual. This is great news for shareholders, as it is a partnership that will be of great value in my opinion. With the ongoing push towards a cleaner and safer environment, and the want to be more conscious about these things, the product is one that fits perfectly into this.

Aeroqual is a quality business who already have many large customers across the world. Their global sensor network covers over 100 different countries and their advanced software platform processes more than 6 million data points per day. Their customers include AECOM, Rio Tinto, and U.S Environmental Protection Agency.

Aeroqual’s products offer real-time data and they market themselves as being an easy solution to measure air quality, "without the hassle, cost and risk associated with traditional air monitoring projects" . I thought it was interesting to note that the company also has products that are suitable for situations that Envirosuite don't currently have a product, like indoor air quality monitoring.

I believe this partnership could be worth more in the long run, and provide more value and revenue, than the recent announcement in regards to NASA. It may even open up the possibility of a merger, but even if it doesn't, this is two of the larger companies in the space, getting together to develop world class products and solutions for air quality monitoring.

Looking through the website for Aeroqual, there is a great section with on-demand webinars that talk about their products and technology and how it can be used in practice. Here is the link for that if you are interested.

DISC: Held.

Envirosuite executes MoU for strategic partnership with Aeroqual

KEY HIGHLIGHTS

Envirosuite and Aeroqual have executed a Memorandum of Understanding (MoU) covering the strategic partnership between the parties for global business development of joint market opportunities

Combines two complementary environmental technologies

The MoU outlines the acceleration of market opportunities in Mining, Waste, Wastewater and Industrial sectors

452kqmg596q9s0.pdf (asx.com.au)

EVS joins NASA’s revolutionary X-59 supersonic consortium

Leading environmental technology company Envirosuite Limited (‘Envirosuite’ or ‘the Company’) is pleased to update the market on its recent win with NASA to be part of the consortium for the X-59 Community Response Testing project.
Envirosuite’s participation in the project is an indefinite-delivery/indefinite- quantity contract, with an eight-year period of performance. The first phase of the project runs to the end of 2023 and focuses on preparing systems, technology and processes for large-scale testing, with a minimum value of approximately $750k to Envirosuite.
Envirosuite has been contracted to provide a software platform that will collect, process and visualize data from NASA’s low-sonic boom flight tests. This will enable NASA and members of the testing team to review the low sonic booms produced by aircraft together with the community response, in real time.
Envirosuite has been engaged by the consortium led by HMMH. NASA is designing and building the X-59 research aircraft – a piloted, single-seat supersonic X-plane – with technology that it hopes will reduce the loudness of a sonic boom to that of a gentle thump. NASA’s aeronautical innovators are leading a team across government and industry to collect data that could allow supersonic flight over land, dramatically reducing travel time within the United States or to anywhere in the world.

CEO Jason Cooper comments

“We’re privileged to have been selected as part of the consortium for this exciting and cutting-edge project with HMMH and NASA. This project represents new opportunities in the innovative area of aerospace, along with the future of Aviation. Our experienced team look forward to being part of this and bringing the X-59 Quiet Supersonic Technology aircraft to the skies.”
This contract has been included in the Q1 FY22 sales with approximately $100k in ARR and $750k in project revenue.

Overview

Envirosuite (EVS) develops and sells environmental management technology solutions. It provides industry with SaaS and Solution as a Service in managing and mitigating environmental impacts in relation to noise, vibration, odour, dust, air quality and water quality.

EVS uses its proprietary software to help customers minimise cost, optimise operations and meet compliance responsibilities through the use of environmental intelligence.

EVS’s three software product suites

• EVS omnis: a cloud-based platform designed to make complex environmental data interpretable for the mining and industrial and waste and wastewater markets. It is installed at 207 sites (as of the FY21 annual report) and delivers the company 14.6m ARR. 
• EVS aviation: world-leading airport management solution. The platform, ANOMS X, delivers aviation analytics and insights which are used to reduce environmental impacts and demonstrate compliance, while improving operational efficiency. This is installed at 160 sites (as of the FY21 annual report) and delivers the company 31.8m ARR. 
• EVS water: a cloud-based engineering solution – provides predictive and real-time advice to design new infrastructure, avoid water quality incidents, reduce operating costs and achieve regulatory targets. This product suite is in its infancy, with solutions installed at three sites (as of the FY21 annual report). There is a lot of opportunity for EVS in the water treatment market, so this is the one to watch closely. 

I won’t delve too much into customer base, other than to mention that both omnis and aviation are used by some significant players in their respective fields – Fortescue Metals, BHP, Veolia; and Heathrow Airport, Amsterdam Airport Schiphol and Airservices – further validating EVS’s products.

Its customers are diverse – both in industry and geographic location. EVS breaks down its target audience into three target regions: Americas, EMEA and Asia Pacific. Each are as significant as the other, with over 100 sites and material ARR received in each of the regions. 

Thesis

My investment thesis is based around ESG tailwinds; EVS is well placed to target and address increasing demand – more capital continues to be invested into socially responsible companies, with investors increasingly placing more value on making the world more sustainable.

There has been a significant shift in the way both countries and big business consider climate and environmental issues impacting communities – think mines, airports etc. and their ‘social licence to operate’. Further, Joe Biden recently announced a 2.3 trillion infrastructure plan to address climate change and trigger an EV revolution; this should amplify growth in EVS’s field of expertise.

I also like:

• First mover advantage in environmental intelligence and a point of difference in the market
• Debt free, with a reasonably healthy balance sheet of 17m.
• Insider ownership is sitting at around 10%, this isn’t standout by any means but is satisfactory.
• Sticky customers with low churn.
• Ties to natural disasters and their impact on airports – studies suggest 3 out of the top 5 global risks are led by extreme weather. Australia and surrounding regions in particular are susceptible. EVS is well placed to service airports (and other markets) using their Environmental Monitoring Units, which are capable of continuous and remote weather monitoring.

Despite ESG concerns arguably being the 'flavour of the decade', EVS still needs demonstrate they can be a profitable, reputable, business in time – that targets environmental concerns and positions itself at the forefront to address this demand. There are still significant risks in EVS eventually achieving cash flow positive.

Risks

• Inexperienced CEO and BOD: I have seen no red flags in EVS’s CEO, Jason Cooper. But the reality is he is reasonably new (hired in March 2021) and doesn’t have a lot of experience within the company. His performance is something to monitor and keep an eye on. This also extends to the BOD which I wouldn’t consider experienced (approx. 3 yrs average tenure).
• Unprofitable, and likely won’t become profitable in the next two-to-three years.
• Shareholders will likely have to prop the company up; dilution needs to be expected, probably many times over. In the past 12 months total shares outstanding grew by more than 15%.
• EVS’s globalised presence results in the company being exposed to foreign exchange, including the negative impact of strengthening AUD on the translation of foreign currency revenue.
• Duration and severity of CV-19 and the impacts this has on EVS’s aviation-related products, although this risk appears to be easing.

Key metrics to monitor

In the short to medium term, I want to see sales growth gradually increase; which should demonstrate growing interest and demand in EVS’s suite of products. I am also keeping a close eye on the cash burn rate, particularly with a new CEO at the helm.

Churn levels (and installed sites) are also important, which currently sit somewhere between 2-3%. These levels are impressive and provide me with confidence that EVS services are important to customer operations, particularly during a pandemic, where many services that weren't mission critical were dropped for cost-cutting purposes. As someone that doesn’t have experience in this industry, churn is also a great measure of product – this helps me mitigate some of my concerns around my lack of industry-specific knowledge. 

I think the most important factor over the next few years is EVS continuing to solidify and expand their strong foothold in the environmental intelligence thematic while using its cash efficiently.

When to consider selling

• Stalling growth
• Significant insider selling
• High levels of customer churn, particularly EVS’s marquee customers.
• Cashburn levels too high
• Any subsequent issues with reaching cash flow positive (this isn't anticipated in the next few years, so this point is arguably 3-5 year forward looking)

DISC: Held since June 2021

Yes, it was Macquarie who sold 80m shares on 24 Sep 21 on market at $0.16. 

Perennial Value increased their holding by just over 1% so took up some of the selling.

Macquarie had been selling since they acquired shares through their sale of EMS Bruel & Kjaer to EVS.  They last lodged a substantial holder notice on 10 Jun 2021, reducing their stake from 8.27% to 7.00%.  It is good in the end to have an overhang like this cleared at a reasonable price.

So it was Macquarie's that jumped ship, offloading their total stake of 80 million shares. I wonder why?

#Sep Monthly Meeting

Really good discussion with Jason. Only one thing he said that concerned me was on capital allocation, and adding or acquiring capability on climate change. My concern stems from that the current scope: airports, omni and water is so huge (especially water), that adding carbon might lead to a loss of focus for what is still a very small firm with limited management bench strength and people.

'A turning point': Murray Hill residents hope odor study finally tracks source of 'vile' odor

The City of Jacksonville (Florida) gave the green light for a year-long study by environmental intelligence software company Envirosuite.

Envirosuite releasing a market sensitive announcement that pretty much just says they "should" be well positioned to take advantage of the US infrastructure bill. I dont see why this was marked as price sensitive or the subsequent pop in SP? The announcement says the company won a contract with a county within the state of Tennessee, but doesnt explain for how much or how long. Im a bit confused about the announcement.