EVS has announced a few things on the ASX recently. Here are my thoughts. I will start with the not so good and end with the good.

Not so good:

• Goalposts of EBITDA positive moved from Q3 2021 to Q4 2021 – If EVS already sandbagged the timing of deals and still missed the mark, then that isn’t good…although not the biggest issue in this current climate. It will be an issue for me if they continue to push the goalposts out without any specific details.
• The CEO is leaving...Not cool! People leave jobs for all kinds of reasons, but he just signed a new remuneration deal in July 2020? I don’t know much about the successor but will be keeping a very close eye on performance. 

Good:

• EVS continues to show that its airport contracts provide resilient revenue.
• Non-recurring revenue expected to be significantly up on H1 FY21
• Recurring revenue expected to be up 4-8% in H1FY21 as temporary discounts offered to airports begin to unwind…will the airports ask for extensions on the discounts?

EVS mention a couple of tailwinds worth mentioning:

• “Increasing community demands and public awareness means rising tide of regulation” -  I agree, and this is a reason why I like EVS. I think the public pressure for mining and construction companies to reduce environmental impact will significantly increase. This could increase the need for monitoring their impact.
• “Biden administration focus on climate change and environmental justice” -  EVS are market leaders in environmental monitoring technology. If they can leverage off this, then that would be huge.
• “Do nothing case for industry is no longer sustainable” – agree that pressures for companies to become more environmentally aware will increase and could create PR disasters for companies that choose to ignore.
   

In summary, not overly excited by any of the recent news but I will be monitoring closely in the near term. I still like the company and I believe the growth is in the construction, mining and industrial sectors but the change of CEO has me on edge a little.

Overview:

EVS is an environmental technology company that captures, stores and displays environmental data to produce actionable insights in real time. Their products are very user friendly, meaning the user doesn’t have to be an expert just to use it. EVS also provides a stakeholder platform to manage stakeholder engagement.

EVS provides technology to monitor air, noise, vibration, dust, water and ouder to the following sectors:

• Airports
• Mining
• Construction
• Waste water
• Industrial 
• Cities

Although EVS sell their own instrumentation, their technology is device agnostic.

Notes:

• Proven resilience in revenue from airport contracts as they must continue to monitor noise levels to comply with regulatory requirements

• Have various industry leaders as clients including BHP, Rio Tinto, Glencore, LAX and Heathrow

• Globally diverse clientbase over a variety of products

• Genuine leaders in their niche

• The focus on environmental impact is increasing which may lead to stricter regulatory requirements and/or public pressure for companies to reduce their impact. This could mean a greater emphasis on environmental monitoring

• EVS products can provide real time and predictive data to avoid incidents and community complaints (quick anecdotal note - A complaint can take a lot of man hours to close out and environmental incidents can take many many months to resolve, putting a halt to works. Which means potentially large fines, delay costs, missed KPI’s and other indirect costs)

• Provides end-to-end solutions over a variety of sectors

• Management have made smart moves by acquiring EMS Bruel & Kjaer, AqMB and negotiating the Sewex licencing agreement which has greatly increased their sales outlook

• 75% recurring revenue

• $24M in cash and cash equivalents with ~$12M as residual to fund operations

Disc: Held

Came across this article published by the AFR stating that BHP (an existing EVS customer) are planning to spend ~$1.37b over the next 5 years to achieve its new emissions reduction targets. Although this isn't exactly huge news for EVS, I see this as positive as it could open opportunities to sell their product to new mining giants if they are pressured to follow suit. It can also open the door to upselling opportunities to existing customers.

Key notes:

• the investment required to achieve the targets would rank above dividends on its list of spending priorities

• Under the ''capital allocation framework'' that governs all of BHP's spending decisions, the first priority for spending is on maintenance, to ensure its mines are safe for workers. BHP said spending to achieve the new emissions targets would share that rank.

In light of this, EVS may benefit from assisting BHP (and possibly others) in monitoring their efforts for emissions reduction.

Linke to article: https://www.afr.com/companies/mining/bhp-s-1-3b-of-climate-projects-more-important-than-dividends-20200910-p55ue8