Well that was unexpected. Hitachi has bought a 12% stake of EVS at $10m. The GM of 'New Business Strategy' at Hitachi will become a director of EVS immediately.

https://envirosuite.com/company/investors

The latest set of results had a few positives, although the key issue remains -- sluggish revenue growth.

The full year results preso is here, but you're looking at a 2.8% rise in ARR and a 2.6% increase in total revenue.

Still, some positives:

• Slight increase in gross margin
• Adjusted EBITDA (which largely strips out one-offs like restructuring and transaction costs), doubled to $1.1m
• Industrial continues to do well -- New ARR up ~25%
• Americas region a standout, ARR up 7.2%
• Cut off low margin and legacy customers
• Average revenue per site continues to grow -- up 10% for the year (gives some legitimacy to the expand part of land & expand strategy)
• $2.5m in costs removed.

Negatives:

• Removing one-off costs, the business has a positive operating cash flow, but still heavily negative when capitalized dev costs are included.
• Only $3m in cash on hand left
• Big writedown in goodwill (a reflection I believe of their aviation acquisition, which was always a bid move..)

The current market cap of ~$54m compares well against total revenue of $59.4m -- at least, that is, if you think they can actually scale well and finally delivery some accelerated sales growth. And that for me is something I lost conviction on a while back..

I retain a small position, but not tempted to buy again until I see some improvement in growth.

Today's announcement making me glad I've walked back my exposure to Envirosuite. Once again, it just shows how elusive any material growth is for them.

To wit;

• Total ARR up 2.9% over the year (hit by FX, but also downsell and churn.. makes you wonder how recurring this revenue really is)
• New ARR was an improvement on recent quarters at $2.1m, but below what they did in the pcp.
• Churn increased a little to 4.1%

And there was also this:

The company is also consulting to explore a range of 'strategic opportunities' with 3rd parties. Which, I presume, is code for "we are shopping ourselves around to potential acquirers" -- although it may be something else. Possibly an acquisition to help rationalise another raise? (Although given their track record of acquisitions I'd be nervous of that).

EVS is now >2% of my portfolio after I sold down a few months ago, and even after today's drop is just on par with my valuation.

I'll probably look to sell down the remaining holding at some point unless there's a material turn around. But I have lost faith in management.

Envirosuite have come out this morning and advised that, well yeah, discussions are occurring, as they typically always do in this end of the market. Some discussions are underway but nothing material has eventuated to date, and that doesn't necessarily mean it will either.

Essentially, "Nothing to see here - business as usual, we talk to people, who talk to people".

Personally, wouldn't mind a little more traction in this space given I've been underwater for some time. The company needs to start making some deliberate moves to reach profitability and hit an inflection.

Been close to hitting the big red button (sell) for a while now but still remaining stuck to my thesis and dare I say "hopeful" that they can make it happen.

Private capital kicks tyres at Envirosuite; watching brief on Potentia

Envirosuite, an ASX-listed technology business geared at the aviation, mining and industrials sectors, may not have had much good news for shareholders since it retained Gresham Partners in late 2022. But there is plenty happening behind closed doors.

Envirosuite’s former chief executive (and now director) Peter White and Beijing BHZQ general manager Zhigang Zhang at a contract signing.  

Sources told this column Envirosuite’s board and Gresham have fielded interest from a handful of buyout firms and strategic players over the past year. But while a data room was established, the proposals were deemed too incomplete to merit disclosure.

Envirosuite’s tech platforms help companies make real-time decisions regarding their operations to minimise both costs, and their environmental footprint. Gresham dealmaker Hugo Dudley-Smith’s pitch to potential bidders is understood to have centred on its footing in fast-growing niches and that its offering is agnostic across various hardware providers.

The company makes $62.6 million in annual recurring revenue from blue-chip clients like NASA and Glencore, but is trading with a paltry $60 million market capitalisation after its share price dropped more than 40 per cent in the past year.

Of note, it is understood Andy Gray’s software specialist firm, Potentia Capital, has been in-and-around the data room, although it is unclear how progressed its interest is, Mid-market private equity firm Adamantem Capital also considered Envirosuite for its $200 million Environmental Opportunities Fund but was turned away,

A spokesperson for Envirosuite declined to comment on Wednesday.

While the buyout talks play out, Envirosuite’s shareholders have had to sit with gritted teeth as the stock continues to plunge. That includes Thorney International (6.5 per cent), Ellerston Capital (7.9 per cent), and Perennial Value Management (14.06 per cent).

Street Talk understands the register – led by Thorney – will start seriously pushing for board-level change, should a bid fail to materialise. Sources said the hunt for a new chair is already under way.

The annual general meetings result from November reflected shareholders’ growing dissatisfaction, with 25.5 per cent of proxies and 28.6 per cent of votes cast on the day going against David Johnstone’s reelection as the chairman.

PE giant EQT pays $250m for Potentia’s NewBook; 6.5 times money

-new chair incoming, Alex Waislitz confirmed there is lots of talk that a number of parties including PE firms and others are sniffing around EVS. Didn’t have any feel for whether something is imminent. Said a number of shareholders have been unhappy with the performance for some time including Thorney and agitating for change. If there is no deal then he expects a new chairman will be put forward. He did not want to say who that might be.

-has PE and strategics looking at it, have received inbound proposals that they have deemed not complete enough to disclose.

I listened in to the call. It was popcorn-worthy.

One shareholder expressed his feelings about the SP and demanded to know when they would see a real profit. He also expressed frustration with the term 'adjusted EBITA less Capitalised Development on a run rate basis'.

Management started out sounding confident and then started fumbling as they tried to explain why they use various terms.They don't seem prepared to handle pushback, they just want to skate through until the brighter future. They closed by saying 'Thanks everyone, I can see we're all aligned on the need to (make money).'

They do like wishy-washy terms. I think they mentioned the establishment of 'centres of excellence' in the Philipines and LatAm.

Takeaways:

-Breakeven will occur in 2025, they said this twice, first hesitantly, and later more emphatically.

-Debt will be an ongoing source of funds to support inventory, beyond the current 3 year term. They claim a good relationship with their bank/s, and used as evidence an improvement in the current terms.

FY24 Q3 SALES UPDATE

New Sales of $2.9m, ARR grows 11.4% PCP to $62.6m

Key Highlights: 

• New Sales of $2.9m, including New ARR of $1.8m and Project Sales of $1.1m. EVS Industrial continues to drive the Company’s growth, with the Americas region maintaining its strong contribution.
• Total ARR grows 11.4% PCP to $62.6m.
• New ARR of $1.4m in EVS Industrial underpinned by solid growth in the Mining sector, including the first mine site landed with new customer LKAB in Sweden, and expansions of existing solutions with Capstone Copper in the USA, Teck Resources in Canada and Glencore’s Cerrejón mine in Colombia.
• This includes New ARR of $0.1m in EVS Water sales. As EVS Water was recently consolidated into EVS Industrial, the Company will no longer provide sales updates for EVS Water.
• EVS Aviation achieved New ARR of $0.4m, including expanded solutions on top of a five-year renewal with Dublin Airport in Ireland, and a new noise and operations management system to be provided to Korea Aerospace Research Institute in South Korea.
• Envirosuite reaffirms its outlook to deliver positive Adjusted EBITDA less Capitalised Development on a run rate basis during FY24, continuing to focus on prudent cost management while delivering sustainable growth.
• Churn over the last twelve months (LTM) increased slightly to 3.7%.
• The Company will host an investor briefing session today at 11:00am AEST.
Click here to register: Envirosuite FY24 Q3 Sales Update

24 April 2024 -  Leading environmental intelligence technology company Envirosuite Limited (ASX: EVS) (Envirosuite or the Company) is pleased to announce that it has achieved $2.9m of New Sales in FY24 Q3 (Q3), with New ARR of $1.8m and Project Sales of $1.1m. Total ARR has grown to $62.6m, up 11.4% PCP.

Envirosuite has delivered solid new ARR growth this quarter particularly within the Mining and Waste sectors which are a strategic focus for EVS Industrial growth. Demand for environmental intelligence technology within these sectors continues to build, with both leading mining companies and US municipalities increasingly looking for innovative and proactive approaches to protect and optimise productivity while managing environmental and community impact responsibly and sustainably.

Envirosuite CEO, Jason Cooper, commented,

“The Company continues to achieve sustainable growth as it remains focused on delivering on its guidance target of positive Adjusted EBITDA less Capitalised Development on a run rate basis in FY24.

“The EVS Industrial growth we are seeing, particularly from the Mining and Waste sectors and in the Americas region, is a direct reflection of the Company’s focused growth strategy in these segments and is further supported by macro-economic drivers including ESG, Environmental Justice in the USA, and the increasingly prevalent need for industry operators to demonstrate responsible operational practices. The calibre of customers we are adding each quarter within these focus sectors coupled with our proven strategy to further expand and scale these relationships, is testament to this – demonstrated in Q3 through key wins with LKAB, Capstone Copper, Teck Resources, Glencore’s Cerrejón mine, Atlantic County Utilities Authority, and a fourth landfill site won with our strategic partner Byers Scientific.

“Envirosuite continues to extend its market leadership position within the Airports sector, headlined this quarter by a long-term renewal with Dublin Airport to continue providing the existing noise and operations management system while also expanding the agreement further to provide additional community engagement and noise quota management solutions. We are proud of the long-standing, deep relationships we have with our Aviation customers and continue to work with them to solve the industry’s current and future challenges.”

Looks like Jason has continued to stick by his word (kudos) in not raising capital.

Instead they have extended their debt finance facility by $5m to $12.5m (up from $7.5m).

Fairly straight bat, forward-defense type stuff in the communication. In the announcement Jason has noted:

“We are pleased to announce the extension of the Facility, which remains strategically aligned with our core business objectives: driving growth, creating long-term customer value, and leveraging the increasing opportunity to bundle hardware and software into our Industrial customer contracts. This extension also funds our global inventory and working capital requirements. With this extension, the Company remains funded to pursue sustainable growth in our focus sectors as we transition to profitability. We currently have no plans to raise further capital to fund our organic growth.” 

Looks like they appear confident this debt facility can provide them enough liquidity to transition them through to profitability.

I haven't done a run on the numbers yet, but cash on hand in their most recent half-yearly was circa $5.5m , and from memory they should be fairly close to break-even.

I applaud Jason sticking by his word - now it's about executing and sailing through to profitability.

Just saw the news this morning that EVS are merging their water products in under Industrial.

While I can see the synergies from a GtM perspective and hopefully they have a reduced cost of sale overall, it will be a shame not to be able to track Water's growth independently of the other product lines.

Albeit off a small base, my investment thesis has been that Water is the wildcard in the portfolio with potentially very large growth driving the future of this business.

• Aviation doesn't feel like a growth business (and frankly, I'm a bit sick of the moaning about the "one off churn event" as churn is a reality in ARR businesses that has to be expected and growth needs to cover for it).
• While Industrial is growing nicely, the challenge with that business seems to be the impact on metrics (shift in margins) as EVS are needing to borrow money to finance a bunch of site instruments rather than a pure software sale. So more and more I suspect that part of the business will put negative pressure on gross profit (and eventual earnings multiple once this company has more reliable profitability).

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.

Latest sales update looks promising

https://envirosuite.com/insights/news/fy24-q2-sales-update

I’ll be interested to understand how much of these new sales are the “sell through” PPE (that I seem to recall was going to grow with debt funding) vs higher margin software revenue. I’ll be interested to see this when they publish their first half results which are supposed to be out in late February.

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).

Ana Rowe has been appointed to the role of Chief Operating Officer. She comes with almost 20 years’ experience in digital product management, strategy, consulting and operations. 

Her background seems impressive, having previously been in leadership roles at SEEK, REA Group and Thoughtworks Australia. As COO, she will oversee all aspects of operations, and is responsible for "identifying areas of improvement and leading required change". Interesting choice of words, with lots of focus on improvement and change.

Ana was a Senior Product Manager in the media line of business at the REA Group (realestate.com.au), managing their content sections and delivering innovative solutions for over 3.5mil monthly visitors, and also looking after native media solutions for customers.

At SEEK Ana was a Product Manager for a number of years, managing the seekbusiness.com.au site, as well as delivering jobseeker products in the areas of search, personalisation and job application process.

Prior to product management, Ana's experience was primarily in marketing and market research roles. She also holds a Master's degree in marketing.

So in short, primarily product manager experience, including experience with reputable, ASX listed companies. Prior marketing experience also. An interesting fit for EVS who really need to encourage adoption of their tech/product suites. Hopefully a good hire.

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.

Not a terrible result from Envirosuite. I missed the first part of the briefing this morning, but my main thoughts are (starting with the negative):

• The team is way too focused on the share price. Yeah, i get it, I bet a lot of investors are asking wtf!?, but stop worrying about it if you truly don't have any near term funding requirements. I messaged the following during the call, but they didn't read it out:
• "Stop worrying about the share price. All you can do is be consistent, candid and clear in your communication and the market will either get it or not. But what it will ALWAYS "get" is a steady improvement in key fundamentals. But if you really did want to send a potent signal to the market in regard to your view on value, buy some shares on market -- and something reasonable! Money speaks louder than words.."
• The level of skin in the game is woeful in my view.
• Jason likes to talk a good game, and I'm sure he's being genuine. But everything always seems to be about to happen. Don't over-egg the pudding!
• Claiming $2m in new ARR as a "strong result" in a typically softer quarter (due to North American holidays) would be fair in comparison to other quarters, but it's still less than the $2.1m in the prior first quarter. Pretty sure holidays would have been a factor in Q1 FY23..
• Anyway, total ARR growth of 10% was reasonable, but not as high as i'd have liked. To be fair, if you exclude the "churn event" in the prior 3rd quarter, which isn't entirely unreasonable, ARR growth would have been 16%.
• Also good to see North America do well -- it accounted for 55% of new ARR -- and the company seems to be winning new clients across all segments.
• We seem to be seeing some traction with Water too, a new enterprise deal with Ion Exchange (an Indian based water treatment company) is encouraging. There's potential to roll out to a lot of additional plants if successful. Not sure of the exact quantum, other than it being "significant"
• Aviation won a significant expansion with a key UK airport customer (they couldn't say which, but seemed to hint it was one of the bigger ones). A rebound in the aviation industry is helping to stimulate more investment from customers and they are especially focused on community engagement.
• Industrial was pretty ordinary, although Jason did stress the lumpy nature of deals here. ARR also impacted by end of life contracts (ie. subscription not renewed because the customer project finished). It was good to see some new and notable customers -- hopefully we can see some of the "expand" phase of the strategy play out here, they certainly seem to have a lot of sites.
• While new ARR was ordinary, project sales were up 31% on the pcp -- and these are a good lead indicator for future revenue (Jason again stressed this in the briefing)
• Perhaps the main thing was the reiteration of the EBITDA +'ve target for FY24 (after rightfully deducting capitalised development spend).
• There was some rumour about a potential takeover of EVS raised by one of the attendees, but Jason batted that off as speculation. Frankly, i'd be annoyed if it was taken out for a low-ball offer.

The company has a market cap that is only 10% above its annual recurring revenue (It's a flawed metric, but you have to work with what you've got!). The near term working capital demands are no longer threatening a raise, we're seeing new customers and a reasonable level of growth in recurring revenues, as well as a large opportunity across the three divisions. It's a super niche area, but one in which EVS is the global leader.

Yeah, it hasn't executed as well as I'd have liked, and they got over their skis for a time there in terms of cost management and growth initiatives, but they've got a good offering across various sectors that all appear to have some traction.

I'm continuing to hold. I wouldn't call EVS a high quality company (although that potential exists for the future), but the valuation seems compelling.

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

Colby Manwaring to be appointed as Director

'Colby has had an executive and entrepreneurial career in water and environmental software, covering nearly all aspects of the industry, including software development, sales and marketing, professional technical training, strategic business planning and execution, mergers and acquisitions, and strategic alliances. Starting his career as a software developer he went on to lead multi-national infrastructure analytics software company, Innovyze, with 3,000 customers globally, which subsequently sold to software giant Autodesk in 2021 for $1Bn USD ($1.55Bn AUD).'

Interesting that Colby is a) based in North America, EVS' largest region and b) has a background in water.

Colby was CEO when Innovyze was sold to Autodesk for just over $1b in 2021. Prior to this, he spent 10 years as CEO of XP Solutions -- another US based business -- which was eventually merged with Innovyze in 2017. Innovyze is a global leader in water infrastructure software. When the acquisition took place, Autodesk stated it positioned them 'as a technology leader in end-to-end water infrastructure solutions from design to operations, accelerates Autodesk’s digital twin strategy, and creates a clearer path to a more sustainable and digitized water industry.'

Very, very interesting. Colby will presumably add significant value and subject-matter expertise around the water segment and bring an established network with him to the director role.

Hugh Robertson to step down

Having served as a director since September 2018, Hugh will step down effective 1 September 2023. There is no justification given for his exit. On paper though, Colby seems a much better addition to the board, so I am not complaining..

My meeting notes for the August 2023 interview:

• $EVS does racetracks! However, I agree with @Rocket6 Racetracks are probably like Defence, they know they make noise and simply need to 'report' and not 'improve' - So no value for $EVS to invest.
• Jason suggested $EVS will be bigger in Africa soon!
• $EVS finished up cashflow +ve, true, but numbers can be flexible, and Jason did state it was a goal of leadership this FY... so I'm skeptically happy.
• No cap raise likely for $EVS. Jason firmly believes the path is set.
• I observed promotional language in Jason – pride? Or salesman? A bit of both, he is very careful with his words. A good sign IMHO.
• Jason's shoulder touching when talking about the restructuring costs was abnormal behaviour for the interview... Causes him stress maybe?
• A genuine laugh from Jason around the ‘fine line’ of profitability vs internal investment. Classic SaaS problem.
• The Americas are the growth engine for EVS. Industrials is 20% growth yoy, Aviation is biggest and strongest, Water is slow because of customer business processes.
• Methane monitoring/insights into the Omnis platform by external IoT provider is a thing for $EVS.
• China potential. Was a big $EVS narrative, but not anymore. On a country basis $EVS is cash flow +ve. however one wants to build a ramp with their supplier and in China it’s a one way street. So not rushing to leave, but not rushing to expand.
• Supply chain, they use a third party for IoT equipment. It sounds as if $EVS is the primary customer and thus has pricing power.
• Inflation. $EVS builds CPI increase into their contracts.
• $EVS software dev team is stable for employment and no high turnover.
• Jason's opinion is that Mr Market's low price assumes a Cap Raise. No CR unless they want to buy a ‘compelling’ offer.
• I agree with @mikebrisy I like the 'cut of the jib' of Jason. He has interviewed well multiple times now.
• Random fun fact, last time I purchased a parcel at $0.08 was in 2018! $EVS is definitely changed since 2018 and I think is a much stronger company than it was in 2018. I'm off to top up. Thanks @Strawman for the interview.

disc: Held IRL.

Another good meeting. My notes are below:

• Recap of results -- best results the company has ever delivered according to Jason.
• Suggested Q1 likely to be weaker as suspected. This is due to this period being holiday time for a lot of the regions they service and it is typically their weakest quarter.
• Provided a little bit more context around the churn of the Defence contract. Jason almost suggested the move was mutual – Defence need a focus on noise (loud planes/jets etc) – Jason suggests they aren’t going to be doing too much on the noise front to help them moving forward, a ‘strategic direction’ with the company, given they want to focus on commercial aviation due to it being ‘scalable, repeatable’ and ‘solving a real problem’. 
• I just made a separate forum post to @Parko5 and @Strawman suggesting this is likely why they don't play more of a role in servicing racetracks.
• Jason indicates ARR is the key EVS metric to track and judge them on.  
• Goal to transition to operating cash flow positive in the backend of FY24
• Firmly believe they will avoid a capital raise. Considering debt options. 
• Transparent views about water – openly stated that water has not grown to the rate management expected due to additional information they have learnt throughout the journey – mainly around evaluation and procurement criteria, and the nature of their customers (utilities etc). Jason maintains the problem they are solving is scalable and real, it is now about evolving the business model so that customers can transact quickly and that they target the right customer segment. 
• Just on water as well, and this does NOT relate to the interview but instead the results call – Jason suggested FY24 would likely be the year Water ‘takes off’ for the lack of a better term, in his view anyway. Lets see what happens over the next 12 months. 
• Jason was more bullish on aviation than I expected – yes it is his job to spruik his own segments, but it genuinely sounds like he is excited for their products and the impact they can make on the market going forward. He sees lots of blue sky here.
• Prompted re: SGS alliance – more influential in some areas than others, South America and Australia for example which have strong traction moving forward. They have ‘heavily influenced’ some mining deals won. They are happy with where this is at but would like to see more growth result from that alliance. 
• Some interesting discussion about the Chinese market. In short, there are more favourable markets for them to interact, dealing with business/countries that actually want them to do well. That said, they do still have some exposure to the Chinese market and they are cash flow positive in that region.

As always, it is great to hear a CEO in the Smiling @Strawman Starchamber.

My takeaway from the discussion is that Jason has been pretty consistent over the three meetings, and I certainly share his disappointment at the lack of a positive response to the annual results, which were good.

However, $EVS remains on my watchlist for now, because I want to see some further confirmation of the ARR growth / revenue trajectory. Because of the huge, global, macro-theme around its ESG-aligned offerings, one thing holding me back is that I don't understand the competitive dynamics in its three verticals. For sure, customers are investing in all three areas, so at some point we have to see a more material uptick in sales.

In concept, $EVS might become a Baby Giant, so I remain interested. And, indeed, the FY23 post-COVID recovery in ARR-uplift is a positive sign that there is more than a story here.

I'm all done with numbers for this week, so instead I will use an analogy to try and convey my assessment.

I'm standing on the 5th floor of a skyscraper (>100 floors), with a row of elevators (ride opportunities) in front of me and a dozen passengers I have to direct to queue at each door to ride to the top. As I see each elevator rising up from the 3rd or 4th floor, I direct each passenger to wait at the door to board the lift. There are several other elevators already moving up to my floor, but I can't see when the $EVS "elevator" is going to arrive, as it is still down at the 1st or 2nd floor. So, I am directing my passengers ($$) to those doors where I've got the confidence they won't have to wait too long. (In my analogy, the payoff is bigger if you get on at lower floors, but is reduced if the elevator is too slow - if that wasn't clear).

OK, not sure if that works. But it is how I am reading things.

Disc: Not held in RL or SM

Our meeting with Envirosuite CEO Jason Cooper this week is well timed; no doubt we'll have some good questions for him and he'll be able to speak much more candidly now their numbers have been published.

(BTW -- please add any questions for Jason here)

First off, the ARR results were known following their 4th quarter results . As mentioned at the time, these were pretty good thanks to a record 4th quarter.

Annual ARR growth in recent years has been:

FY20: (not relevant as the acquisition of EMS distorts things. fwiw ARR in 2019 was $5.6m, which at least points to the substantial growth of the industrials segment)

FY21: 8.1%

FY22: 14.0%

FY23: 12.1%

It's worth noting that the industrial segment ARR growth has been around 22%pa over the last 3 years. With airports no longer (hopefully) acting as a deadweight, we'll see group ARR accelerate a bit.

If EVS simply match the same new ARR in the current year, total group ARR should be up by over 15% for FY24. Which is about what's needed as a minimum for me.

(The water segment is still very nascent -- but a bit of traction here could really help too. I'm really looking at this as a free kick option right now)

This time last year, ARR was reported at $53m, and for the year just ended EVS said it had recorded $49.5m in recurring revenue. There was the loss of those defence sites in the second half, but there was also $4m in new ARR from the first half -- so i'm not exactly sure why there's a small mismatch. A question for Jason, maybe just timing issues?

(It's not a huge difference, but ARR metrics just always seem to be a little fuzzy. Yes, a useful guide for investors and management, but too subjective for my liking)

Finally, it's great to see some really strong ARR growth in the Americas and EMEA. These are big markets, of course, so hopefully they can sustain some momentum in these geographies.

Anyway, moving past ARR.

It was good to see improved gross margins. In fact they've been steadily improving for some time now. Tick.

Adjusted EBITDA was positive $500k, a big improvement from the $3.9m loss in FY22 and ahead of what they had guided for. The big swing factor here is the $1.8m in annualised cost savings due to restructuring efforts (ie redundancies), which is reasonable to strip out, imo. Less so is the exclusion of share based payments, which amounted to $743k -- add that back in and it was a negative adjusted EBITDA.

To be fair, they do breakout a better picture of things with what they call "Management Operating Cash flow":

So not to be negative (I'm certainly not unhappy with the improved trajectory with the financials), but the business is very much asking you to focus on their preferred metrics. Let's not forget that on a statutory basis they lost over $10m this year -- largely due to $9.4m in D&A charges.

In fact, capitalised development costs were up 21.3% to $5.7m. And accounting for this, operating cash flows were negative $3m (even if you add back one-off restructuring costs and the like). Still, they have been working on new modules and there's (hopefully) genuine value being created. And, yes, capitalising dev costs is just par for the course -- even Objective Corp has yielded to the practice! Still, i just make note of it. Those D&A charges may be "non-cash" but they are very real if you hope to maintain competitive software solutions.

There's a little over $8m in cash left. So it'll be a close call with a raise. Prudence suggests it's wise to expect one. Maybe they'll do a Pointerra and issue a big contract win first? (or maybe i'm just getting too cynical with age..)

Elsewhere, operating expenses were up 6.9% over the year to over $40m (see annual report, not the preso, for stat numbers). I'm keen to see what the 'normalised' cost base is like. The truth is, we need to see some operating leverage kick in -- and if they can sustain 16% gross profit growth while holding fixed costs steady (or at least only wear modest fixed cost growth), 'adjusted EBITDA' could really explode higher -- and even, dare i say it,NPAT growth too -- in the coming years.

Anyway -- there's a solid little business somewhere here. Overly aggressive expansion plans (remember the push into China?), ill-disciplined cost control, a global pandemic that knocked the biggest segment for six, a change in management...(have i missed anything?).. have all acted to impede the growth in cash flows and certainly tested shareholder patience. But i'm encouraged with the return of growth in aviation, the continued strong growth in industrial segment and the free kick potential with water (the Chairman has said this segment has the potential to be the "jewel in the crown"), especially in combination with more prudent cost discipline.

If all goes well, I cant see why Envirosuite shouldn't be generating $100m in revenue in 3-4 years. Ideally with at least a 20% operating margin. If achieved, the market cap could easily be $200-250m (around 16-20cps) at that stage, and offer a decent annual return for current investors.

An overly dilutive raise, mediocre top line growth or a failure to manage costs effectively would, of course, undermine any confidence here.

Will continue to ponder and hoping we can get a clearer picture after we chat with Jason this Thursday.

[HELD]

Just went down a rabbit hole on the latest annual report ... (trying to work out my latest valuation)

Trying to work out the negative cashflow -8.052M and get a feel for when these guys are going to run out of money and need to raise more capital. They've only got 8.22M cash so look to have less than a year or runway left. Based on their last raise and burn I'm guessing they are going to be looking for another $10m or so which would be a further 10ish% dilution.

In doing this digging I realised how large an amount of goodwill they have on their balance sheet. In viewing this, they have racked up 66m of retained losses to generate 107m of intangible assets. This seems to be backed up by a DCF model from management.

My key question here is how do these figures compare with those in your DCFs or estimates of value (mid teens revenue growth rate with 12.5% discount rate) that seem to have lead to a consensus valuation of 15c per share?

FY23 FINANCIAL RESULTS 

$4.5m improvement in Adjusted EBITDA to $0.5m profit, cash flow positive of $0.7m from operating activities, ARR grows to $59.4m up 12% YOY 

Key Highlights: 

• Adjusted EBITDA profit of $0.5m achieved for the year, an improvement of $4.5m YOY, exceeding the Company’s goal of transitioning to Adjusted EBITDA positive during FY23
• Gross profit improved by 7.7% YOY to 51.6% on an EBITDA basis
• Positive cash flow from operations of $0.7m, an improvement of $3.9m YOY, successfully balancing cash management with investment in people, product and growth
• ARR increases to $59.4m up 12.0% YOY following a record $9.1m in new ARR with particularly strong growth in the Americas region, which contributed over 40% of new ARR
• Recurring revenue up 12.8% YOY to $49.5m, representing 85.5% of Total Revenue of $57.9m
• EVS Aviation – ARR of $36.4m up 7.4% YOY, demonstrated strong customer retention with key renewals and exciting growth from new marquee customers. The success of innovative aviation products (Carbon Emissions Modelling and InsightFull community engagement portal) highlights the industry’s growing response regarding the environmental and social impact of air travel
• EVS Industrial – The Company’s primary driver of growth, with ARR up 19.3% YOY to $21.6m, including strong growth in the mining sector and the Americas region, where the Environmental Justice movement and resulting legislation has generated significant momentum in the US
• EVS Water – ARR up 36.0% YOY to $1.4m and achieved significant product validation in every region during the year creating a strong opportunity pipeline through several channels
• Annualised churn of 8.1% (1.9% when excluding the previously reported one-off churn event) 
• The Company ended the year with $8.3m cash and no debt

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

Not quite the $50k Strawman was chasing however Susan Klose picked up 500,000 shares today. Always happy to see director buying but feel the dial won’t turn until there is an announcement that they are getting closer to cashflow positive. Certainly requiring lots of patience.

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.

Envirosuite is getting pounded pretty hard on tax loss selling. Quickly approaching 5 year lows.

Speaks to the sentiment investors have towards the business at the time. Board renewal will now likely align with investors holding renewal.

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.

20 April 2023: MA Moelis Australia: Envirosuite Limited (Buy): "Mar'23 4C: ARR broadly flat due to Aviation churn, 4Q pipeline remains strong"

That's the first page. Click here to access the full report.

Disclosure: I hold EVS shares here in my Strawman.com virtual portfolio and also in one of my real life portfolios.

Envirosuite MA Moelis AU buy rec 20 April.pdf

Solid broker report with a "target price" of 17c. Touches on much of what has already been discussed.

@raymon68 has provided the details on $EVS.

I only observe in addition that with New ARR of $2.0m in the Q - the same level achieved in the PCP - that Total ARR is moving into decline for the fist time in recent periods, from $56.9m to $56.2m. That's not what you expect in a growth play.

At the last investor presentation, Jason Cooper spoke powerfully about the quality of the pipeline and we were led to expect that there would be strong wins upcoming. However, I wasn't convinced, and exited at the time. Today's report indicates this questionmark remains.

I remain on the sidelines for now, with $EVS still on my watch list. This just isn't showing delivery progress commensurate with the story and earlier management rhetoric.

Disc: Not Held

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

This was a decent result for Envirosuite.

You can read all the details here, but the main things of note to me were:

• ARR growth more or less on pace (although hoping this starts to accelerate as aviation picks up)
• ARR growth across all geographies, but US especially strong
• ARR growth above customer growth (increased ARPU)
• Gross margin improvement
• Much closer to breakeven, Adjusted EBITDA (adds back capitalised dev costs) positive in final two months of the year. Expect to be so on a sustainable basis going forward this year.
• Plenty of cash at just shy of $12m
• Solid pipeline

Valuation remains undemanding at about 2.6x ARR (not a great measure, but somewhat useful as a benchmark at the current stage). Provided, that is, top line growth can be sustained (or exceeded) in the mid-teens AND the business scales well.

Held.

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

Seems an ok quarter overall for Envirosuite. ASX announcement here

New ARR grew by 11% from a year ago. And total ARR up 16% to $56.9m, with Aviation recording its strongest quarter ever with air traffic rebounding in the US. The new carbon emissions module is showing some good potential.

That masked a drop in new ARR from Omnis, which added $0.6m in Q2 compared to $1.3m in the pcp. A number of deals were signed during the quarter with revenues expected in the current quarter. Overall Jason Cooper said he expects growth here to be at, or above, the historical growth rate for the rest of the year.

The nascent water business didn't see any new ARR (in total this segment is only at <2% of total ARR), but new features were released, previously signed contracts continued to be rolled out which, it's hoped, will provide useful reference sites and product validation. Combined with a proof of concept trial with a major US based water treatment services company, Jason reckons it provides the business with "an exceptional revenue opportunity"

Still have $12.9m in cash, down from $16.2 at June 30 last year, which implies an annual cash burn of $8.6m (although need to be careful here due to timing effects etc). I'm unable to attend the briefing today (register here for 10:30am), but it'd be good to get an update on how they see their cash burn evolving.

Overall, it seems the general thesis is on track. It's really encouraging to see some life in aviation after the impact of covid. Representing 70% of group revenues, previous sluggishness here has really limited overall growth.

While the level of total recurring revenue has been growing steadily -- the pace of growth hasn't improved for a while. EVS is adding an average of $8m in ARR per year, which represent mid-teen growth. Not bad, but it'd be nice to have all three segments increasing new ARR at the same time.

EVS shares are currently trading on 2.8x ARR

Held.

Moelis Australia broker report on Envirosuite BUY rating with price target 0.17

https://mamoelisaustralia.bluematrix.com/sellside/EmailDocViewer?encrypt=6edd91b6-48ba-41dc-89fa-07bbfdbcd1c4&mime=pdf&co=moelis&id=edward.day@moelisaustralia.com&source=mail

Have announced achieving adjusted EBITDA positive in fy23. Path to being NPAT positive seems much further away. Note from tables below that that the book value of the intangibles didn't materially move from fy21 to fy22 even though they made $5m amortisation. This because they capitalised another $5M in software development.

They have an eye watering $108M intangibles on the balance sheet. $89M is goodwill that they aren't amortising at all. Perhaps that's ok. That leaves $19M to amortise without adding any more which seems unlikely since they are capitising software dev to get to the adjusted ebitda break even.

I just attended the EVS investor call for their Q1 FY23 results and my notes are below. Unfortunately I missed the first 5 minutes of the call.

There were some good questions with people in particular digging into the (small amount) growth in the water segment and the value of the SA Water deal and expansion in number of sites at Water Corp. Unfortunately they didn't really shed any further light on specifics but said they were really happy with how it was progressing in line with their “Land, Expand and Scale” strategy.

Q1 Earnings call notes:

Very happy with the results.

Churn low at 2.3%, when it does happen due to construction projects finishing up (still good relationship with the builder/construction companies) and government spending reduction.

Water

Added second Australian water utility, SA Water, for SeweX. On top of existing customer Water Corp.

Only one site/catchment currently but great opportunity to expand. In line with “Land, Expand and Scale” strategy

Utilities like to start with one site/catchment as a trial and see how they can use it before rolling out to other sites.

Water Corp has expanded the number of sites using SeweX but they wouldn’t say how many specifically.

From a technology standpoint, continuing to add new features.

Outlook: 

Q1 strongest start EVS has ever had to a year. Demand only getting stronger.

Validation on the SewX opportunity via acquisition of Water Corp and SA Water. Actively talking to many other water utilities in Australia. Unique product in the market.

New RGM (Regional General Manager) for Europe, to focus and drive sales in that region.

Pathway to profitability on track.

Philippines office going well and able to attract skilled and quality employees.

Continuing to look at supply chain improvements. Signed new 3rd party contract manufacturers. Adding on capability and de-risking.

Transitioning to an adjusted EBITDA profitable position in FY23. Fully funded to reach profitability, don’t see any need to raise further capital.

Did not answer a question in the chat box on reaching statuatory profitability.

SGS partnership focused on Omnis product.

SGS active in so many segments around the world but starting focus on mining, industrial and oil & gas.

Philippine office not a “cost reduction” strategy, but “cost efficiency” way to grow at a lower marginal cost.

Putting like minded people in one environment. A centre of excellence.

@Rocket6 has already added excellent comments, so i just wanted to add one point from the investor call (i did miss most of it unfortunately)

They emphasised they would be 'adjusted EBITDA' positive this year and had no need to access the capital markets.

I'll also second the significance of the SGS partnership. Will be watching that with great interest.

On initial impression, this report isn’t nearly as impressive as their previous quarter (Q4 FY22, which was a belter). Q1 sales was a modest 3.4m, which pales in comparison to the 6m recorded in Q4. That said, there were some real positives.

Highlights

• ARR 55.2m, a small increase on the 53m previously reported
• Another 18 new sites added, eight of which were from existing customers. Once again, Omnis did the heavy lifting for EVS, winning 13 of the 18 new sites.
• Omnis signed a ‘global strategic alliance’ with SGS. More on this below.
• Continued cross selling between products – 'land and expand' strategy
• Small increase to churn Q on Q – increasing from 2.5% to 2.8%

New contract win – SGS

This is a multinational company which provides world-leading inspection, verification, testing and certification services. With more than 90,000 staff, 2600 offices and a 2021 revenue of more than $6b (CHF), this appears an impressive ‘get’ for EVS.

So what exactly does the alliance consist of?

‘The agreement sets out terms that will see EVS and SGS work together collaboratively to promote, market, and sell bundled services that combine SGS’s testing, inspection, and certification services with the EVS Omnis environmental intelligence platform to provide complete compliance and operational optimisation solutions for companies in a range of sectors globally, including the mining, heavy industrial and oil & gas sectors.’

EVS anticipate the partnership – essentially the bundled services – will expand global market opportunities and accelerate revenue growth.

Yes, the expected revenue growth is excellent, but a company bringing in more than $6b per annum in revenue wanting to bundle their services with EVS (Omnis) suggests 1) EVS is clearly doing something right, and 2) confirms the unique point of difference Omnis provides. For SGS to sign this agreement, you would expect they are confident Omnis will provide strong value add for customers.

It is hard to gauge the impact this will have on EVS’s top line – and when we will see this occur – but I would have thought this is well and truly material for the business. In addition, it should provide EVS exposure to new geographical areas where they don't currently service; the beauty of bundling services with a global behemoth in their respective industry!

Product suite breakdown

More of the same for EVS. Again Omnis leads from the front – the agreement with SGS suggests to me this will be a common theme going forward. Some other points below:

• WA's Water Corporation, a current EVS customer, became an Omnis customer – highlights 'land and expand' strategy at work.
• The growing adoption of EVS Water continues with the signing of the first sewer network with SA Water. This further validates EVS technology and somewhat offsets what is otherwise a mediocre quarter for EVS Water (in terms of revenue). I think it is important to remember this signing only refers to one water catchment, so the validation here the most important factor for me.

I will tune into the investor presentation and report back with any significant commentary.

@mikebrisy already gave an excellent overview of Envirosuite's recent product demo, but there's a recording available on Youtube if you want to watch:

https://www.youtube.com/watch?v=4Vn-5AuZ0q0

A very decent set of results I thought.

I'll let members read the full ASX presentation here, but a few points to highlight include:

• Cost of revenue was flat, leading to a solid boost in gross profit. This was delivered through improved implementation and right-sizing of the China business (frankly, i'd pull out of China altogether. Yeah, it's a big market, but the work they have won there is ultra low-margin and I think there's significant sovereign risk)
• The Americas is now the biggest geographic segment, following 31% growth in ARR in that region over FY22. Great to see traction in such a large market.
• Omnis remains the growth engine of the business, and saw a 24% lift in ARR
• Seemingly a lot of cross-sell and up-sell opportunity across existing network of customers. EVS have "single digit" penetration of existing customer sites
• Global Air traffic at 68% of pre-pandemic levels. As this continues to normalise it should help underpin growth in the group's aviation segment, especially given new modules and replacement of ageing sensors.
• Foundational investment into water now complete, and with high margins, high revenue per site and a good overlap with Omnis customers, they should be able to flex this new division for solid EBITDA growth
• $16m in cash with no debt, and expectations to be adjusted EBITDA positive in FY23
• Big improvement in operating cash flows, although a jump in capitalised development cost worth noting. Free Cash Flow went from -$12.5m to -$9.7m (excluding last year's acquisition).

Overall, it looks like Envirosuite is finally hitting its straps. With the disruption of covid (hopefully) behind them, a well rounded and more mature product suite, good sales momentum, and apparent good cost control and improved operational efficiencies, they are in a good position to pivot into profitability and press for improved scale.

No outlook was given, but with a ARR base of $53m, and $6m in new sales for the final quarter, i'm hopeful they can deliver top line growth of at least 20% in the current year. And, ideally, sustain at a decent double-digit rate for many years.

disc. held IRL and on SM

I have just come off the $EVS demonstration today. It was well worth the time. The three products (Omni, Airport and Water) are each in their own way remarkable. With the strong environmental / sustainability / community licence to operate tailwinds, my sense is that they are well positioned for many years of growth.

How profitable this all is will come down to how scalable and adaptable the solutions are - but from the presentation the team seems to have these issues in clear view.

It would also be good to have a better sense of the competitive landscape, as this area is going to be massive, if it isn't already. (Any reading recommendations appreciated!)

I hope they will make the recording of the presentation available. Anyone interested who couldn't make it the contact, according to the ASX release, is Warrick.lace@envirosuite.com.

FY Financial Results are next week, Tuesday 23rd and 9:30am:

https://teams.microsoft.com/registration/NK2XVQWj206N92lr6AlLbQ,gxrlUa1CbkmJVdEH2NazsQ,w1imAu1fXEqYabZu9w2now,G4W9vXJxtUa5Pi8VPIIeYQ,Rx7jNPKR-UadgGNW16_CWg,Zc2beVndzkW3dcMli94N6A?mode=read&tenantId=5597ad34-a305-4edb-8df7-696be8094b6d

(P.S. It was also a welcome relief after sitting through 4 results calls today. My brain is fried!)

Disc: Held IRL and SM

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.

Bell Potter - PT $0.25 (BUY)

https://bellpotter.com.au/wp-content/uploads/2022/04/EVS_20220420.pdf

Envirosuite executes MoU for strategic partnership with Byers Scientific

Key Highlights: 

• Envirosuite and Byers Scientific 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 for the monitoring and mitigation of odour
• The MoU outlines the acceleration of market opportunities in Industrial, Waste and Wastewater

27 April 2022 - Leading environmental technology company Envirosuite Limited (‘Envirosuite’ or ‘the Company’) is pleased to announce it has executed a Memorandum of Understanding (MoU) for a strategic partnership with Byers Scientific (‘Byers’), a technology, research and manufacturing firm that helps companies to manage industrial-scale odour and emissions.

The MoU sets out the terms of a proposed deal to enter into a strategic partnership agreement between Envirosuite and Byers for the packaged offering that combines the best-in-class Byers’ odour control systems and Envirosuite’s EVS Omnis platform to address complex odour and emissions problems for companies in the Industrial, Waste and Wastewater sectors. The combined solution will allow companies to monitor, manage and control odour and emissions. The technology is anticipated to support global business opportunities, drive revenue and increase customer traction for both companies. 

Byers offers an odour control solution that combines custom-designed and manufactured equipment optimized with Cloud-based (IIoT) SCADA technology that has been successfully deployed in the waste and commercial agriculture space across North America. Byers’ odour mitigation strategies are informed by input from its research division, Byers Emissions Analysis (‘BEA’). Combining Byers’ research-driven control technology with EVS Omnis allows companies to model, predict, and mitigate odour and emissions while preserving critical community relationships. 

Headquartered in the United States of America, Byers develops state-of-the-art odour mitigation solutions and equipment that helps its customers effectively achieve odour and emissions compliance. The strategic partnership between EVS and Byers aims to benefit both parties with greater market access and leveraging of the combined technologies and respective expertise to drive revenue and customer traction with the complementary nature of their businesses and strategic growth objectives in North America.

The parties are already engaged on a landfill project in King County, Washington, and a commercial cannabis project in Santa Barbara County, California. 

Jason Cooper, Envirosuite CEO said;

“We’re excited to expand our opportunity potential with Byers Scientific, especially in the Waste sector where odour management and mitigation are a significant challenge in the United States. Having already partnered on two projects, we’re confident that the combined offering will help accelerate our growth in the waste and commercial agriculture sectors.”

Marc Byers, Byers Scientific President & Founder said:

“We have long admired Envirosuite’s innovative and advanced platform and viewed its capability as a common-sense combination with our own odour mitigation equipment and strategies. The opportunity to combine these offerings creates an industrial dream-team and provides the market with the most comprehensive odour management system available.” 

About Byers Scientific

Byers Scientific is a globally recognized leader in the odor mitigation industry and believes that clean air is a basic human right. They provide custom-engineered, patented solutions to improve Indoor Air Quality and mitigate odor supported by data-driven emissions analysis and scalable Cloud-based technology. Learn more at byers-scientific.com.

+ a link to a short video on the partnership: https://www.youtube.com/watch?v=FHt5ypObpeQ

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. 

@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.

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.

11-Feb-2022: Sequoia: Envirosuite Limited (EVS) – Initiation of Coverage: "Emerging leader in Environmental Intelligence (EI) software"

evs-sequoia-initiation-110222.pdf

Prepared by Wayne Sanderson – Head of Research @ Sequoia -

email: wayne.sanderson@sequoia.com.au

Phone: +61 3 8548 3314

• Wayne says EVS is a "BUY (High Risk)"
• 12-mth Target Price: (AUD) $0.23
• Share Price (AUD): $0.195
• 12-mth Price Range: $0.087 - $0.245
• Forecast 24-mth Capital Growth: 17.9%
• Forecast 24-mth Dividend Yield: 0.0%
• 24-mth Total Shareholder Return: 17.9%
• Market cap ($m): 244.6
• Net debt (net cash) ($m) (Dec 21e): (17.2)
• Enterprise Value ($m): 227.4
• Gearing (Net Debt/ Equity): n/a - Net cash
• Shares on Issue (m): 1,254.5
• Options / Perf rights on Issue (m): 99.3
• Sector: IT /Software
• Average Daily Value Traded ($): $274,000
• ASX 300 Weight: n/a 

Click on the link for the full report from Sequoia.

Disclosure: I hold EVS IRL and here.

Australian Mining Review (Feb 2022): A step-change in Environmental Monitoring

"We sat down with Envirosuite to discuss their latest solution, EVS Omnis, to learn about their latest solution for Noise and Vibration Control and Air and Water monitoring."

Click on the link at the top to get a full page display of this.

Click here to watch the video (skip through the ads).

Disclosure: I hold EVS shares IRL and here.

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.

https://vimeo.com/659199883https://stockhead.com.au/stockhead-tv/clean-tech-envirosuites-nasa-partnership-focused-on-climate-change-solutions-and-innovation/?utm_medium=email&utm_campaign=Stockhead%20Morning%20Newsletter-01-03-2022&utm_content=httpsstockheadcomaustockheadtvcleantechenvirosuitesnasapartnershipfocusedonclimatechangesolutionsandinnovation&utm_medium=email&utm_campaign=Morning%20Email%20Jan%204&utm_content=Morning%20Email%20Jan%204+CID_1ecc32bc302e31e31457ca251b32e87f&utm_source=Campaign%20Monitor&utm_term=Clean%20tech%20Envirosuites%20NASA%20partnership%20focused%20on%20climate%20change%20solutions%20and%20innovation

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.

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

#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

Looking a little deeper into Aeroqual .

Another NZ based company established in 2001 with what is stated on the website 24 employees.

Revenue $4.68mill US (I assume this past FY)

I couldn't get a grasp on if they are listed in NZ or Aust or US (assuming they are private)

What is of interest to me is clearly EVS are significantly bigger as a company in revenue and employee base etc. If this is the case what is the reason of MoU versus a straight takeover ?

Is this simply a step in that direction ?

Can see the attraction for both parties and i assume in order for this to be a partnership what Aeroqual offer is not what EVS have thus no competing platforms ?

Disclose I Hold in SM and RL

Bill

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.

The market likes the Q1 results, with shares up nearly 10%. With (so far) >12.5m shares trading hands, it's also one of the highest volume days in the last year.

A few early thoughts:

• The first quarter last year (see image below) was hard hit by covid, so maybe the "42% growth" in ARR year on year, as stated on the ASX update, is less impressive than it seems.
• In fact, $1.7m in new ARR for the quarter is below the $2.2m/qtr average pace seen in the second half of FY21.
• Still, on pace to beat the $6.6m total new ARR for last year -- but not by much. Will need to see better growth from here
• Omnis was the biggest contributor to the growth in ARR -- accounting for 62% of the total
• Total sales were $4m, so there's $2.3m in non-recurring sales. Last year they did $8.1m in non-recurring revenue so they are on track for a 13% annual lift here.
• Encouraging to hear North America doing well, accounting for half of new sales
• EVS Water is at a point where reference customers been secured and "significant new sales in the final stages of negotiation". EVS water is a negligible contributor at present, but I remain hopeful there's a good opportunity here. Will be hoping to hear more from management on this
• A small point, but also encouraged to hear inbound enquiries are apparently increasing. A much easier and more productive sales environment if you can get potential customers reaching out to you.

Overall, the investment thesis for me remains in tact. But i'd like to see a few quarters of >$2.5m in new ARR growth 

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

24-Sep-2021:  If somebody wanted to liquidate (sell) 80 million shares on-market, it would not be all at the same price, and it would have a serious effect on the buy/sell spread, and would move the share price substantially.  I therefore assume that this was a block trade that was executed between yesterday's close and today's open, and added into the history for today.  A quick check reveals that is was indeed processed by the system at 9:18am this morning, before the market opened, so was a block trade done outside of market hours.  And all at 16c/share, for $12.8m.  There are only two subs (substantial holders) listed with that quantity of shares, being National Nominees and Macquarie Group.  Macquarie Group did hold exactly 80m shares, so we shall see in the coming 2 business days during which time the seller must lodge a "ceasing to be a substantial shareholder" notice. 

The upside of that is that there was someone, or a consortium of someones that was willing to buy 80m EVS at 16 cps for $12.8m.  You would assume they value the company higher than that.

If it was a single buyer, we should see a notice from them lodged as well.  80m shares is 6.7% of the company.  If the 80m was bought by two or more different buyers then we may not see any notices from the buyers because each of them may hold less than 5%, but we will know who sold when they lodge their notice, because they've just sold 6.7% of EVS.

Someone bought 80m shares this morning at 16c .... 

#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.

Investor briefing notes

Others have highlighted the results, so i'll just add a few notes from the investor call.

• FY23 $100m revenue target will likely be pushed back due to the impact of covid. But Jason Cooper said that was "very much in their sights still" and they expect to hit and exceed that threshold in the coming years
• ESG (Environmental, Social and Governance) proving to be a big driver -- both from customers and investors
• Water solution is very nascent but has the largest addressable market. Offers clients very big savings in terms of design, electicity, chemicals and water savings. Thetechnology here is best in breed.
• Omnis is the core of EVS and the ARR growth has been very strong and should continue. 
• Airports rather flat, but a strong result when you consider that airports globally have seen a ~64% drop in revenues due to covid.
• 'Adjusted' EBITDA actually adds a lot of expenses normally listed elsewhere (eg finance cashflows etc). I see it as reasonably conservative. Not sure whether they will be EBITDA positive for the full FY24 year, but likely to be close if sales growth continues
• Sales growth is the number one focus as the company tries to capitalise on its first mover advantage.
• Gross margins improving well due to cost out and better product mix.

Also, shares on 3x sales seems pretty conservative for a business that has doubled revenue -- although airports contributed only 6m last year. Nevertheless, core omnis product growing ARR at 20%+ is very strong -- especially with strong sales pipeline, market leadership and large TAM.

Cashburn and sales growth are the key metrics to watch in my opinion. The business seems very well placed, but will need to execute well.

I think the new CEO is a bit more promotional than the last, but overall has a clear vision and stratgey for the business.

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. 

EVS Envirosuite Ltd,

So a good  financial report in July 2021.

share price chart rebounds. 10c to 13c strong rebound 26/7/21.

if we place a 50day MA . The price is above the 50DMA, So promising here.

MACD has peaked

RSI is high at 60

EVS could break to upside or downside at this moment of time.

No fundamentals to support this price.

pure growth via CAGR and ARR... or nothing.

IMO...

8/ July 21. announcement....Summary

Envirosuite announced the successful achievement of another record quarter of $2.3m in new ARR sales.

New ARR sales for the quarter were generated across its core focus industries with $1.0m from Airports, $0.5m from Waste and Wastewater and $0.4m from Mining with the residual $0.4m coming from other customer segments.

Of new ARR sales, $1.3m came from existing customers, demonstrating the Company's execution of its strategy of growing deeper relationships with its blue-chip customer base. New sales combined with favourable foreign exchange movements of $0.8m and continued unwinding of discounts contributed to ARR increasing to $46.5m up $4.0m (9%) on the prior quarter and up $3.5m (8%) on PCP.

Noted:

1/Strawman touted ARR of 20% is required..

2/So EVS "needs sustainable EBITDA If this happens, shares are very cheap."

4th quarter results from Envirosuite show a record $2.3m in new ARR, taking the total to $46.5m.

Over half of this was from sales to exisiting customers, which helps validate the "land & expand" strategy. The Omnis product (the core product prior to the EMS acquisition, and the one that has been internally developed) saw an encouraging 24% YoY growth in ARR. Also good to see non-recurring revenue at $2.4m -- looks like they will deliver (or slightly exceed) on guidance for ~$8m in non-recurring sales for FY21

Certainly some positive aspects to the announcement, but I have some reservations.

• In their capital raise presentation (pg15) they had a forecast ARR of 2.4m for the quarter. So this result is a slight miss.
• No mention of whether they acheived target of positive adjusted EBITDA for Q4. We'll see this when they release full results on August 18, but any mention of this target was noteably absent. 
• FY ARR growth (ex FX changes) was decent at 11%, especially given the covid disrpution in the first half. But even if we normalise the first half, and adjust H1 new ARR to be in line with H2, ARR growth would have been ~16%. Ok, given the relatively low base and supposed market opportunity, but I would prefer to see a figure north of 20%.
• No apparent new sales for the new EVS Water product, with ARR flat for the quarter 
• Growth in Aviation ARR was in part due to unwinding of previous covid relief to customers, but not sure to what extent discounts have been unwound.

I continue to hold a large position (~10% on Strawman), and think the company has good potential. It's done me very well over the years, despite the recent weakness in price (>50% CAGR). BUT I was not a fan of the timing and discount of recent raise, and am yet to see the strategic benefits of the (very large) EMS acquisition.

The Omnis product and opportunity was always the best part of the business, but the growth that is being achieved there is being diluted by the much larger aviation sector which is displaying much slower growth. Maybe that's just being dampened by covid, but so far the touted benefits of integration are not obvious. And all that we've seen is a delay to the company delivering sustainable +'ve EBITDA and cash flows.

I'd like to see ARR growth get closer to 20%, to see some traction with the new Water product, and for the business to demonstrate sustainable EBITDA. If that happens, shares are very cheap.

That being said, with a Price to ARR of ~2.6 i think there's not too much downside from here provided growth doesnt stall and costs are contained.

BUT, if they miss their EBITDA target and sales growth drops, there's certainly a bit of downside in the near term.

Envirosuite has launched a capital raising, seeking up to $14m via an institutional and non-renounceable rights offer. ($13m after costs)

Investors have the opportunity to buy new shares at 8.5c -- a 19% discount to the last traded price. Existing shareholders can buy 1 new share for every 14.5 shares already owned.

The deal will add an additional 165m new shares, taking the total share count to approx. 1,193m shares. That's a ~16% dilution.

Once complete, EVS cash balance will increase from $9.7m to $22.8m. The funds will be used to accelerate sales in the Omnis and Water products, as well as geographgic expansion.

So... is it a good thing?

Well I think the offer is too generous -- 8.5c per share values the business (pro-forma) at just over $100m, which is just over 2x forecast revenue, or 2.4x Annual Recurring Revenue. 

As such, the dilution impact is greater than it needed to be in my opinion.

That being said, the business has taken a big knock from covid due to delayed project work and discounted pricing to support airport customers. FY21 guidance for $48-49m in revenue represents a big reduction from the $58m in the previous year (pro forma, assuming the EMS business was held for the full year).

Similarly, the company has so far failed to pass EBITDA breakeven (although that's targeted for the final quarter). The move into China hasnt appeared to have delivered much to date, and the business looks to have walked back from earlier targets of $100m in revenue run-rate by FY23. Plus, the CEO left recently.

So perhaps a higher offer price may have been difficult...

At any rate, the business is on track to post a cash spend of ~$10m in FY21, and with $9.7m in cash held before the raise, and supposedly on the verge of breakeven, i'm not convinced there was a great urgency to raise capital -- especially with the depressed share price. If they were confident of a solid 4th quarter, and delivering on their EBITDA positive target, I suspect they could have raised at a much lower discount in a couple months.

But then again, perhaps the timing says something about this...?

I genuinely like the company's offering and potential. There's a very large addressable market and they have a market leading position. I'm convinced there is a strong and growing need for the kind of solutions they offer.

After a painful first half, new ARR sales have essentially doubled in the second, and if you remove the acquired airports business (much more mature), the core EVS product (now called Omnis) has essentially doubled its ARR in the last 2 years.

The massive EMS acquisition and the impact of covid make it hard to cut through to a clearer 'normalised' performance picture, so it's hard to know how much poor execution is to blame for the recent stagnation.

Still, if I don't see signs of improvement in the coming quarters, i'll likely consider my thesis busted and sell out. I want to see sustainable positive EBITDA by the end of Q1 FY22 and a material pick up in new ARR sales. 

For now, there's enough negativity in the price to compensate me for the risks, and the capital raise at least puts them on a much firmer footing. 

You can read the Capital Raise presentation here.

Envirosuite went from forecasting last year that they would be cashflow positive by March 2021. To holding their hand out for more money from shareholders in May 2021 - and not yet cashflow positive (in fact they seemed to completely ignore that target in their half yearly report and Q3 trading update.)

This would just be frustrating for shareholders. 

Envirosuite has appointed Alberto Calderon as an advisor to the CEO. This is a guy that used to be CEO of Orica, and prior to that was very senior at BHP and the CEO of Cerrejon (Columbia's largest mining company).

His brief is to assist with strategic development, but for me the real value is the introductions he can fascilitate with some of the world's largest mining and energy operations (he appears to be very well connected).

What's interesting is that his remuneration is in the form of 10m unlisted options. These allow Mr Calderon to buy shares at 20c each (half he can exercise now, with the rest exerciseable in 12 and 18 months).

With the market price currently <13c, these options are effectively worthless at present. So this is potentially indicative of the board's and Mr Calderon's optimism. 

ASX announcement here

disc. held

Is the recent dip a great buying opportunity? 

Envirosuite presented today at the NWR Virtual Investor Conference. 

Presenting for Envirosuite were Jason Cooper (CEO), Matthew Patterson (CFO) and Andrew Barron (Head of Product).

The CEO Jason opened with one customer story per the 3 segments within which they operate, giving us some details on their most common use cases. Andrew dove deeper into the 3 layers they tend to grow in each segment: comply, predict, optimise (don’t quote me on this). And Matthew went over recent results and looked at the wider market size for future opportunities. 

The biggest question to many is about growth; can they sustain an-above average growth rate expected with high-margin Saas companies? 

I was pleased to see the CEO get asked that question. They are focused on a 20% yearly growth rate. If they execute consistently on this, they will become a very dominant and powerful industry leader, and their stock will no doubt be massively re-rated. 

At current, with the recent sell off, giving us a market cap of $143M, and they expect a yearly ARR of $43M, we have a P/ARR ratio of 3.3. Many would consider that a bargain.  

Like many of their investors, I’ve not worked with product. To look at product I default to their churn rate, which at <2% is very impressive. 

There’s a lot of the future will tell us, but at current, it appears EVS might be a good case study of patience paying off in the markets. 

Interesting interview with  CEO.

ASX Release

Investor briefing questions 11 March 2021

Envirosuite Limited (ASX:EVS) advises that following the release of its H1 FY2021 results on 26 February 2021, CEO Jason Cooper and CFO Matthew Patterson presented a series of presentations and webinars with investors and analysts. For the benefit of those unable to attend, EVS provides the following summary of questions received by investors and accompanying responses along with other questions put to the Directors and management.

What gives you confidence to increase sales in the second half considering the lower sales in the first half?

Our forecast for Q3 is based on deals that have reached the negotiation phase of the sales cycle by the end of February and that we believe will close during this period.

Whilst sales from the first half of the year were affected by COVID-19, as well as the impact of bringing two businesses together, we have seen a steady increase in deal volumes and pipeline for the second half of the year, with business confidence increasing as vaccination programs are rolled out.

Can you quantify the impact of discounting in the airports business across the first half?

Due to COVID-19, the impact of discounting was approximately $1m on the first half reported revenue, however, discounts for some of these customers started to unwind in December 2020.

At your current scale, what gross margin improvements do you expect from the initiatives outlined on page 8 of the presentation?

The gross margin will be impacted by various factors including revenue mix across our three main product lines, the mix of recurring and non-recurring revenue, as well as overall revenue growth. However, we expect that based on our current level of business, that the cost initiatives should provide a gross margin of ~50-55%. As the mix of revenue shifts more towards the EVS Water software solution, we expect the gross margin to further improve.

What sort of incremental margin do you expect on new revenue?

EVS management focus on a metric called ‘contribution margin’ which is revenue less the direct variable costs and excludes internal overheads (gross margin includes the allocation of internal overheads and non-variable external costs related to supporting customer). The contribution margin is what we view as the incremental margin on new deals and assumes we can leverage our existing overhead cost base in relation to customer support. The contribution margin that we achieve on new recurring revenue deals is ~80% and should continue to improve the gross margin.

(ASX: EVS)

Envirosuite Limited 1 Suite 1, Level 10, 157 Walker St
North Sydney NSW 2060

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

(ASX: EVS)

Given your outlook, are there any changes to previous revenue and EBITDA targets for the next few years? Has there been a change to when EVS expects to be breakeven due to COVID-19?

Over the past 12 months the results have been affected by two main factors: foreign exchange and COVID-19. The Australian dollar appreciated ~10% against the USD during the 6 months ending 31 December 2020, which has meant our reported revenue has been reduced by an equivalent amount for those contracts based in USD (~25% of total revenue came from the North America region of which the majority was in USD). COVID-19 has seen a reduction in the discretionary expenditure (one-off projects) by airport customers, and this has led to a temporary decline in our profitable non-recurring revenues. In addition, EVS has elected to support some of our airport customers, particularly in the EMEA region, with temporary discounts, some of which started to unwind in December 2020.

The above factors have slightly pushed back the timeframe for EBITDA positive result but EVS still expects, based on current operations, and forecasted recurring and non-recurring revenue to be EBITDA positive in Q4 FY21.

What is your view on the role of China in your future plans?

The China market is rapidly evolving and has the potential to be a significant market for Envirosuite’s products with its increased focus on environmental protection and digital transformation across water, air, and noise. EVS is still exploring the optimal pricing model, go-to-market strategy and overall product mix to take advantage of this growing market.

China continues to represent a vast opportunity for our Airports, Industrial and EVS Water solutions noting China’s most recent 5-year plan. We are mindful of ensuring that our products are the right fit for the market in China and that we can be successful in that market. This includes leveraging our existing operating model as well as relationships that we have with our existing global client base that have operations in the China market.

Historically, the focus has been on six sectors, why has that reduced recently?

As part of our strategy review the Company has decided to focus on 4 major sectors: Airports, Waste, Mining and Water. This will bring discipline and focus for our product, sales, marketing, and operations teams to ensure we build market and product leadership in these sectors. We will continue to explore opportunities in other sectors (such as construction or cities) as we can address them with our existing solutions, but we will not proactively pursue these opportunities.

Tell us a bit more about the buying cycles of the sectors that you’re focusing on? Which sector will lead the charge as Airports have a long cycle?

Buying cycles are typically dependent on the sector. Airports typically buy via a procurement and tender process, and plan budget cycles annually. Typical lead times for new opportunities are therefore approximately 12 months. Lead times for upsell of solutions at existing airport customers can be much shorter (3-6 months). This is balanced by the long term committed revenue that airports offer (often 5-year contracts with additional options).

For Industrial (Waste and Mining), lead times vary by procurement method, but typically are in the 3-6-month timeframe. For our EVS Water solution we have already seen that lead times can be much shorter for non-government entities (2-4 months), as the cost benefit analysis for this product is obvious and drives quick acceptance.

Envirosuite Limited 2 Suite 1, Level 10, 157 Walker St
North Sydney NSW 2060

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

How much revenue is exposed to Airports?

It is important to note that our customers are Airports and not airlines. Airports have regulatory requirements that we address regardless of flight volumes. At the moment, we have approximately 65% of our revenue from the airport sector. Whilst we see further growth in airports, we expect our Water and Industrial portfolios will grow at a faster rate.

Are all your products on a single platform? If not, when do you expect this to be the case?

With the recent appointment of Andrew Barron as our Head of Product, we are developing our product strategy to build products that delight our customers and allow them to access the full range of our solutions.

The major driver of cost in our products, and the greatest opportunity for convergence, is the infrastructure layer. We are currently executing our ‘One Cloud’ strategy which is migrating all of our applications into a common cloud platform. Whilst we do expect to have a hybrid approach to our infrastructure, our cloud migration will be complete in the next 12 months and benefits will be realised during this time.

Jason, given you’ve had 8 months with Envirosuite before stepping into the CEO role, can you outline your focus for Envirosuite?

One of the compelling reasons why I chose to join Envirosuite originally was based on our vision to harness the power of environmental intelligence so industries can grow sustainably, and communities thrive. We have strong product market fit and there is an increasingly strong need for what we do across the world.

My time in Silicon Valley working in high growth technology companies has helped me to understand what drives global, scalable businesses. With a deep understanding of the business within operations and reflecting on our vision the key focuses for me are to improve our discipline and focus across sales and marketing, optimise our global operations, invest in our product to build world-class technology that continues to solve customer problems across our focus sectors and move us deeper into their operations, and continue to build out the leadership team with experienced talent.

I'm not thrilled about Peter White stepping down as CEO of envirosuite.

I've met him a few times and he always struck me as honest and capable. He really took the company a long way in his 8 years at the helm.

What's happened behind the scenes could be a falling out with the board, concerns for the future or just simply some benign personal reason that has nothing whatsoever to do with Envirosuite's prospects.

The market seems to have taken a negative view of it, as is it's want.

To be fair, people generally don't step aside from a business when it's poised to see substantial growth, and when you're holding a bunch of performance rights and options (as Peter does). Eg. He was entitled to get a further 500,000 shares after June 30 this year, just as part of a retention incentive. If the share price got above 50c before FY23, he would have got another million shares and had 5m in-the-money options.

Peter will be on the board after he steps down as CEO and still has 9.2m shares in the business. But it was a surprise to see him go, and for better or worse it has raised some questions.

Jason Cooper, Peter's replacement, seems qualified anough, but has only been with the company for 8 months and is a bit of an unknown quantity.

Time will tell I suppose.

On its own, it doesn't materially change my expectations for the business. But it has raised the risk profile for me.

If I don't start to see some good traction from here, I'll consider my investment thesis in need of some harsh adjustments.

For the first half of FY21, Envirosuite reported a 17% lift in revenue over the preceeding half (HY20, which only had a 4month contribution from the EMS acquisition). Normalising for this, revenue would be flat, to slightly down on the preceeding half.

Operating expenses were however down due to savings measures, and gross margins improved significantly from 32% to 41%. So overall the adjusted EBITDA improved from -$6.9m to -$3.5m

Recurring revenue, as a percentage of the total, also increased from 77% to 85%, due to the covid related deferral of project work, which hit non-recurring revenue.

Envirosuite has $9.7m in cash, having burnt through $5.8m in the half (exclduing acqusition related costs), this is expected to reduce in the current half, although they didnt offer more clarity than that.

Importantly, management are forecasting a much improved second half, with new ARR sales orders expected to double in the second half. Recurring revenue is expected to grow 4-8%, the rest will be related to project delivery from new contract wins.

The business will still report a negative EBITDA for FY21, although will be improved in H2 on an adjusted basis. But the company reiterated that it still expects to report a positive EBITDA in Q4 (although will be dependent on timing of non-recurring revenue).

All in all, the business has been pretty resilient during covid, but it's definitely been impacted by it in terms of non-recurring project work and some discounts to airports. Project work in China also took a big step back (although this was associated with lower margin equipment sales), and the business says it is looking to focus more on higher margin subscription contracts there. There was a lot of potential promised when they first moved into China -- but there's not really much to show for it as yet...

Outside of airports, recurring revenues were 18% higher, so the original part of the business seems to be still doing well. This was always the part i liked the most.

The EMS integration and Covid make an effective comparison against earlier expectations more difficult. But when trying to normalise for this, I still see a business that should deliver lower double digit revenue growth in the coming years, and sustainably move past breakeven. (Hopefully another capital raise isnt needed, but it is a definite possibility).

Some good contract wins and achieving their target for psoitive EBITDA by Q4 is essential to drive the price materially higher from here in my opinion. 

Disc. Held

26-Feb-2021:  FY 21 Half Year Results Presentation   plus   Half Yearly Report and Accounts  (click on the correct announcement from the list under "Company Announcements" on the EVS website - which is where those links will take you.)

Also:  Appointment of new CEO following retirement of Peter White

I'll leave the commentary to Andrew (Strawman) as he follows this company a LOT more closely than I do.  I do hold EVS in one of my RL portfolios and they are also one of the larger positions on my Strawman.com scorecard/portfolio.

I do not see anything particularly nasty in the numbers or in the immediate retirement of Peter White.  With the current COO taking over as the new CEO, it seems like an orderly transition.  

Envirosuite's sales update for Q2 2021 isnt as clear as I would like, and requires a bit of detective work to see how it aligns with earlier expectations.

In the groups FY20 Results presentation (August 2020), the company provides a chart (pg 13) that shows targeted ARR growing by approximately $11m per annum, or about $2.75m/qtr.

In Q1 ARR grew by $1.2m, and then $1.1m in the quarter just reported. That's well below pace.

The company didnt provide total sales figures in the recent two quaters (only new ARR, renewed contracts and non-recurring), so it's hard to know how likely they are to achieve their targeted $65m in sales.

But with at least 2/3rds of income generated offshore in FY20, and likely more in the current year, i suspect the strengthening AUD will provide some headwinds.

It was encouraging that management still expect the business to be EBITDA positive on a run rate basis by the end of the current quarter. That will be an important milestone if that can be achieved sustainably.

Similarly, encouraged that Churn was very low (<0.2%), and that the airport sector appears to be holding up well despite covid.

Will be awaiting the half year results before making any further judgements -- but really hoping to see the pace of ARR growth accelerate, and to see if the expected cost reductions materialise.

Envirosuite CEO Peter White has entered into a new remuneration agreement.

While the base salary of $300k remains unchanged, Peter will be eligible for an additional 30% of this as a Short Term Incentive (STI) "based on a broad number of financial and non-financial performance measures" including EBITDA (although no figures were detailed).

Personally, I really dislike vague and subjective performance measures. More than happy for management to receive big rewards when they deliver for shareholders -- but these kinds of STIs just leave too much to the board's discretion.

Anyway, without getting into a debate on executive remuneration, I did find the Long Term Incentive (LTI) component very interesting.

If EVS shares hit 50c by June 2023 -- and remain above that level for at least 30 consecutive days --  the CEO will get 1m shares for free. He'll get a further million if shares hit 75c and another million if they hit $1.

This may seem very generous, but I doubt shareholders would be upset if these thresholds were met. After all, the lower tier represents approx. 50% compound annual growth rate in the share price over 3 years!

Again, we can debate how reasonable these levels may or may not be, but I note that if EVS hits its target of $100m in revenue by 2023, a share price of 50c would put the business on a Price/Sales ratio of ~5x. Not too unreasonable at all given the required growth rates.

A cynic would argue that boards do not set targets that they think are unreasonable -- if it's about feathering the nests of insiders, you want to set a very low bar.

Of course, none of this guarantees anything, but i find it very telling in relation to the board's optimism.

[updated to fix incorrect P/s ratio]

[I own EVS shares]  

Envirosuite has provided an edited transcript of analyst and investor questions following the FY20 result.

Key points:

• big sales pipeline and on track to hit breakeven and revenue targets
• 65% of revenue is exposed to airports, but churn has been very low (1.5%) as airports mandated to have noise/vibration monitoring. 
• Organic growth for the seperate businesses were 100% and 8-10% (pro-forma) for EVS and EMS, respectively.
• Management incentives only become meaningful if share price exceeds 50c
• 82% contribution margin
• Sufficient cash to make it through to breakeven
• $11m in costs to be removed due to duplications and synergies with EMS

Announcement can be seen here

It was a very busy year for Envirosuite, with the (massive) acquisition of EMS and the move into China the most significant events.

It makes a comparison with prior years difficult, but in relation to FY19 revenue was 209% higher while EBITDA (adjusted) loss doubled to -$12m.

Envirosuite reckons it can take a further $11m in costs out of the business due to duplicated roles and systems, and still expects to be EBITDA +'ve by March 2021. Forecasts provided suggest expectations for a fairly stable cost base going forward.

It is targeting revenue growth of around 170% this year (the first full year with EMS on board), with ~20% top line growth per year through to FY23. Around 3/4 of all revenue will be subscription based. And the company expects operating margins to grow rapidly as the business scales -- they're calling for a 15% EBITDA margin in FY23.

Where is all this growth going to come from?

Well, the company now has a far deeper and richer offering, a broader geographic presence and a strengthened sales team that is targeting a $2.3b global market opportunity.

There's a big structural shift in the gathering and reporting of "environmental intelligence", and most companies that have these considerations will inevitably shift to a digital solution in time. It's simply far cheaper and more effective than previous methods. Moreover, there are very real regulatory drivers here that will require companies to focus more on these issues.

That doesn't mean that EVS will be the winner, but they are very well positioned as a genuine market leader, have a solid existing customer base that offer some cross-sell/up-sell opportunities, and they have a good first mover advantage thanks to years of R&D.

With the acquisition of EMS out of the way, the next few quarters will be critical in determining if the company can deliever to its ambitous targets.

The early growth in China, which has already contributed $3m in revenue to FY20 and has announcved $5m of new deals is encouraging. And it's good to see the resiliance of revenues from airport customers (which have a regulatory requirement to montir noise levels).

The SaaS caharacteristics of the business -- low churn, high revenue visibility, strong operating leverage -- remain very attractive, and should really come to the fore if EVS can drive strong top-line growth.

Envirosuite has around $24m in the bank, with around $12m available to fund operations. Given their cash flow trajectory, this should be enough to sustain them through to breakeven.

It ticks a lot of boxes for me, and I think there is a good deal of upside if they can deliever anything close to their long term targets.

That being said, I see this as a higher risk investment and expect plenty of voliatility. EMS was a big mouthful to swallow, and although airport revenues have held up so far there are some real risks if covid has a sustained impact on travel. We're also yet to see if the necessary organic sales growth, post merger, will eventuate.

Disc: held

Results presentation here

My heart skipped a beat when i first saw "acquisition" -- something that could drain cash, prolongue breakeven, or worse require a capital raise.

But the purchase of AqMB IP looks really smart, and at just $1.35m seems to have little downside (EVS had $24m in cash at the bank prior to the this).

AqMB IP offers a "neural network-based machine learning tool that models chemical and biological processes at water treatment plants". This helps optimise plant operations and can lead to significant cost savings. In a trial, it supposedly saw a 35% reduction in annual chemical and electricity costs.

EVS reckons there's a very big market for anything that can offer a 25% saving or more -- around 25,000 sites globally -- and of course they already have a lot of wastewater customers. Over the coming six months, EVS will be working to integrate AqMB IP into a "smart water" product, in combination with their SeweX technology.

Envirosuite has a good history of smart, low cost strategic acquisitions, so I'm hopeful this is another example of that. The deal offers:

• A broader and more compelling offering
• Upsell opportunities
• Accelerated product development (it would likely take a few years and loads of R&D costs to develop this internally)
• A negligible hit to earnings resulting from the purchase and integration.

There are always risks in terms of execution, and perhaps in misreading the potential market demand. But the risk/reward to me seems very attractive.

I don't expect this to materially move the dial in the short term in terms of per share earnings, especially given the much broader customer base post the EMS acquisition. So i'm not inclined to alter my valuation as yet. But the return on this investment could prove very satisfactory. 

{disc. held}

ASX announcemenet here

Envirosuite has brought forward its target for EBITDA breakeven, saying they expect to reach this target by the end of March 2021 -- 3 months earlier than previously advised.

This is a result of ongoing cost reductions and new projections for one-off and recurring sales.

It will be an important milestone if achieved, and i suspect will help bring about a re-rate of the company's shares.

ASX announcement here

Envirosuite will enter the S&P ASX All Ordinaries Index on June 22.

Doesn't alter the buy thesis, but in the short run it should help support the price as index funds are forced to buy. Longer term it may help with liquidity too.

Envirosuite has announced that it expects the recent (massive) acquisition of EMS to be fully integrated at the end of May -- on buget and on schedule.

This process has identified $8m in cost synergies and a further $3m in budgeted savings. These are expected to be realised by the end of FY21. 

If realised, that's quite material. I estimate it reduces cash costs by ~19% (and will boost pro-forma operating margins).

EVS also believs it will boost revenue growth potential, will see a restructure of senior exectuve team from the 2 businesses, and a consolidated product road-map.

Importantly, EVS reiterated its goal of being EBITDA positive on a monthly run-rate basis by the end of FY21.

A group presentation that more thoroughly outlines the new business will be released at the end of May.

Full announcement is here  

Envirosuite has announced a binding agreement to initiate its launch into the Chinese market.

The deal is with Mr Zhigang Zhang, the GM of Beijing BHZQ Environmental Engineering Solutions, a person envirosuite described as "a prominent leader in the environmental protection sector". He'll also be offerred a board seat.

Mr Zhang will purchase 50m shares at 8c each ($4m worth). He'll also get 25m options to acquire shares at 15c each, which expire in March 2022 and vest on the condition that a minimum of A$10m in cumulative revenues are received by Envirosuits Chinese subsidiaries before the end of calendar 2021. (for context, EVS is targetting $12m in recurring revnues by the end of FY2020)

Another 15m of options will be allocated to China employees under the same terms.

Much of this is subject to shareholder approval at the upcoming AGM.

The $4m raised is before costs, which include 1.25m options (under the same terms as above) for the executing broker. As a percentage of funds raised, seems like the broker will do pretty well out of this...

Envirosuite said that the $10m revenue threshold was NOT a target or forecast -- rather just a performance hurdle. 

Still, the market opportunity in China is obviously vast and the Government there has a clear focus to address air and water issues. Definitely an exciting prospect.

But is it a good deal?

Well, the issue price (8c) seems overly generous to me -- although the strategic value of this deal clearly has big potential. It's hard to do business in China without the right partner...

The deal, in its entirety, will also be reasonably dilutive to existing shareholders. Accounting for all options, there'll be a further ~24% increase in the share count.

Further, the new China subsidiary will undoubtedly extend the cost base. It's entirely possible that any additional revenue earned in the medium term is more than offset by the increased costs.

I expect the market will react favourably to the news when trade resumes, and not without some justification. It's just worth keeping in mind that execution is everything -- and far from gauranteed. 

I'll likely adjust my valuation in the coming days, once more is known.

Read full ASX announcement here

18/02/2020

Envirosuite provided an update on its China venture since it established operations last year.

EVS China now has 10 people, including a local general manager. The previously announced strategic agreements with local partners has supposedly contributed "substantially" to the sales pipeline, the qualified portion of which represents around $12m.

EVS reported a maiden sale of $270k to a wastewater plant, and more sales are expected in the coming months. With the SaaS model still unfavoured in China, new sales are expected to involve a large upfront capital component, followed by a few years of smaller maintainance and software fees.

The recent takeover of EMS gives Envirosuite 4 existing contracts in China for the related solution, and there's potential for further expansion here.

This news is not material from a financial perspective, but at face value it seems as though the move into China has started well.

Management certainly have a lot going on -- ingesting the much larger EMS while simultaneously expanding into a new (and often challenging) geography and overseeing product integration and development is no easy task!  

You can read the full announcement here

There's a lot of detail related to this acquisition, and others have already summarised the main points.

Key considerations for me:

• An extremely large takeover (technically, a reverse takeover) that radically changes the business mix. EVS is now essentially a noise monitoring business that has a relatively small odour and wastewater segment. That being said, they'll be looking to provide a more holistic solution to customers going forward.
• Very dilutive. When accounting for options, there are around 1,127m shares. That gives the company a market cap of ~$225m
• The combined entity will still be loss making, although it is targeting a doubling in revenue over the next 3 years to ~$100m, with EBITDA margin of 15-20%.
• With $15m in cash, post transaction, it should have enough cash to make it to profitability (if projections are indeed realised)
• Cross sell opportunity is significant -- but this is often touted as an acquisition rationalisation, and not always realised..
• EMS has a history of growth, and is expected to see a 9% lift in sales for the current year.
• Macquarie will retain an 8% holding (14% if all options are exercised) and will be the largest single shareholder. It will refer potential clients.
• Big potential, but similarly big risks in terms of integration and realsing cross sell potential.

I've updated my valuation (see my company report)

Envirosuite has today signed a "cooperation agreement" with BHZQ.

This follows on from the "binding agreement" announced in September.

Frankly, I'm not too clear on the difference, but it appears the recent announcement relates to a more formal agreement that makes EVS the preferred supplier for associated solutions. 

(EDIT: Looks like i wasnt the only one who was a bit confused -- EVS released a supplemental clarification on the relevance of the agreement on the 19th Oct. You can read here. Essentially, this agreement was an essential step, profit sharing will be determined on a project by project basis, and that projects will likely require joint input from both parties)

There were no financials or forecasts provided, other than a reiteration of the $10m aspirational target for options conversions, which require $10m in cummulative income from China by the end of calendar 2021.

Still, this appears to be an inevitable contractual step from what was already in train and the initial ~7% jump in shares seemed a bit of a knee jerk reaction.

Good to see progress being made, but I wont be raising my valuation until we see some tangible progress.