Pointerra Ltd - Positive Q1 Operating Cashflow, ACV Bests US$20m

35 Views10 Nov 2022 08:00

Issuer-paid

SUMMARY

Pointerra Ltd (ASX:3DP) provides a powerful cloud-based solution (Pointerra3D) for managing, visualising, analysing, using and sharing massive 3D point clouds and datasets. The company has taken a highly manual, slow and cost-prohibitive process and turned it into a fast, efficient workflow solution for 3D data, enabling digital asset management from any device in any location. The Pointerra3D suite of solutions spans target sectors including survey and mapping; architecture, engineering and construction (AEC); utilities; transport; resources and defence and intelligence. Pointerra has delivered its best-ever quarterly cash receipts, reporting $3.41m in Q1 FY23. Operating cashflow for the quarter was also positive at $0.213m. The result underscores Pointerra’s strengthening financial position, made evident in its recent FY22 audited results which saw the company report its maiden positive underlying EBITDA and NPAT. Pointerra also announced its Annual Contract Value at the end of October had surpassed US$20m for the first time, booking US$20.1m for the quarter end, up from the US$18.22m reported at the end of July. At the run-rate generated in Q1, we are of the view that Pointerra is on track to meet our interim forecast for ACV of US$22.6m. We have made some adjustments to our FY23 forecasts, chiefly to do with timing of when contracts are booked in the P&L. Our base case valuation remains unchanged at $0.95/share and is predicated on Pointerra reaching ACV of US$50m by the first half of FY25.

Business model

Pointerra’s patented, cloud-deployed technology and AI-driven algorithms solve a long- standing problem of efficiently, effectively and rapidly converting massive 3D datasets into analytics and insights to provide definitive answers. Its technology essentially creates a digital twin to manage the physical world. The Pointerra3D product has three key components each with different features and capabilities: Core, Analytics and Answers. Core provides the processing, storage and sharing, visualisation and management of data while Analytics creates the digital twin for the physical world, analysis and classifies the data while Answers creates predictive insights and delivers business intelligence, risk mitigation and ESG improvement suggestions to users. Pointerra charges its clients on the amount of data (in terabytes), the number of users and the analytic tools that clients use.

Continued evidence of profitability in Q1 FY23 results

Pointerra delivered positive operating cashflow of $0.213m in Q1 FY23 on the back of its best-ever quarterly cash receipts of $3.41m, an increase of 247% on the previous corresponding period and 105% on Q4 FY22. Operating costs for Q1 were also up, 8% on a quarter-on-quarter basis and 65% year-on-year, chiefly due to higher staff costs. The company is well on its way to meeting our H1 FY23 cashflow forecasts and follows the better than expected FY22 maiden operating and net profit reported in the company’s annual report. Pointerra has pointed to multiple pathways to profitability in FY23 including margin expansion from further R&D investment in AI approaches to Pointerra3D analytics and answers products, known opportunities, paid Proof of Concept projects and tenders across a range of target sectors. The company’s technology has been a critical component in its client, Florida Power & Light’s recent response to Hurricane Ian and we would expect this to provide a basis for further contract wins in the US market.

Base-case DCF valuation is $0.95/share

We use the discounted cashflow methodology to value Pointerra, using a WACC of 14.7% and terminal growth rate of 2.2% and this derives a base-case valuation of $0.95/share. Our valuation is predicated on ACV surpassing US$50m by H1 FY25.

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