Sensen Networks Ltd - Q4 Client Wins Lift ARR to $8m; Costs Come into Focus
Sensen Networks Ltd
Q4 client wins lift ARR to $8m; costs come into focus
Sensen Networks Ltd (ASX:SNS) is a technology company providing video and sensor artificial intelligence (AI) data analytics software solutions for the smart cities, casinos and retail industries. Its ‘SenDISA’ (SenSen Distributed Intelligent Sensor Analytics) AI platform gathers inputs from cameras, GPS, LIDAR (Light Detection and Ranging) and other sensors to extract customised and real-time insights (such as parking management, traffic flow and theft detection). SNS has ~70 customers located across Australia, NZ, Singapore, North America, India and UAE. It generated the majority of its $11m FY22 revenue from annual Software-as-a-Service (SaaS) licences (~60%). SNS completed two notable corporate initiatives in FY22, namely: (1) The acquisition of Scancam Industries, a fuel-theft monitoring company, for $6.3m (plus up to $4.2m of potential deferred consideration); and (2) Capital raisings totalling $10m (at $0.12 per share) in late 2021 to fund growth. These initiatives enabled it to secure new or expanded contracts with several clients during Q4 FY22 (with est. minimum total value of $3.8m in upfront and recurring SaaS revenue to be recognised over two-three years). In July, SNS also announced $2.5m of expected cost reduction initiatives for FY23 stating that “delivering growth while reducing costs is a pressing priority”.
Business model
SNS’s SenDISA platform provides the following AI analytics services: (1) For smart cities clients, namely local councils, road authorities, transit agencies, national parks (64% FY22 revenue): Traffic data, law enforcement and civic compliance solutions; (2) For casinos (9% FY22 revenue): Actionable insights from real-time data on games, customers, productivity and compliance; and (3) For retail (27% FY22 revenue): Anti-fuel theft (Scancam acquisition), loss prevention and asset protection. SNS is also seeking to develop use cases for additional industries. Its revenue model comprises: (1) Upfront revenue from the deployment of pre- packaged hardware solutions (~20% of revenue); (2) Recurring, higher-margin revenue from SaaS licences for its analytics and back-office software (~60% of revenue); and (3) Professional services fees for upfront and ongoing services from trials for prospective clients, solution design services, software installation, configuration, customisation and user-acceptance testing support (~20% of revenue). SNS actively seeks to upsell additional deployments and use cases to its existing clients. Geographically, revenue is split between Australia/NZ (~47%), North America (~36%) and Asia (~17%) [based on FY21].
Record revenue reflecting Scancam and investment in sales
SNS recently announced its FY22 preliminary unaudited results including the following key metrics: (1) $9.1m sales revenue (up 65% on pcp boosted by Scancam’s $2.4m ~12-month contribution) and $3.0m of R&D grant income; (2) 21% organic yoy revenue growth (i.e. ex- Scancam); (3) $5.6m gross profit (62% margin); (4) $10.9m EBITDA loss (up from $2.3m loss in pcp) due to investment in sales teams and R&D to accelerate growth and expand into new market segments; (5) Net loss of $12.3m; (6) Operating cash outflows of $8.0m and free cash outflows of $8.2m; and (7) $4.3m net cash (including $2.0m debt) at 30 June and $1.8m of unused finance facilities. SNS exited FY22 with Annual Recurring Revenue (ARR) of ~$8.0m.
Trading on higher EV/Rev multiple than ASX-listed peers
SNS is trading on EV/Revenue of 5.1x for FY22 and 2.8x for FY23f (Source: Refinitiv). We consider Smart Parking Ltd (ASX:SPZ), Rocketboots Ltd (ASX:ROC), SKYFII Ltd (ASX:SKF), Spectur Ltd (ASX:SP3) and Icetana Ltd (ASX:ICE) to be SNS’s ASX-listed AI segment peers. SNS is trading at a significant premium to the average 1.8x FY22 EV/Revenue of this peer group, including SPZ which is profitable and trading on 1.8x FY22 EV/Revenue and 8.0x FY22 EV/EBITDA.
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