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To expand on DVP25's post, also note that going from the 2020 dec @59k assets to 70k is 11k difference. New connections are happening at around $140-150 MRR because it's O&G (if alberta ever gets back to freedom). The 59k are at an average of what, $34 MRR? So connecting 11k new assets doubles the revenue because of the massive increase in MRR. The originals are at a low MRR because they were doing proof of concept. Once those contract get recycled, the original 59k should change well above $34 MRR.
I’m just happy that the news release didn’t mention anything about a certain stock promoter who was previously barred by the SEC lol
Ya thanks. Seems like they are connecting these in New York, BC is starting the program in June. Nothing on that site about mcloud. So I don’t know when it starts etc.
Right, so it depends on if they spend any money on Prof and consulting. They may not to get the debt. These guys raised money before a brutal quarter, knowing the quarter was brutal. So I think they know the game.
The stock was priced as if it was going bankrupt. $1 doesn't make any sense other than there was a bankrupt risk. But in reality, someone probably found out about the crappy quarter and dumped beyond any logical price. So people had low expectations, something like what you read on this board, partly kidding ;). But reality was just Alberta was closed and 1/2 our new connections were delayed, we still have a big backlog to get us to 80k. Just have to be patient. I think that narrative is not a $1 valuation. If you don't believe that narrative, that's fair. But I think a lot of people do.
EBITDA obviously doesn't include interest expenses either. It's just a milestone. Why not 71,493 connected assets. 70,000 is close enough. And positive EBITDA is the signal to get cheap bank loans. It's not the end goal, it's just a milestone on the longer run.
Ya so I listened to the call. At least 1/2 the backlog is alberta. Alberta basically shut down. They did around 1/2 Q4's connections. Russ said, thank god we had new york and california. So the 2k connections probably came from existing customers in the US.
Ya I agree that guidance is BS, good to have low expectations. But a big chunk of mCloud's business is in Canada I believe. I'm not sure of the resources they have in the US etc. But there might be some travel required to support connections. A lot of the US was still under various lockdown etc. All of Canada has been basically under lockdown, including ontario. The latest lockdown was the most brutal. So ya dissapointed to see the low connection still and am not bullish on 10k/q for a while
Ya brutal.
Ya. Frauds are extremely rare. But tell that to Theranos investors. Maybe run a Benford's law script against their financial statements. Made up financials tend to have lots of 9's.
https://en.wikipedia.org/wiki/Benford%27s_law
Ya fair. Two other Micros I'm in I can email the CEO and they respond.
Yes this. That's the issue. Will they actually be cash flow positive at 70k. I can do the math and get there, but will some other cost come up and suck more cash.
If they were a fraud, they would have to be pretty elaborate, fooling three utilities for example. Why would they enter into a pay for performance contract if their product didn't work?
In addition, people are pissed about the latest tranche at 2.10 + warrants, but if MCLD didn't do the second tranche, they would have been bankrupt. They released their balance sheet with 14M cash after raising 14M in cash.
Hammer. It’s a stretch conspiracy theory (no offence, it is what it is) because he worked for interoil and later Wayne andrews did as well. Wayne was contracted in last year to do IR for mCloud. It’s a guilt by association and then some kind of assumption that Wayne is doing something bad for mCloud now. But I guess you’re free to speculate.
Ya it doesn’t do any good to have retail investors on the call. Although I agree that analysts are a joke, you don’t want some Russian dude blabbing like they let happen at fairfax.
Lol ok, I haven’t disagreed with anything you’ve posted yet. But I wont be shy.
Anonymous: seems like they're not trading today. Might be out of shares? I always speak too soon, so don't hold your breath.
To be fair, Russ had a start up exit to Yokogawa Electric/honeywell. Made it to a good level within their software division as a president/Vp or something. Same with a lot of these other guys. Sometimes businesses fail not only because of leadership, but because the product or whatever isn't good enough. I don't know enough about his previous businesses. However, you seem to only focus on the negatives. Which is fair to bring up, but to ignore everything else is pretty unfair.
These guys already have a lot of shares and were probably blacked out over the last couple weeks from the annual report, the share issuance news, and Q1 coming up next week. Insider activity isn't everything. The dumping could just be people who bought the latest raise for the warrants and are dumping the shares. There is no way to know. People sell for all kinds of reasons.
I agree that this selling is a little ridiculous, however I've been involved in a number of stock that sold off as if they were going bankrupt, when a simple analysis showed otherwise. It gets to a point where emotion eludes reality and some people are forced to sell because the stock doesn't meet their internal mandates. $1 might as well be $0. I don't see a base case for $1 valuation. Like the only base case that support $1 is essentially zero growth going forward. All the news releases indicate otherwise.
So what do we have to believe for this to be at $1? What is true? I spoke to IR - zero lost customers. So it's not that unless they straight up lied. They have $15-20M in cash now. So they have cash for 2-3 more quarters. Did they have a shitty quarter for growth? Maybe. Will things likely get better in Q2-Q4? Probably with things opening up.
No I'm far from being anyone special. I am a consultant in the aerospace sector (engineer + masters in BS administration). So what I do is help people buy large fleets of aircraft, the maintenance contracts etc, and then set up and advise on the asset management of those fleets. So what mCloud does, we've been doing for decades on aircraft. We buy software to manage the assets very similar to AssetCare, but much more complex.
For example, AssetCare's heat exchanger product changes maintenance from a scheduled maintenance event (i.e. replace/service every x months) to a on-condition predictive maintenance (i.e. replace/service when AssetCare tells you to). We do this on a much larger scale. We have Reliability and Maintainability engineers that help us massage large/complex maintenance programs such that we limit downtime, etc. We are always trying to eliminate maintenance requirements that aren't required or repackage the certain out of sequence maintenance requirements into larger scheduled maintenance events. i.e. if we are overhauling the aircraft, might as well do this or that now etc. This is very valuable because it's not the service cost, it's the downtime that cost money. If you can plan that better, it's worth a lot.
New aircraft are becoming more and more on-condition as they increase the number of sensors on them. A simple example is a magnetic particle sensors in engine oil that lets you know when to change the oil (we've had this for decades). Some cars have this now too. More complex aircraft like fighter jets have strain gages all over them to estimate fatigue index on the structure. The modern maintainer spends his or her day resetting fault codes after each flight.
So I've dealt with these aircraft software companies many times and seen the money they print. Replace aircraft assets with building, O&G facility, Heat exchanger, wind turbine, etc. There are tons of assets that cost a lot of money and who are not optimized. It's a really long tail here.
A little technical:
When I was doing my engineering degree, I specialized in control systems (e.g. robotic controls etc). The classical way of doing robotic controls is through feedback loops wit linear models etc. But I took some grad courses as well where we were using machine learning to automatically learn the robot's dynamics to control it. One type of machine learning is using neural networks (NN), but any type of learning algorithm is "AI". You can take a NN or some other type of algorithm and feed it random data over and over on the robot arm or whatever. You use a formula to update the nodes of the NN (i.e. the error or difference between your input command and the bad output you got) and eventually the NN starts to output the right voltages to control the robot arm based on your desired command. You can do the same thing with HVAC or whatever. For example, the "Digital Twin" is just some machine learning algorithm (e.g. neural net) that has correctly learned whatever you want to control.
So I also consult on aircraft simulators. An aircraft simulator is just a digital twin of an aircraft for pilots to train. Now they don't really use machine learning or AI to model the aircraft. They are still at the stage of using engineering formula's (e.g. force = mass x Acceleration) and estimated coefficients they estimate from flight testing to simulate the aircraft. Alternatively, you could throw a bunch of sensors onto an aircraft, fly millions of iterations of speed, angle of attack, landings, takeoffs etc - take all that data and pump it into a large neural net. Then you would have a model of the aircraft without one single engineering formula. But you can't really do that with a new aircraft that just came out. And you would probably have gaps if you didn't have enough data etc.
So I get the technical aspect. Modelling a heat exchanger or a wind turbine is a lot simpler than an aircraft.
So I guess to answer your question, I'm up in front of management all the time talking about billion dollar acquisitions. Talking to finance people (like these analysts) who only know numbers. So you do your best to answer questions in the 15 minutes you have. Which is why I don't really pay 100% attention to deconstructing every sentence in a conference call. Plus from my experience, so much changes in a month. Especially in a startup. So you need to give a lot of wiggle room. If we were a $1B rev business, things can change a little slower and you have a longer term strategy etc.
Asset initialization is 20% of Total Contract Value. It's not real money, but an accounting treatment of revenue. It's just how they recognize revenue. So for a $10,000/36 month contract they would recognize:
month 1: $2000
month 2: $228
month 3: $228
...
month 36: $228
The cash flows look however they are negotiated. So if there is an upfront payment to "pull forward" 20% of TCV in month one, their cash flows would look similar. But if not, the cash flows would look like MRR:
month 1: $277
month 2: $277
month 3: $277
...
month 36: $277
So asset care initialization isn't in addition to the MRR.
So if you only focus on the negatives, all you will see is negative news. I think the stock price is obviously affecting some emotions here. Fair enough. The stock price is an indicator that you can use, but from my experience, it's wrong all the time. Great investors analyze the facts and then convert the stock price into either an opportunity, fair price, or overvalued. All we can do is examine the facts in front of us. All the stock price does is allow you to run around speculating. Specifically, we are starting to focus on one quarter's results. Although I could be wrong and we have a brutal quarter, what matters is the long term outlook. I have no issues if someone decides to sell because they are speculating on a bad quarter. Even if they end up right, selling because the price went down is not my definition of investing.
For example, good news - they specifically highlighted increased activity at the beginning of march we got new contracts in Asia, the first roll out of fugitive gas, 6 new oil and gas facilities, etc:
CALGARY, AB, March 2, 2021 /CNW/ - mCloud Technologies Corp. (TSXV: MCLD) (OTCQB: MCLDF) ("mCloud" or the "Company"), a leading provider of asset management solutions combining IoT, cloud computing, artificial intelligence ("AI") and analytics, today provided an update on progress made since announcing a partnership with Invest Alberta Corporation ("IAC") on February 2, 2021. mCloud announced it had signed new AssetCare contracts at six oil and gas facilities in Alberta, including the adoption of mobile connected worker and connected asset solutions by multiple oil and gas companies in the province.
The Company also announced plans to deliver the first major customer rollout of its new AssetCare fugitive gas emission and leak detection solution in the province during the second quarter ending June 30, 2021 ("Q2 2021"). This solution is one of the Company's key Environmental, Social, and Governance ("ESG") applications that will drive major carbon emission reductions for AssetCare customers in Alberta and abroad.
Outside of its activities in Alberta, mCloud indicated it is seeing continued success internationally with the recent addition of AssetCare contracts at 12 new locations around the world, including sites in Asia-Pacific and Greater China, with plans to have these solutions delivered in the coming weeks. Among these solutions are connected oil and gas applications derived from mCloud's acquisition of kanepi Group Pty Ltd ("kanepi") in late 2020 and now the foundation of the Company's AssetCare Enterprise offering for strategic customer rollouts of mCloud technology.
"We are adding new connected assets and workers to our AssetCare portfolio every day," said Russ McMeekin, mCloud President and CEO. "As we see businesses finding their path past the current global pandemic, we are on track to achieving our near-term objective of having 70,000 connected assets under management."
I don't think it's late. Last year they released Q1 on the exact same date:
May 26 2020
07:04:26 ET
Interim financial statements/report - English
May 26 2020
07:04:07 ET
MD&A - English
Ya I think you might be reading too much into it. He was just trying to answer a specific question on guidance:
Jack Vander Aarde
Okay, great. That's helpful Russ. And then, just switching gears to a question on kind of the outlook for guidance. I guess, just for starters, would you expect, it's kind of a pointed question, obviously. So it's okay, maybe you can't provide a specific answer. But from the revenue line, total revenue, would you expect the first quarter revenue to decline from the fourth quarter? And then, but then grow sequentially throughout the year? Or would you expect first quarter to be above the fourth quarter?
Also this came out in March. So he is referring to they are still working on the quarter.
I've been there many times (answering questions in front of a board or whatever), you try to do your best. But it's not a 1 on 1 where you get time to think answers through. You just blab things out as best you can. So we have the benefit of going line by line analyzing what someone said.
In a lot of other recent presentations and conferences, I've seen Russ indirectly hint that it will take a long while to get to 70k. Then Wayne Andrews says but aren't we doing 4-5k per Q, shouldn't we get there by mid 2021? Then Russ is like oh ya, but we want to go faster... blah blah blah.... so I take it with a grain of salt. They don't really know the future either too.
Ya entirely possible that asset velocity went down. Hence the financing, hence the announcements about utility connections etc. Give us something to chew on.
Ya I think the restrictions have been the same for the past year. So I don't look into it more than that. Also I don't think they should be releasing # of connected assets outside of the quarterly reports as they are material to Quarterly revenues. Other than perhaps announcing milestones like 70k or 100k.
BTW Wayne told me 100k is significant because they should be Net profitable then. 70k is cash flow positive.
Ya no prob. I agree.
not quite, fully diluted there are 64M shares I think. If we get to 5B everyone will convert or exercise the warrants. But a very large bagger for sure. That is why $1 does not make any sense. You can do large dilution and still get a wonderful result. The issue is can they grow this thing fast enough.
Look at EQ.V. Different space, but a digital analytics company with decent gross margins. But their 3 year growth target is around $50M in rev from their current $10M. But the stock EV/Rev is around 10x. they have had to raise a bunch of dilutive money too, going from 23M shares in 2017 to 68M shares now.
There is just so much negative sentiment on this stock. Zero optimism. So you have to use your judgement on if the negative sentiment is justified or not.
I continue to buy, I bought a ton between 1.5 and 2.6. I never conceived that it would go to $1.10 I just ran out of cash for now. I continue to buy more as more cash comes in. I have a big exit hopefully in Aug. So I'm hoping all is good and it stays below $2 until then.
Asset connection velocity has been in the 4k's since covid. Like I mentioned, they do need to fly and travel to certain assets like wind to support onboarding. Also they need local HVAC contractors to potentially do some building HVAC connection work or install some smart sensors etc. The expectation at $6/share pre covid was probably 10k assets/Q, which I would like to see. It's just been tough logistically. There is a backlog and a lot of other waiting to sign a contract, but like I mentioned before, there shouldn't really be any significant backlog. They should be able to connect buildings really fast and have the property managers connect them on their own.
So I expect things to accelerate once we get past covid. The US is past it, so we will see the effect of that in the next two quarters. Canada will take forever at this rate. But the real market is US, Middle east, and Asia Plus Alberta for O&G.
I think if we get to cash flow neutral at 70k, the stock will get back to $2-3. If we see 100k, you might see $5-14/share. The range is a result of the connection growth velocity. I think if we get to 7-10k/Q it will drive the stock price better than waiting 2 years to get to 100k @ 4k/Q.
Remember the formula for rev is
Assets x MRR x 12 months
MRR is at $31, but new asset MRR is at ~$150. The old MRR is getting renewed at a higher rate as those old contracts get renewed.
Gross margins for new assets are probably 70-75%. So you can do a FCF estimation from say 70k assets to 100k at whatever MRR you want to use. Then slap a EV/EBIT multiple on it if you don't want to use EV/Sales.
Ya it's just a gut feel. They are burning through what 4-5M/Q at 59,000 assets. so another 11,000 assets x $150 MRR x 3 months = $4.95M.
But that this operations neutral. They need to continue to grow their operations and sales etc. So I think that operational cash will continue to outpace cash growth for a while, unless they can get to 10,000 assets/Q velocity. I just get the feeling they will need more than 15-20M in cash to get to a point that this is really sustainable. Look at kinaxis. They had $170M share capital for a 200M revenue business that is profitable now. We have 80M, mind you the convertibles + warrants should shift to share capital if they convert. So that would be $130M.
If they can pull off a no more raised capital and grow with cash flow, that is the unexpected IMO. I just see this getting diluted to over 100M. People hate the dilution, but 100% of nothing is nothing. That's why venture capital funding in the pubic market doesn't work unless there is a real hard on from the right fund managers. 100M shares of a $2B business is $20/share. I'm fine with diluting to get to 500,000 assets. Even 200M shares still gets a great return from here. So i would have rather them just rip off the band-aid and get the $50 in one shot. But maybe when they list on the NASDAQ (can't now with a $1 share price) they will get a way better valuation. Who knows when that will be.
Ya it's funny because if the share price were high, we wouldn't need to raise anymore money. The share price is low because people are forecasting future raises will be at a low price and heavy dilution. It's a death valuation spiral. Obviously we wouldn't be in it if they were growing faster, but then we wouldn't need money then.
Confused? I am.
They need to be inside a BBU or somewhere with access to lots of cheap capital. I honestly think brookfield should just buy this for $300M or whatever. Someone like them with access to tons of assets and exposure to the industry could grow this thing.
Actually I think it was not expensive money:
The ATB Facility is a demand operating line bearing interest at a floating rate equal to the prime rate per annum established by ATB from time to time for commercial loans denominated in Canadian dollars made by ATB in Canada, plus an applicable margin rate based on the senior debt to EBITDA ratio of the Company at the time of determination.
ATB is a crown bank in alberta. This is actually the first time mCloud has got bank money. They got a $13M bond at 6 some percent from some fund before, and another one from some other fund. And obviously a bunch of converts. I think we all want to stop the converts and other dilution so this is good news. Although $5 is one quarter of cash at this rate.
Ya they need a $50M line. Remember the secrete to a happy marriage, low expectations. Same goes for investing.
Also, RE lime energy, I don’t think they are exactly the same as mCloud. When you look at their website, it’s mostly about energy savings from replacement of assets (lights bulbs, physical controllers, upgrading to brushless motors and compressors for refrigeration, etc). They also have an app to control things, but I don’t think they are using AI. It actually seems more like the typical replace assets to save and install smart controls. Not as much of a turn key solution like mCloud, although they do offer a fully managed power service. Definitely something worth Looking into more.
Ya I don’t think it’s anything pointing to doubling the quarterly connection count, but it’s something. Also I’m not sure O’Neil contradicted as he was talking about the two US programs when he mentioned pay for performance. Then Russ talked about the Canadian program. And the BC program goes till the end of may I believe, with the trial starting in June. It may have initially ended in April, or it’s a typo. Later on it says May. You can still sign up if you click on the link.
The $4,000 goes towards some of the connection costs maybe? Not 100% clear. But the terms are 36 months for signing up (see mcloud BC landing page). The BC hydro trial is 1 year long. Not sure what that means. Maybe your credit is only good for a year or something. Maybe they assess the performance of mcloud and do another program. Maybe you get automated demand response kickback for a year. I’ll call BC hydro tomorrow and see.
I think the long term implication is that these some of these programs may become mandatory in certain regions. So they are testing them out.
Not sure your background, so I'll provide a bit of background on energy distribution. Apologize if I dumb it down.
So not everybody knows that in the grid, energy gets created and used at the same instant. So when you switch on a light, the energy you are consuming was created at the same time at the hydro or coal plant. So the power plants always have to compensate to match power demand. They don't want to create too much or have too little power flowing through the wires. So when you switch on one light bulb it doesn't make a big difference. But when 10,000 people all switch on their Air conditioning units at the same time, that's a huge power draw. Most things that have pumps or machinery etc have a big spike in power to get it going and then taper off to a lower power draw.
So I mentioned that power is created and used in the same instant. What that means is that the utility needs to quickly ramp up power production. This is important as not all power sources can be adjusted quickly to match demand. Nuclear is good as a base for example, but you can't ramp it up and down as fast as hydro. Hydro you just open and close a gate. Gas turbines are really fast at adjusting. Solar, wind etc you can't ramp it, you can just switch units off and on.
So the utilities have to manage the power distribution grid and the power sources to always match demand. They spend a lot of capital doing this, building more plans or more complex grids to shed and buy power. Wouldn't it be good if the power company could lower net power demand and enable them to do slight delays in HVAC start ups? That would smooth out the initial HVAC start up power spikes across a power region. HVACs are always turning on and off during the day as they cool, let the building heat, cool, let the building heat, etc. The solution is automated demand response so the utility can control the customer's power cycles and startup etc.
Enter mCloud...
So how the utility programs works is the customer signs up through the utility for the trial program. They sign up directly with mCloud for AssetCare on a 36 month period. Then the utility pays the customer incentives based on the automated demand response and the customer gets savings from AssetCare energy reductions. I think there are different models for each utility. In BC you get a $4000 credit:
https://www.bchydro.com/powersmart/business/programs/auto-demand-response.html?WT.mc_rd=rd_autodemandresponse
https://utilities.mcloudcorp.com/bch
In New York it's with Con Edison, but I'm not sure of the compensation there. It could be monthly utility cost reductions or something else:
https://utilities.mcloudcorp.com/coned-bep/
https://www.coned.com/en/save-money/rebates-incentives-tax-credits/rebates-incentives-tax-credits-for-commercial-industrial-buildings-customers/business-energy-pro
https://www.nyserda.ny.gov/All-Programs/Programs/Business-Energy-Pro
Note the competitor Lime energy in the NY programs. They primarily do lighting, but also HVAC. Note sure their business model tho.
Wayne confirmed the third is California, but I haven't found it yet and got distracted to ask during my IR call.
So there you have it. It has nothing to do with ESG as a driver. It has everything to do with the utilities delaying billions in capEx and giving an incentive to the customer. It's also a "trial" so it's temporary (1 year trial). But if it works, maybe it will go on for a while. I remember my hydro company wanted to install a free smart HVAC controller in my house. They persisted for years with flyers in my bill etc.
Is it good for mCloud? I think so. It shows 3 great partners and that they at least got the attention to create a trial for AssetCare and attach incentives on it. It's also strategic to get the mom and pop commercial and industrial etc. Those one-offs would be expensive sales cycles for $50-100 MRR individually. The utilities help scale those customers. Also if they get one building manager at a bigger franchise, it might get pushed to corporate to scale it to all their buildings. So it is another sales funnel.
How many will they get? I have no idea. I think it's better than people think, but we will see how much better. I think over the long run it will be good, but will take time like anything.
Same goes for that press release on them implementing asset care on one floor. FYI some buildings have individual HVAC for each floor.
For example if you are in a building with a glycol chiller on the roof, you can have heat pumps on each floor. So they just showed that assets are not only buildings, but potentially each floor of a building, or they can sell to a firm with an ESG lens and put AssetCare on all their locations even if they only occupy a floor here and there. Which is obviously a larger TAM and another sales funnel.
I don't know if they are technically insiders anymore. Also nothing filed recently. They could have not been part of mCloud after they sold the company. They could be external investors that funded the original acquisition etc. Heck, we don't even know if it is actually them. It could be an original investor in mCloud who just got tired of dilution. Who knows. The only thing I can tell you for sure is that if I had 1-3M shares, I wouldn't dump them on the open market. I would find a buyer to tender them at $2 or whatever. But I guess compared to the last raise at 2.10 + warrants, $1.50 might have been all they could have got. I don't know. I'm scratching my head at someone dumping, but Speaking to Wayne, unless he is lying or hiding something, I didn't get the sense that anything in particular was wrong. Like no smoking gun. But I guess we are all here at $1.09 holding the bag.
Thanks great to be here.
1.) "...cash burn was set up on assumptions pre-pandemic."
I guess I just have different expectations. Maybe I just expected it, although not at the crappy valuation. Looking at their cashflow, burning through 20M by Q3 last year, I just expected more raises. With the expansion into Alberta, I just expected more cash burn. That act alone probably added 1-2M last Q. I think they need another $50M after this round to get this thing going long term. I also think they need to really scale this thing as it seems to be a first to market + high relative switching costs. Retail banking is a similar analogy. Retail banking is competitive, but people are not likely to switch after they sign up with a particular bank - the effort to switch is more than the fees you pay. I'm of the opinion that they should go to the US, raise a bucket load and attack the market. But valuation matters obviously.
My message to them was, just tell people that you need more money and don't give false expectations. Be conservative. All these guys need are the right investors that will back the growth at good valuations because they can look out 5 years. Right now it seems like they have a bunch of short term investors who want a dividend to fund their retirement (exaggerating). I think if everyone just switch to that mindset and accepted dilution, things would be better.
2.) "Shouldn't the asset count backlog be growing while they are still restricted logistically if the demand is there?"
Yes I agree. What, they have 30M contractual backlog or 130M high potential TCV. Something like that. Maybe they can't get commitments with the logistical delays. Maybe people are still wait and see before they commit to $50-$150 a month. Maybe people don't want to sign a contract and wait 6 months to a year to get onto the system (I think this is the most likely case). I guess the key thing is for them continue to show new monthly connections with their current capabilities. They do need a sales backlog, but how it's defined between contractual backlog and high probability backlog isn't that important to me, nor is the size as it's a relatively fast sales cycle. I don't think most SaaS really have backlogs if they have a fast sales cycle. Usually you convert quickly. As long as it exists and continues to exist is good though. What's more important is their marketing reach long term.
3.) Yes I believe they recognize 20% upfront, and amortize the remaining TCV over the remaining contract duration. But that is earnings - the only thing that really matters is cash flow and that is MRR unless they "pull money up front".
4.) "Regarding the recent selling, where are you getting the 4M share count from? Is that the number of restricted shares that recently matured?"
I'm just guessing based on the volume since volume picked up at around $2. Sorry maybe around 2-3M shares if you add day by day when it really started to dip past $2. Maybe 1-2M if you factor in some shorts or others selling. I have no idea how many. I wouldn't be surprised to see more selling on monday. It seems like it will never end.
It's interesting reading these comments. I've been lurking here and there for a while. I think when you own something its always good to have bears to force you to rethink things. I think one thing to take into consideration is that reality is always somewhere in between the bear and bull. If all you read is the bears you will never invest in anything. If all you read is the bulls, you would have bought too much at $6.
RE: Russ. If you held past failures against every CEO, there would be no Apple. In fact most VC's like someone who has failed before, numerous times. I agree that maybe some of his decisions haven't been perfect, cash burn was set up on assumptions pre-pandemic. I think they just underestimated the logistical implications of onboarding assets. Is he a good capital allocator? We'll see. What Russ did was raise some money to amalgamate several technologies into one product offering. I think everyone can agree that the offering is really good. So we have a guy who did that well, however the financing was obviously painful. Investments take 3-5 years usually to declare victory or defeat. Is he a burner of capital? I think if you look at any other startup, they are heavy spenders of cash until they can reach that critical point. It helps when you have a high valuation for capital raises to get you past that obviously.
RE: They couldn't sell water in the desert. The bottleneck hasn't been lack of demand, it's been logistics for implementing during Covid. For example, wind assets in China need a bit of logistical support to onboard and work with the drone operators etc. Travel is restricted, so they can't go to China. Buildings may require some modifications from HVAC to install UV lights and some sensors. So to be fair, yes it's not as fast as we would like, but there is a backlog and they keep showing signs of expanding through partners. So I'm in the middle here. If it doesn't start to pick up in the next 2-3 quarters, maybe something worth thinking about. 10,000 assets per quarter gets you to 1/2 their 500,000 five year target, although we should start thinking of 500,000 as a four year target lol.
RE: Financing and Dilution. I agree that this thing would have been way better not in the public market. Retail investors and family offices outside the VC space are finicky. The Canadian Venture exchange is probably the worst place in the world to raise money. Canadians are brutal at VC. If there was no share price and they were in the US, they probably would have increased their valuation raises every offering. Then you list this thing close to cash flow positive on the NASDAQ at 10-20x sales. There is a reason Shopify listed in the US. It would still be at 10x sales if it weren't. Because the market is set by people who aren't VCs and can't handle dilution, emotion sets the price. Dilution is painful, but you can essentially triple the share count from here if you believe in even 1/2 the five year connection target. If the valuation were at 10-15x sales, the dilution wouldn't have been brutal and the share price wouldn't have dropped so bad. This is the valuation dilution spiral. Is that Russ' fault? Yes and no. I think it's a reality of the venture. The sewer of investment markets.
New assets are being brought in at around $140-150/asset. You can do the math on the marginal recurring rev vs new assets. Old contracts are getting renewed as well. BoA was initially onboarded at $3. Clean air is an upsell. So it takes time, but I think in the long run it will eventually pay off.
RE: ESG. I know people find it BS, but there is a reason Brookfield created a bunch of ESG funds. It's to sell the stock and the product. I wouldn't underestimate the power of green bobbleheads with stimi checks.
Is there something else driving the price down? I don't think so. I had a long conversation with the dreaded Wayne Andrews. I didn't feel like he was upselling anything or BS'ing. There were a lot of RSUs from previous acquisitions that matured. The selling essentially happened exactly at the capital raise announcement. I'm just surprised that the seller didn't just find someone to tender the 4M shares at say $2. They could probably have found a buyer from the 9 US institutions who participated in the recent raise. For some reason they decided to dump on the market. Either way, it makes no sense.
So I'm in the camp of objective reason. Share price is brutal. I'm expecting another round of dilution in the future. It's not a negative assumption, but rather a reality. I use 150-300M shares as my 5 year base. However, I think the business itself has really good upside. So betting here makes sense. I'm not as negative as most on Russ. I don't think I could have done any better.