Sensing another record quarter of AI SaaS

SenSen Networks 3 May 2022 Update
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SenSen Networks

Sensing another record quarter of AI SaaS

Q322 update

Software & comp services

3 May 2022

Price

A$0.105

Market cap

A$68m

US$0.70/A$

Net cash (A$m) at 31 March 2022 (includes leases)

4.9

Shares in issue (31 March 2021)

650.3m

Free float

52%

Code

SNS

Primary exchange

ASX

Secondary exchange

OTCQB: SSNSF

Share price performance

%

1m

3m

12m

Abs

(16.0)

(19.2)

(34.4)

Rel (local)

(14.2)

(21.6)

(37.3)

52-week high/low

A$0.17

A$0.10

Business description

SenSen Networks, an Australian-based technology company, operates in the field of sensor artificial intelligence. By applying its SenDISA AI platform to physical space monitoring, it extracts real-time insights for customers. It provides solutions to customers in the smart city, gaming, retail and emerging market verticals.

Next events

Q422 activities and cash flow report

22 July

Analysts

Ken Mestemacher, CFA

+44 (0)20 3077 5700

Max Hayes

+44 (0)20 3077 5700

SenSen Networks is a research client of Edison Investment Research Limited

SenSen (SNS), an Australian-based artificial intelligence company, reported another quarter of record cash receipts, growing 109% y-o-y to A$1.7m in Q322. SNS’s ‘land and expand’ strategy generated contract wins with significant portions of higher-margin recurring revenues, resulting from its transition to a ‘pragmatic SaaS’ model. Monthly recurring revenue (MRR) remains on track to reach A$0.65–0.7m by the end of FY22, and we maintain our current forecasts. If SenSen can sustain this recent momentum of contract wins across geographies and verticals, we expect that it could lead to a reduction of the valuation gap.

Year end

Revenue

(A$m)

Adj EBITDA*

(A$m)

PBT**

(A$m)

EPS**

(c)

P/sales

(x)

Net cash***

(A$m)

06/20

3.8

(2.8)

(3.7)

(0.85)

13.8

0.7

06/21

5.5

(2.2)

(2.9)

(0.61)

9.4

3.9

06/22e

9.3

(6.6)

(9.7)

(1.67)

5.6

1.2

06/23e

16.4

(2.5)

(4.8)

(0.73)

3.2

(0.5)

Note: *Adjusted EBITDA excludes non-cash share-based payments. **PBT and EPS are normalised, excluding amortisation of acquired intangibles, other income, and exceptional items. ***Net cash/(debt) is cash less debt and leases.

Q322: Record cash receipts

SenSen reported another quarter of record cash receipts, bringing in A$1.7m in Q322, growing 109% y-o-y and 12% over Q222. Net cash used in operations improved to A$2.1m versus Q222’s A$3.2m, as Sensen implemented cost saving initiatives with the goal of reducing operating expenses by 10%. The cash balance fell by A$2.4m as SenSen continued investing in sales and marketing.

Land and expand rolls on

SNS’s ‘land and expand’ strategy continued to generate contract wins, including Brisbane City Council and Toowoomba Regional Council. For instance, the former ordered four additional vehicles for automated parking enforcement using SenSen’s AI solutions, bringing the client’s total to 11 systems. This contract was for c A$278k upfront and a minimum of A$280k pa in recurring fees. These contract wins contributed to SNS’s continuing growth in MRR.

Back on schedule after flood delays

As noted in our initiation report, recent floods in Australia delayed the rollout of projects and contracts, leading SNS to revise its FY22 guidance. Management now reports that revenues are picking up and project rollouts are back on track, as they continue to recover from the floods. Furthermore, no expected orders or contracts were lost, with only the timing of revenue recognition delayed to FY23.

Valuation: Still undervalued versus peers

SenSen is trading at 3.2x price/revenue for FY23e, a significant discount to its peers despite SNS’s higher forecasted growth rates. Using the average peer multiple of 7.4x FY23e price/revenue implies a share price of A$0.19 or upside of 132%. If SenSen can maintain the momentum in new customer wins and success across geographies and verticals, we expect there could be a reduction in the gap.

Exhibit 1: Financial summary

A$000

FY20

FY21

FY22e

FY23e

FY24e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

3,764

5,533

9,338

16,417

24,940

Cost of Sales

(997)

(2,030)

(2,863)

(4,763)

(5,907)

Gross Profit

2,766

3,503

6,474

11,654

19,034

Other Income

1,539

2,807

3,600

3,960

4,356

Operating Expense (not incl. share-based payments)

(7,567)

(9,112)

(17,760)

(19,466)

(21,381)

Share-based payments (non-cash)

(290)

(72)

(2,500)

(1,500)

(1,000)

Adjusted EBITDA

(2,807)

(2,243)

(6,557)

(2,450)

3,419

Operating Profit (before amort. and except.)

(3,534)

(2,785)

(9,507)

(4,675)

1,685

Intangible Amortisation*

-

(83)

(675)

(675)

(675)

Exceptionals

(18)

(6)

(3)

(2)

(2)

Operating Profit (EBIT)

(3,552)

(2,874)

(10,186)

(5,352)

1,008

Net Interest

(138)

(142)

(163)

(98)

(98)

Other

-

-

-

-

-

Profit Before Tax (norm)

(3,672)

(2,927)

(9,671)

(4,774)

1,586

Profit Before Tax (reported)

(3,690)

(3,016)

(10,349)

(5,450)

910

Tax

(15)

(6)

(62)

(33)

(182)

Other

-

-

-

-

-

Profit After Tax (norm)

(3,687)

(2,933)

(9,733)

(4,806)

1,404

Profit After Tax (reported)

(3,705)

(3,022)

(10,411)

(5,483)

728

Average Number of Shares Outstanding (m)

436

484

584

655

665

EPS - normalised (c)

(0.85)

(0.61)

(1.67)

(0.73)

0.21

EPS - reported (c)

(0.85)

(0.62)

(1.78)

(0.84)

0.11

Dividend per share (c)

-

-

-

-

-

Gross Margin (%)

73.5%

63.3%

69.3%

71.0%

76.3%

EBITDA Margin (%)

N/A

N/A

N/A

N/A

13.7%

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

6.8%

BALANCE SHEET

Fixed Assets

790

2,168

9,324

8,488

7,643

Intangible Assets

-

1,300

8,303

7,628

6,953

Tangible Assets

353

391

545

383

213

Other

437

477

476

476

476

Current Assets

4,706

8,022

6,052

4,313

6,947

Stocks

803

241

875

875

875

Debtors

744

979

960

960

960

Cash & cash equivalents

2,463

5,176

2,021

282

2,916

Other

696

1,625

2,196

2,196

2,196

Current Liabilities

(4,498)

(3,640)

(6,800)

(8,980)

(9,122)

Creditors

(1,095)

(750)

(2,000)

(2,500)

(2,700)

Short term borrowings

(1,313)

(861)

(450)

(450)

-

Lease Liabs

(235)

(306)

(300)

(300)

(300)

Other

(1,856)

(1,723)

(4,050)

(5,730)

(6,122)

Long Term Liabilities

(276)

(244)

(1,899)

(1,348)

(801)

Long term borrowings

-

-

-

-

-

Lease Liabs

(197)

(138)

(60)

(60)

(60)

Other long term liabilities

(79)

(106)

(1,839)

(1,288)

(741)

Net Assets

721

6,305

6,676

2,473

4,666

Minority Interests

-

-

-

-

-

Shareholder equity

721

6,305

6,676

2,473

4,666

CASH FLOW

Operating Cash Flow

(2,884)

(3,250)

(10,470)

(1,044)

3,928

Net Interest

(42)

(127)

(163)

(98)

(98)

Tax

(101)

(31)

(62)

(33)

(182)

Capex

(100)

(253)

(340)

(300)

(300)

Acquisitions/disposals

-

-

(1,127)

-

-

Equity financing

3,329

7,043

9,682

-

-

Dividends

-

-

-

-

-

Other**

288

(667)

(675)

(264)

(714)

Net Cash Flow

490

2,714

(3,155)

(1,739)

2,634

Opening net debt/(cash) w/o Leases

(648)

(1,150)

(4,315)

(1,571)

168

HP finance leases initiated

-

-

-

-

-

Exchange rate movements

-

-

-

-

-

Other

12

451

411

-

450

Closing net debt/(cash) w/o Leases

(1,150)

(4,315)

(1,571)

168

(2,916)

Closing net debt/(cash) w/ Leases

(718)

(3,871)

(1,211)

528

(2,556)

Source: SenSen, Edison Investment Research. Note: *Amortisation of acquired intangibles (patents). **Includes repayment of leases, proceeds from/repayment of borrowings, etc.

General disclaimer and copyright

This report has been commissioned by SenSen Networks and prepared and issued by Edison, in consideration of a fee payable by SenSen Networks. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by SenSen Networks and prepared and issued by Edison, in consideration of a fee payable by SenSen Networks. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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