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Research: TMT
SenSen Networks (SNS) maintained its streak of record year-on-year cash receipts in Q223, with customer receipts up 70% against Q222 to A$2.6m. SNS continues to see growth across its key verticals of smart cities, gaming, retail and surveillance, boosting annual recurring revenues (ARR) to c A$8m, and leaving the company well on track to meet management’s expected ARR of A$10m by the end of FY23. SNS’s operational restructuring and previously announced A$2.5m in cost saving efforts should support management’s goal of cash flow neutrality by the end of the fiscal year. These results lead us to maintain our forecasts and if SenSen can continue to grow ARR, then the valuation gap between peers can potentially close.
Written by
kmestemacher
SenSen Networks |
Record receipts and restructuring |
Q223 activity report |
Software and comp services |
30 January 2023 |
Share price performance
Business description
Next events
Analysts
SenSen Networks is a research client of Edison Investment Research Limited |
SenSen Networks (SNS) maintained its streak of record year-on-year cash receipts in Q223, with customer receipts up 70% against Q222 to A$2.6m. SNS continues to see growth across its key verticals of smart cities, gaming, retail and surveillance, boosting annual recurring revenues (ARR) to c A$8m, and leaving the company well on track to meet management’s expected ARR of A$10m by the end of FY23. SNS’s operational restructuring and previously announced A$2.5m in cost saving efforts should support management’s goal of cash flow neutrality by the end of the fiscal year. These results lead us to maintain our forecasts and if SenSen can continue to grow ARR, then the valuation gap between peers can potentially close.
Year end |
Revenue |
Adjusted |
PBT** |
EPS** (c) |
P/sales (x) |
Net cash*** (A$m) |
06/21 |
5.5 |
(2.2) |
(3.0) |
(0.62) |
7.4 |
3.9 |
06/22 |
9.1 |
(7.8) |
(12.3) |
(2.02) |
4.5 |
3.9 |
06/23e |
15.5 |
(2.8) |
(5.6) |
(0.83) |
2.6 |
2.5 |
06/24e |
23.5 |
3.2 |
0.4 |
0.05 |
1.7 |
3.5 |
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 is cash less debt and including leases.
Q223: Another quarter of record cash receipt growth
Live Awareness company SenSen generated its eighth consecutive period of year-on-year cash receipt growth, with cash receipts up 70% over Q222 to A$2.6m. Net cash from operations of A$0.7m was boosted by A$2.3m from an R&D tax grant. Excluding the annual tax benefit, net cash used was A$1.6m, a reduction of about A$1.2m against Q123. To mitigate the impact of seasonality on its short-term liquidity, SenSen also entered into A$1.9m in financing arrangements. The company reported gross Q223 cash and equivalents of A$3.7m, and we estimate net cash of A$1.4m.
Working towards cash-flow neutrality
In Q223, management executed an operational restructuring as part of its drive to reach cash flow neutrality by the end of FY23 and to become cash flow positive shortly thereafter. Resources in areas such as sales, marketing, etc, will now be shared among verticals, which should improve operational gearing as SenSen scales its business. Moreover, as part of its previously announced A$2.5m reduction in operating costs, management reduced 26 full-time positions and converted two more to part time. We continue to expect free cash flow to reach positive levels by FY24e, lessening the need for future debt or capital raises to fund operations.
Valuation: ARR and liquidity key to reducing gap
At a 1.7x FY24e price/revenue multiple, SenSen’s shares continue to trade at a discount to its small-cap AI, SaaS and AI vision analytics peers. While some of the gap could be due to the company’s cash liquidity situation, SenSen is forecasted to generate higher growth rates than its peers. We expect key drivers of the share price to include evidence of an improving cash situation and ARR growth from wins across the globe in SNS’s key verticals.
Exhibit 1: Financial summary
A$000s |
2021 |
2022 |
2023e |
2024e |
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
||||
Revenue |
5,533 |
9,145 |
15,500 |
23,500 |
Cost of Sales |
(2,030) |
(3,513) |
(4,683) |
(6,455) |
Gross Profit |
3,503 |
5,633 |
10,817 |
17,045 |
Other Income |
2,807 |
2,978 |
3,275 |
3,603 |
Oper. Expense (not incl. share-based payments) |
(9,078) |
(17,330) |
(17,950) |
(18,561) |
Share-based payments (non-cash) |
(72) |
(3,173) |
(1,500) |
(1,500) |
EBITDA |
(2,209) |
(7,751) |
(2,779) |
3,199 |
Operating Profit (before except.) |
(2,835) |
(12,038) |
(5,349) |
596 |
Exceptionals |
(6) |
145 |
(9) |
(9) |
Operating Profit (EBIT) |
(2,840) |
(11,893) |
(5,357) |
587 |
Net Interest |
(176) |
(254) |
(237) |
(162) |
Profit Before Tax (norm) |
(3,011) |
(12,292) |
(5,586) |
434 |
Profit Before Tax (reported) |
(3,016) |
(12,300) |
(5,594) |
425 |
Tax |
(6) |
8 |
(34) |
(85) |
Other |
- |
- |
- |
- |
Profit After Tax (norm) |
(3,016) |
(12,284) |
(5,619) |
349 |
Profit After Tax (reported) |
(3,022) |
(12,292) |
(5,628) |
340 |
Average Number of Shares Outstanding (m) |
484 |
608 |
678 |
721 |
EPS - normalised (c) |
(0.62) |
(2.02) |
(0.83) |
0.05 |
EPS - reported (c) |
(0.62) |
(2.02) |
(0.83) |
0.05 |
Dividend per share (c) |
- |
- |
- |
- |
|
|
|||
Gross Margin (%) |
63.3% |
61.6% |
69.8% |
72.5% |
EBITDA Margin (%) |
N/A |
N/A |
N/A |
13.6% |
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
2.5% |
|
|
|||
BALANCE SHEET |
|
|
||
Fixed Assets |
2,168 |
9,127 |
8,733 |
8,319 |
Intangible Assets |
1,300 |
8,281 |
7,681 |
7,081 |
Tangible Assets |
391 |
435 |
641 |
827 |
Other |
477 |
410 |
410 |
410 |
Current Assets |
8,022 |
11,391 |
11,570 |
11,967 |
Stocks |
241 |
232 |
232 |
232 |
Debtors |
979 |
1,943 |
3,000 |
4,400 |
Cash & cash equivalents |
5,176 |
6,214 |
5,336 |
4,333 |
Other |
1,625 |
3,002 |
3,002 |
3,002 |
Current Liabilities |
(3,640) |
(7,999) |
(10,060) |
(8,237) |
Creditors |
(750) |
(1,239) |
(2,500) |
(2,000) |
Short-term borrowings |
(861) |
(1,954) |
(2,454) |
(454) |
Lease liabilities |
(306) |
(185) |
(185) |
(185) |
Other |
(1,723) |
(4,621) |
(4,920) |
(5,597) |
Long-term liabilities |
(244) |
(506) |
(508) |
(510) |
Long-term borrowings |
- |
- |
- |
- |
Lease liabilities |
(138) |
(183) |
(183) |
(183) |
Other long-term liabilities |
(106) |
(324) |
(325) |
(327) |
Net assets |
6,305 |
12,012 |
9,734 |
11,539 |
Minority interests |
- |
- |
- |
- |
Shareholder equity |
6,305 |
12,012 |
9,734 |
11,539 |
|
|
|||
CASH FLOW |
|
|
||
Operating Cash Flow |
(3,250) |
(7,632) |
(2,502) |
1,935 |
Net Interest |
(127) |
(73) |
(237) |
(162) |
Tax |
(31) |
(232) |
(34) |
(85) |
Capex |
(253) |
(220) |
(400) |
(400) |
Acquisitions/disposals |
- |
(1,010) |
- |
- |
Equity financing |
7,043 |
9,644 |
2,070 |
- |
Dividends |
- |
- |
- |
- |
Other* |
(667) |
560 |
224 |
(2,290) |
Net Cash Flow |
2,714 |
1,037 |
(878) |
(1,002) |
Opening net debt/(cash) w/o Leases |
(1,150) |
(4,315) |
(4,259) |
(2,881) |
HP finance leases initiated |
- |
- |
- |
- |
Exchange rate movements |
- |
- |
- |
- |
Other |
451 |
(1,093) |
(500) |
2,000 |
Closing net debt/(cash) |
(4,315) |
(4,259) |
(2,881) |
(3,879) |
Closing net debt/(cash) w/ Leases |
(3,871) |
(3,891) |
(2,513) |
(3,511) |
Source: SenSen Networks, Edison Investment Research
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Research: TMT
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