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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.
SenSen Networks |
Sensing another record quarter of AI SaaS |
Q322 update |
Software & comp services |
3 May 2022 |
Share price performance
Business description
Next events
Analysts
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.
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