Watchy Wednesday - Acusensus Ltd

ASX listed road safety technology business

Watchy Wednesday, the 3-5 minute weekly write up as refreshing as the other side of the pillow.

This week taking a look at Acusensus (ASX: ACE) a business focused on creating road safety solutions to focus on tackling distracted driving globally. 

Like everything at the moment it uses artificial intelligence and in its case attempts to eliminate road safety issues including stopping mobile phone use, checking for seatbelt usage, point to point speeding as well as many other functions.

Acusensus was founded in 2018 by Alexander Jannink along side Ravin Mirchandani via an investment from Ador Powerton Limited an Indian power electronics company. The company listed on the ASX in January of this year raising $20 million. its current market cap sits at just on $100 million.

Acusensus is targeting government and enforcement agencies. During FY23 it landed a number of government contracts both in Australia and the US. These deals included a three-year Mobile Device Detection Cameras Services Agreement with the ACT government and a contract to supply speed camera services to the Queensland Government. Excitingly, the company signed its first enforcement program contract in the US. Acusensus will provide services in North Carolina to detect drivers of commercial vehicles who are using mobile devices or who are not wearing seatbelts. 

Acusensus is paid a fixed monthly fee to provide all relevant services. It does not play into the hands of its results and won’t be paid based on the number of offenders caught. It receives revenue through the below sources:

• Licence fees

• For the use of the Company’s products and intellectual property;

• Review fees

• For the manual review of images taken using the Company’s products; 

• Maintenance fees

• for the ongoing maintenance of purchased or rented products; 

• Deployment fees 

• for the relocation of camera vehicles or trailers from one location to another; 

• Sale and/or rental of hardware;

• Fees related to peripheral activities such as recommendations to customers for potential suitable locations for fixed and/or mobile detection units.

Management

As mentioned, Acusensus was founded by Alexander Jannink following the death of a close friend as a result of a driver driving under the influence and allegedly using a mobile phone.

Prior to starting Acusenus, Alexander was responsible for research and development as the Head of Future Product Group for Redflex Traffic Systems Limited (previously ASX:RDF). He currently holds 13% of the business via Jannink & Associates.

Co-founder Ravin Mirchandani is also the Executive Chair of Ador Powertron, a major shareholder of the company with over 16% of shares held. Ravin has covered a lot of ground in many different sectors with experience in defence, energy, gas, manufacturing and power electronics. 

One thing to keep a close eye on is the shares in escrow. A large portion of these were released upon the full year result announcement last week with a further portion in 12 months time.

Financials

Acusensus had significant revenue growth in FY23 up 46.6% to $42 million.

Unfortunately for shareholders this did not translate to the bottom line. While gross margin was steady at 44% employee benefits and admin expenses increased by 71% to just over $11.5 million ($6.7 million FY22). This halved profit before tax to $575k.

Taking a look at the balance sheet Acusensus is in a strong position cash wise. 

The company currently has $11.3 million un-restricted cash in the bank at 30 June 2023 with a further $12 million in term deposit. It also generated positive operating cash flow of $4.2 million for FY2023. With its ability to generate positive cash flow and significant cash reserves i wouldn’t expect the Acusensus would need to raise any cash in the near term.

Despite the decline Acusensus is still profitable although just. It is currently trading at a price to sales ratio of almost 2.5. If revenues can continue to grow at this rate and costs are controlled we could see some impressive scale.

For me, this is a very interesting business with a cause everyone can get behind. I feel it is still a watch as its early days since listing. Can it continue to win key government contracts and will it be able to keep costs down and scale?

If you’re still here, thanks for reading, I appreciate it! Would love any feedback particularly on this format or any additional thoughts/critiques. As always the above isn’t advice and for research purposes only! I currently do not hold a position in ACE.