TickBomb wrote: So the math is a bit tricky since they add assets and expenses throughout the year and the older contracts have lower MRR. It was lower to get those initial customers on board. Their long term view is a $70 average MRR between $50/building and $150-$250 for things like wind and Oil & gas. Their current MRR average is ~$31/asset, which is rapidly rising with new contracts.
So at the beginning of 2020 they had ~41,000 assets and at the end they had ~59,000, for a weighted average of 50,000 during the year. With that average, they burned through $25M in operating cash in 2020 which includes interest, but obviously not loan repayments. Then if you further adjust the $25M eliminating the professional fees in 2020 ($8.9M) you get to $16.1M. They adjust further to account for non-recurring salaries that aren't part of operations ($8.3M). But even if you ignore that in their adjusted EBITDA, we need at most ~$16M in additional cash flow.
Also, they have been heavy growing Oil & Gas assets. So will the additional 20k of assets have an average MRR of $70 or more like $100? 20,000 @ $100 is $24M in ARR. 20,000 @ $70 is $16.8M or $10M gross. So we are close. For sure some of the salaries are one time expenses etc. They have said multiple times that 70k is the cash flow neutral goal. Last conference call they got directly asked about it. You also have to make assumptions on engineering services and hookup fees also. They know their number better than me as all I can do is make a bunch of assumptions on gross margins and new connected asset MRR etc.
Jack Vander Aarde
Got you. That's a great answer. Okay. And that makes sense. I only asked because I know how lumpy this business can be from the project side especially. And then, just reviewing your comments as well as for EBITDA and if that's synonymous with cash flow, breakeven, because I know in your EBITDA reconciliation, you guys add back a bunch of items. I’m just wondering like, when do you expect to be I guess, like, truly cash flow positive about revenue level.
Russ McMeekin
So that's the 14.5, I gave you. So that's just back out non-cashes. So stock comp and all that other stuff that goes into EBITDA, back those things out and just look at cash margin minus cash items. And assuming normalized, I think someone asked me the question, I think was Stephen about M&A deals and so on. To assume M&A like or NASDAQ like, I’m not doing a whole bunch of crazy stuff. At $14.5 million, the gross margins minus the cash items equals cash contribution. That's called a cash contribution.
Jack Vander Aarde
And that's on a per quarter, Russ?
Russ McMeekin
Yes. Then we go up from 14.5 to a bigger. That's the breakpoint. Yes.