Keystone NotesVery early days yet for Keystone but some good positives and nice to see that they will now monitor its progress. GLTA
Tantalus Systems Holding Inc. (GRID:TSX)
| COMPANY DATA |
| Symbol | GRID:TSX |
| Stock Price | $1.86 |
| Market Cap | $83.84 M |
| Yield | nil |
What does Tantalus do?
A provider of smart grid solutions to public power and electric cooperative utilities. The company’s hardware devices, software applications, and related services are designed to automate, monitor, and control power flow, consumption, and quality to improve grid reliability.
This slide should give you a snapshot of the business over the past 7 years.
There has been moderate consolidated revenue growth, but nothing spectacular and operating income has been primarily negative.
Share count over the same time horizon:
Significant increase over that time – the company is in a growth phase and when you don’t make money, you must fund operations via debt and/or issuing shares, and the company has done both.
Q4 and 2023 Annual Highlights
Tantalus generated the highest annual revenue in its history of US$42.1 million (CND$56.8 million), a 6% increase over 2022. Revenue contributions from the Utility Software Applications and Services segment (Software & Services) in 2023 and Q4 hit 35%, representing the highest percentage contribution in the Company’s history.
Annual Recurring Revenue (ARR): record by growing ARR to approximately US$11.5 million (CND$15.2 million) as of December 31, 2023, representing 17% growth year-over-year. Recurring Revenue recognized in the Q4 represented approximately 24% of total revenue generated.
Adjusted EBITDA: Positive Adjusted EBITDA of US$0.35 million (approximately CND$0.5 million) in Q4 compared to positive Adjusted EBITDA of US$0.1 million (approximately CND$0.1 million) for the prior year period. Adjusted EBITDA for FY 2023, approached a point of neutrality at a loss of US$29k (approximately negative CND$40k) compared to a loss of US$2.4 million (negative CND$3.1 million) for the prior year. The Adjusted EBITDA result for 2023 includes approximately US$5.0 million (approximately CND$6.8 million) of further investment in the TRUSense Gateway™ product offering made throughout the year.
Small-loss on an adjusted basis and headed in the right direction, but still not generating positive cash flow.
Balance Sheet:
Cash: $5.2 Million.
Debt: $11.4 Million.
Lease Oblig: $3.0 Million.
Valuations:
EV/aEBITDA (TTM): 65x.
EV/aEBITDA (FY 2024e): 23x
PE (TTM): Nil
PE (FY 2024e): 180x
Conclusion:
The positives:
- Tantalus provides leading grid modernization technology that allows utilities to collect, manage, and analyze data.
- The company’s platform directly supports decarbonization and the electrification of everything and is gaining traction with its strong value proposition to regional co-op utilities, municipalities, and some investor-owned utilities.
- The TRUSense Gateway is the future of GRID’s product offering and provides the utility next generation advanced meter infrastructure (AMI) capabilities, improved power quality analytics, and most interestingly behind-the-meter access (among others). Initial feedback from GRID’s nine-member advisory committee and other early adoptions has been very positive and confirms that the product is addressing the challenges they told GRID they needing help managing Decarbonization, Electrification, and Aging Infrastructure. Tantalus’s product plays into these long-term trends well.
We like the business and the potential for growth, but Annual Recuring revenue is still just $15.4 million Canadian. And Tantalus remains cash flow negative over the past year. Our minimum criterion for investment is positive cash flow. We continue to monitor it, but have found more profitable ways to investing in electrification and aging infrastructure with a name like Hammond Power.