Artificial Intelligence (AI) has made for popular science fiction, but it is becoming increasingly ingrained into our daily lives. One Company has developed a means to utilize AI’s power to streamline energy consumption and help solve a serious economic problem that costs $57 billion a year (USD). Major operators in oil and gas, wind energy and commercial buildings across the globe have already taken notice and engaged its services.
Universal mCloud Corp. (TSX-V: MCLD , OTCQB: MCLDF , Forum) specializes in AI with a purpose, combining the internet of things (IoT), cloud computing and analytics. Not only is its tech forward-looking but so is its business plan.
The AI that the Company deploys - “AssetCare” - is smart tech that delivers real-time, 24/7 monitoring, data, and analysis on client assets such as HVAC units, wind turbines and gas compressors. AssetCare can improve the operational performance and efficiency of these assets by learning over time and applying those learnings to solve real world problems.
(AssetCare at work. Image via Universal mCloud. Click to enlarge.)
A lot has happened with the Company since the last time Stockhouse covered MCLD in-depth earlier this year. Upon ending 2018 with 28,000 connected assets, the emerging tech leader now has 35,000 assets connected, with that number anticipated to rise to 40,000 by the end of the year. Every day, the Company is connecting new assets continually driving it forward to reach its goal of 300,000 connected in five years. We will look deeper into this outlook later.
Universal McCloud is entering a new phase of growth. Now with its advanced technology in place, the Company knows what works and is focused on generating revenue.
Improving efficiency in underserved markets
Universal mCloud is using AI to manage the health and performance of energy assets, from curbing energy waste to optimizing energy production to even extending the lifespan of critical energy infrastructure., The Company focuses on three vertical markets: buildings, energy production and process industries, targeting the underserved segments of those markets.
On average, 30% of the energy consumed in commercial buildings is wasted. The single largest way to eliminate this waste is through energy efficiency. There are approximately four million of these buildings in North America alone. The opportunity here is immense, from the economics to the environmental and sustainability reasons behind it. AssetCare identifies areas where energy is being wasted and applies AI to reduce or eliminate that waste.
A similar opportunity is evident in wind energy. Profit margins for wind energy are on the decline, while the cost of producing energy keeps increasing as the turbines get older. Without new methods of improving the efficiency of these turbines, eventually they will become unsustainable. AssetCare enables wind farm owners and operators to make intelligent operations and maintenance decisions that maximize energy production and turbine availability.
The oil and gas industry has seen this issue and has been deploying critical asset management to its top 10-20% most crucial and expensive assets in any given facility. However, many smaller oil and gas assets still go unmanaged because it simply isn’t economical to connect them. By connecting all the assets in those underserved oil and gas facilities, AssetCare can help oil and gas providers identify new opportunities to optimize production and yield.
Scalable recurring revenue through connected assets
Universal mCloud’s strategy combines strategic acquisition with focused organic growth, and through a commercial Software-as-a-Service (SaaS) model, the Company can connect underserved assets in its target markets and generate recurring revenue at scale.
Acquisition targets are selected for one of two reasons; to gain needed technology or to gain entry into a selected market.. In the case of its endeavors to create oil and gas efficiencies, a recent venture demonstrated that strategy at work.
In July 2019; Universal mCloud completed its acquisition of Fulcrum Automation Technologies and subsequently, Autopro Automation Consultants. Autopro essentially works with every major oil and gas provider in the province of Alberta. This was a key move for MCLD, as Autopro has almost 30 years of experience in the oil and gas industry. Over that time, it has collected a captive customer base and built a reputation with deep expertise that is of high value.
Looking deeper into this acquisition, Autopro has established long term relationships with many of its customers, resulting in a large amount of repeat engineering services business. MCLD can now bring AssetCare to all of these customers, providing a high margin, recurring revenue stream from a well-established customer base..
The importance of human expertise can’t be understated, as AI only works if it is used by people who can teach it to be more efficient. That level of experience isn’t replaceable and Autopro has around 185 experts on hand. The combination of a large existing customer base and the expert factor are two major facets that Universal mCloud believes will propel the Company to be a leader in oil and gas efficiency.
Looking to the future, the Company is now focused on achieving exponential organic revenue growth, which is expected to significantly eclipse the baseline acquired revenue simply due to the scale that AssetCare lets it achieve.
Universal mCloud Corp. is growing globally, launching energy projects in China and Europe. The Company is targeting specific hot spot geographies where connectable assets show great potential. The European market is important for wind, China even more so as they have half of the world’s wind turbines.
MCLD recently signed a service agreement with the largest single wind developer in China - Longyuan Wind Power. From here, the Company intends to also look at oil and gas opportunities in Southeast Asia, such as Malaysia. The strategy is very targeted, focusing on specific markets rather than pursuing a “shotgun approach” across several.
AssetCare at work
In a sit down interview, Universal mCloud’s Chief Product Officer, Dr. Barry Po guided Stockhouse Editorial through a recent case study to show how effective AssetCare is to the oil and gas industry.
Within the first week of the Company's acquisition of Autopro, six facilities were connected to AssetCare in Alberta. These facilities represent $1 million in annual recurring revenue through the AssetCare SaaS business model. Landing one facility is impressive on its own, let alone six, which is a solid indication that their service is something the industry needs.
At one of these facilities, there was an unplanned outage, the kind of event that AssetCare is designed to get out in front of. Simply by being directly connected to their control system, Universal mCloud was able to quickly identify the source of the problem.
The facility was only down for two hours as a result, compared to a six hour outage for the same issue that occurred prior to being connected to AssetCare. In that time, AssetCare prevented the facility from losing over $50,000 in generated production revenue, and identified the root cause of the outage to prevent it from happening again.
This is a major reason to become excited about AI and why oil and gas producers should take it seriously. The Company isn’t installing new hardware, just tapping into the control systems and implementing its AI to get ahead of problems before they happen. Through AssetCare, they can optimize production yields and manage risk, so that these “nightmare scenarios” of production downtime are few and far between. It makes perfect economic sense and is just where Universal mCloud is positioned.
Universal mCloud estimates that there are around 700 facilities in Western Canada alone with approximately 300 connectable assets in each facility, and expects to reach over 14,000 similar upstream, midstream, and downstream oil and gas facilities worldwide. This equates to approximately 4.2 million connectable assets worldwide.
Another major deal the Company closed was a six-year agreement with TELUS Corp. Commercial Real Estate to improve the energy efficiency of their flagship office tower at Consilium Place in Ontario, where its 450+ thermostats were connected through around 30 floors. By connecting to AssetCare, 25% gains in energy efficiency are being realized.
We are living in the future
In August 2019; the Company reported quarter-over-quarter organic revenue growth of 36% to $3 million (CAD). This is the Company’s strategy at work.
In the next five years, Universal mCloud plans to connect 300,000 assets and generate $150 million a year in revenue toward a potential market cap of $1 billion.
Following its growth trajectory thus far, the Company is right on track to accomplish these goals via recent acquisitions and its sustained organic revenue growth. AssetCare is the driver of this growth going forward.
There are numerous developments in the AI world that the Company is excited to work on. One new facet to the tech is conversational AI; the concept that people can talk to AssetCare directly. In April 2019; Universal mCloud entered into a partnership with RealWear to develop an AI-powered digital assistant with advanced 3D and mixed reality capabilities onto a headset that would use “smart glasses” to assist asset operators and maintainers in the field.
One example of how AssetCare can be deployed in this manner is a situation where a technician working on a gas compressor could look at the equipment, ask questions about when it was last maintained and get an immediate answer. People already talk to AI all the time, like Siri or Alexa, this is the next step.
Connecting assets, looking to the horizon
Universal mCloud Corp. is focused on organically growing its global reach, including an expansion into the US, where it is working to secure a listing on the NASDAQ.
The demand for energy in the US is greatly outpacing the supply. In states such as California, energy rates are skyrocketing and it is a problem that can’t be fixed by just adding to the supply.
People are starting to realize that the economic opportunities are substantial through increasing efficiency and curbing waste, and small changes can have big impacts.
With each new asset connected to AssetCare, its AI grows smarter and becomes more valuable for the customer and in turn, more valuable for MCLD, creating a virtuous circle.
Universal mCloud Corp. is clearly an undervalued stock that may not be undervalued for long.
mcloudcorp.com
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.