I’ve just finished watching the AITX Q&A with the CEO, Steve Reinharz, and it was chalk full of information to dissect. If you haven’t seen it yet, I recommend you check it out. The purpose of this article is to go over what I thought the most important/key pieces of information Steve discussed, and then discuss the implications of these.
There’s a lot, so let’s rapid fire through these!
Profitability
Steve obviously can’t guarantee anything, nor can I. But straight from the horse’s mouth, Steve said the plan, hope, goal, whatever you want to call it, is for the company to be profitable within 2-3 years. That would mean by about FYE 2024-2025. And by profitable, I think he means at an operating level. So profitable before (primarily) interest expense.
My take: this is about in line with what I have been forecasting. This all assumes the current business trajectory continues, or even grows at a faster rate. What this means is, assuming all goes well, you’ll see incremental revenues exceed expenses sometime in late FYE 2023 or early FYE 2024. But to be honest, it only takes one or two big orders for that to really take off.
So exciting stuff there, but Steve and the RAD team have a lot of work to do! I’m glad to see that the team has high expectations for themselves.
Growth
Short snippet, but Steve said growth prospects for FYE 2023 are revenue growth of anywhere between 5-15 times prior fiscal year. For those of you that remember, that is the exact same guidance as from FYE 2021 to FYE 2022. Based on my article with my predictions for Q3, and a rough estimate for Q4, they’re going to be well within that band. I think somewhere around 8-9x revenue growth from FYE 2021 to FYE 2022 is probably fair.
Given that, it’s totally possible for AITX to reach to reach that level of growth once more for FYE 2023. Those growth prospects are also right in line with how rapidly they need to grow to be operating profitable by FYE 2024/FYE 2025. All in all, great news once again to hear. But this is all forecasts and speculation, so naturally I will be following along closely and tracking progress.
Raising Capital / Outstanding Share Count
I purposely didn’t ask about the outstanding share count and new share issuances because I saw someone else had…but this was my number one question. Steve confirmed four key things for me around this:
- The S-3 is not depleted and will not be after this most recent 400m issuance.
- They are expecting a strong cash balance at FYE 2022
- New share issuances will likely be on-hold after FYE 2022 and resumed as needed.
- The outstanding share count will be increased if they are resumed.
Let’s break this down, and some of my followers have been DM’ing me about this and I’m glad Steve brought it up.
The S-3 still has some runway, so we know for sure they have raised less than the $30m max. I think most people already knew that, but good to hear. On top of that, we’re supposed to see a strong cash balance at the end of the year (2/28/2022) which is awesome to see. I love that the company is going to have some breathing room and can focus on driving revenue and internal development.
Raising the outstanding share count was my number one question over the last few weeks from followers, and I told them the same thing, the outstanding share count is going to be increased barring some massive orders in Q1-Q2 FYE 2023. Steve didn’t say that with certainty, just to clarify, but I’m telling you my opinion: I predict the outstanding share count will be increased by Q4 FYE 2023.
As they’re not expecting profitability until FYE 2024/2025, we need to assume they’ll raise more capital. THAT’S OKAY. This is what growing businesses do. It’s not bad dilution…which thankfully Steve explained, yet again, that issuances like this are not toxic (assuming effective reinvestment). I’ve written about this ad nauseam, so I’ll leave it at that.
Sales PR
Quick one, but he hinted at some sales PR coming this week from a Fortune 25 client. The Discord may need to correct me on this one, but I know people have been theorizing (I think) AmerisourceBergen and/or McKesson for a long time. I want to say the consensus is McKesson, but I might be wrong. Though McKesson may be a current customer.
Either way, nabbing another customer on the Fortune 25 would be awesome. Needless to say, their reach, stature, and physical footprint would be massive.
But who knows, could be Fannie Mae (#25 on the list, couldn’t resist)!
He also said one (or maybe both) would be ROAMEO related which is huge. Remember, a ROAMEO is like 10(?) ROSAs in terms of gross profit. While it’s just one unit, it carries a lot more weight than just a ROSA. I’m very excited to see that PR when it comes out.
Light My Way (“LMW”)
LMW is my favorite RAD solution right now, coupled with the ROSA of course, and I will be writing a whole article on that one. Stay tuned for that. But Steve clarified some things on LMW which I thought was crucial. They’re going to be rolling out LMW for free on ROSA units for the first year or two, and it will then be sold as a per user fee, or something of the kind, after that.
I absolutely LOVE LMW, and I think it’s going to be their biggest offering (based on current offerings). Naturally, I think giving it out for free and getting it out into the market early with test cases and exposure is going to be HUGE. I usually hate “foot in the door” pricing, but a relatively simple application like this given out for a free for a bit is an exception I’m willing to make. Plus, these companies will be paying for ROSAs anyways, so it’s not really free 😊.
Quick Hits
Some shorter ones that require less commentary that I liked:
- One big municipality customer is in the works. That will be huge from a publicity perspective as local government has to be incredibly transparent.
- The sales force is almost doubling from around 4 people to 7 people by the end of January.
- There are acquisition talks happening with another company, but let’s temper expectations on that one. Steve didn’t seem like it was set in stone, would be cool though.
- They are planning a second Detroit facility which is really cool. I’ve expected this for a while. I think we’ll likely start seeing siloed manufacturing/assembly at different facilities in the future.
Closing Thoughts
I know a lot of it is speculation, but it is exciting hearing about the plans for the company. Even if it doesn’t all work out, I am very comfortable in where I placed my money and that I’ve received a fair risk-reward profile from this company.
Yes, they have lofty goals. Yes, it’s a risky investment. But with so many scam companies out there priced at obnoxious levels based on almost no transparent fact, AITX seems like a beacon of light in the murky waters that are the OTC. So do your DD, understand what you think a fair price is for the company based on your perceived risk-reward, and take your calculated risk.
All in all, though, great Q&A. Love the transparency, and I’m anxiously looking forward to reading 10Q in the next week or so. Thanks for reading!!
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DISCLAIMER – I CURRENTLY HOLD A LONG POSITION IN $AITX. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.
