Shares in Simble Solutions Limited (ASX:SIS) opened 10% higher on Monday morning after the company released an impressive June quarter report and management provided a promising business update.
Simble is an Australian software company focused on energy management, mobility and Internet of Things (IoT) solutions.
The Simble Energy Platform or ‘SimbleSense’ is an integrated hardware and real-time software solution that enables businesses to visualise, control and monetise their energy systems.
Over the three-month period to June 2020, the number of meters under management on the SimbleSense platform increased by 4.2%, resulting in annual growth of 37% since June 2019.
The growth rate of meters under management is expected to accelerate through the September quarter as a result of recently signed contracts with Sylvania Lighting and Bluewater Shopping Centre in the UK, as well as recent wins in Australia driven by the NSW and Federal Government energy efficiency grants.
Recurring revenue looking robust
This is an important area of the business for the company as it generates recurring revenue, providing predictability of income as opposed to the lumpy earnings that can come with one-off contracts.
As indicated in the following graph, annualised recurring earnings have stayed above the $500,000 mark for the last 12 months, and over the last six months and they have increased by nearly 20% during that period, pushing above $600,000 in May.
During the quarter Simble continued to on-board customer sites and meters under management to its energy data analytics platform, with each installation delivering recurring Software-as-a Service (SaaS) revenue which is recognised on a pro-rata basis over the life of the contract.
Orders of the Simble Energy platform also include hardware components, which are recognised on an upfront basis.
From a broader perspective, the company’s cash burn profile has improved dramatically over the last 12 months and management expects to consolidate and maintain the reduced cost base.
Gross cash outflows from operating and investing activities (excluding non-recurring costs) declined year on year to $780,000, a 39% improvement on June quarter 2019.
Whilst this measure was slightly higher than the March quarter due to variable cost of sales on June quarter mobility revenues, operating and investing overheads (gross cash outflows excluding cost of sales and non-recurring costs) have continued to reduce for the third quarter in succession.
These developments, along with important client retention and new business wins leave the company well-placed as it works towards a solid result in fiscal 2020 (SIS reports on a calendar year basis).