Company Interview / Hitachi's $10M investment in Envirosuite

Key points:

Hitachi invests $10M in Envirosuite, focusing on environmental technologyEnvirosuite sees robust sales growth, especially in aviation and industrial sectorsDespite the strong fundamentals, Envirosuite's share price struggles

Hitachi Construction Machinery invests $10M for a 12% stake in Envirosuite (ASX: EVS). Jason Cooper values the partnership, highlighting Hitachi's global mining footprint. Envirosuite's Omnis platform aims to enter the mining sector, focusing on greenhouse gas emissions reduction and strong net-zero drive.

Envirosuite sees strong sales growth, particularly in aviation and industrial segments, with top-line growth at 28% last year. Jason mentions the company’s dominant aviation market position and continual expansion into new segments, while the Americas significantly contributed to growth.

Despite consistent growth and a strong balance sheet bolstered by Hitachi's investment, Envirosuite's share price remains volatile. Jason is optimistic about future growth, emphasising the company’s leading ESG software platform and potential for profitability.

Full unedited transcript below:

0:11

And also in the small cap space. Hitachi Construction Machinery is investing $10 million into Enviro Suite by acquiring a 12% stake in the companies. Now, the two say that the partnership will leverage enviro suites, environmental technology and Hitachi industry expertise. So to find out what comes out of that, let's speak with Enviro Suite CEO Jason Cooper. He joins me now. Jason, hi. Welcome back to office. Thanks so much for joining us. So what does this do for Enviro Suite?

0:46

Yeah. Look it's a great partnership that we were really pleased to announce on Monday. Uh, we hosted a webinar as well yesterday where we invited our Japanese partners onto the call, and they were able to talk about that There's a few things here that we're looking for. Number one, that is about driving growth in the company. Hitachi has got a magnificent footprint Globally, they've got access into about 400 mining sites around the world. And so what we're looking to do is take our ominous platform, which is in the industrial sector, uh, into mining and leveraging that Hitachi relationship. But furthermore, the strong collaboration in the product development around greenhouse gas emissions, um, through, you know, the fuel burn of diesel, uh, as well as the impact that, uh, it's having on the society around that so strong drive in net zero, um, and within that mining space. Okay. So so does this have, um, any sort of dollar signs attached to it insofar

1:45

as more of the enviro sweet technology is guaranteed to be deployed in different, you know, scenarios?

1:53

Yeah. There's nothing that's, let's say, guaranteed. But there's a collaboration agreement that the, um, both companies have signed, which is driving that. So we are looking to sell what we have today, now on this platform into the mining sector. Now, for those that follow the story, you know, we have indicated over the last three years that mining is one of the strongest growth segments in the company. Our online platform grew at the top line last year at 28%, and that really was underpinned by strong growth. And that was in in Europe. It was here in Australia and it was in the Americas as well. So that core offering that we have got today that can be sold straight away. And so that's what the collaboration agreement or part of the collaboration agreement is working towards, is is leveraging both Hitachi and Enviro suites go to market and to support that. There's also within Hitachi there is a subsidiary companies that they also own that are providing software solutions that will also look to to leverage and to work with.

2:53

Okay. And when it comes to, uh, just the overall state of of what's happening at Enviro Suite. So how are sales going? So how's it going? Well, so now we're quite happy with our sales. So last year if we look at our, our revenue growth, uh, it was impacted by churn. Um, and that was largely down to end of life contracts, low margin contracts or contracts that were non-core to us. So the top line growth was quite strong. Aviation had a good year. Now we certainly are expecting a stronger year now in FY 25. Certainly both from a pipeline and also airport activity and understanding. We are market leaders in the aviation segment. You know, our next nearest competitor is is about a quarter of the size of us. So we have a strong footprint in there. Um, but we still are winning new contracts within the aviation sector and importantly expanding into into new segments. But the industrial, as I said,

3:53

28% growth at the top line was was a, you know, was a good result for the company. Yeah. Okay. And when it comes to where most of this growth. So I would imagine by Hitachi investing that, um, you know, that there would be potential growth in Asia. I know that Americas is still leading the growth or is America still leading the growth? Yeah. Look, Americas is strong, because if you look at mining operations, you know South America for us is almost exclusively mining, um, Canada and parts of the US, again, very strong within that mining sector. So the America's for enviro suite is really important and represented more than 50% of our growth last year and even the year before. What I like about the Hitachi relationship is yes, they are global, but they're also strong in regions where we're strong. And so North America, South America, they do have a strong footprint in there. Um, but, you know, they are a global operation. As I said,

4:53

they've got 400 sites globally.

4:56

So Enviro Suite has been, you know, at this for quite some time. And, you know, you would think that the, the tailwinds would be behind Enviro suite because of our move to net zero, because of our concern about water, about air, about land as well. Um, why has the share price failed to fire again and again and again?

5:18

Yeah. Look, I think it's a really good question. Um, I don't actually understand the fundamentals on that one. Uh, we had, uh, theories around, you know, a poor balance sheet. Um, you know, certainly the the agreement that we now have with Hitachi is a really strong balance sheet onto that part. Um, but look, the underlying value is there. And what we have seen over the last 12 months is a lot of companies come in to confirm that. We now have, you know, one of the largest, if not the largest ESG software platforms in the world. And that's quite a great statement for Australian technology companies. Um, you know, our IRR is above 60 million. And that is a big number when you get into the recurring revenue model. So look, the fundamentals are in place. And we do believe that the growth engine we have for 25 and 26 will certainly support our strong growth objectives. Okay. And I know that there was some takeover speculation early in the year. Is there anything happening on that front that you can share?

6:16

No, nothing. Nothing at all. I mean, I think the the decision from Hitachi to invest into us and take the 12% investment plus a board seat really strengthens that position. And, you know, the private equity may may be around the corner. Who honestly knows on that one. But for the moment we're heads down and we're focusing on executing and working with the timesheet to maximize, um, you know, the earnings in the company and get us to, uh, profitable in a sustainable way as soon as possible.