mCloud Technologies Corp. sounds like the name of a penny-pinching Scottish Corporation.
This Vancouver-based company mCloud is in the business of helping industry pinch pennies by digital management and remote inspection of assets.
Under the asset care programs, the company uses artificial intelligence and analysis in the Cloud to stop energy waste in buildings — promising up to 25 per cent cost savings.
The asset care program also remotely inspects industrial processes for maintenance and ensures less down time from interruptions like power outages. A third division uses software to optimize electricity production on wind turbines.
The capital cost to sign up is low with mCloud receiving a long-term stream of recurring revenue.
Six acquisitions in the last year have added capabilities to operations in seven countries. Recent asset connections included 2,000 oil and gas wells and 1,000 United Kingdom wind turbines.
Easily-recognized mCloud clients are food wholesaler Sysco, oil sands miner Suncor, telecom provider Telus, Starbucks coffee, and 3,300 bank branches in the U.S.A. The bank realized $40 million annual savings.
The company has offices in seven countries. A job for asset care of a Chinese shopping centre has been delayed by the COVID-19 issues.
The company is aiming at a $25 billion market with plans to grow revenues to $400 million in five years.
That is a tall order considering revenues for 2019 were $18.4 million — quite a leap from $1.8 million the year before. Revenues for the first three months this year leaped to $6.5 million versus $1.4 million last year in that three months.
Losses have been horrendous as the company transitions from a concept development phase to the commercial phase. Losses amounted to $30.6 million in 2019 and $12.2 million the year before.
Loss for the first quarter this year of $10.6 million came from $5.5 million increased wages as mCloud ramped up operations, $1.5 million in increased depreciation and $1.4 million in new interest costs.
Last year, as part of the ramping up process, the company issued $23.5 million in convertible debentures paying 10 per cent interest, convertible at $5 a share. A loan for $13 million was taken out.
At a current $3.04, the shares trade at less than half the estimate by two analysts following the venture, and less than half the high of $6.50 on the year.
Instead of the shares, investors might want to look at the convertible debentures, trading at $93 for an 11.8 per cent yield. One risk with the debentures convertible into 200 shares at $5 by May 2024 is that mCloud will raise enough cash to buy them back before conversion.
Fast-growing companies often issue convertible debentures with the intent of redeeming them before conversion takes place. The shares need a 65 per cent increase to put them in the money.
mCloud is a relatively small company with ambitious plans to grow big in five years. That poses a lot of risk. But the rewards of success would be great too.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
