OneSoft Quick Update - $OSS.v

Quick update after Q4 2023 & 2024 guide

*Disclosure: I hold shares in OSS.v

Price: $0.92 CAD

MC: 113 million CAD

EV: 109 million CAD

1 year performance: +80%

OSS issued a news release yesterday that went over their preliminary 2023 results and they issued guidance for 2024. The results were in line with what I was expecting. I was happy to see the guidance which was a little ahead of my expectations.

The company released an update in February on the crack management, internal & external corrosion, and geohazard modules. Nice to see the continued advancement and release of the modules. This maintains or increases the distance from them and their competitors.

2023 Results and 2024 Guidance

• 2023 Results

  • Revenue at 10.4 million which was up 51%.

  • Finished the year about EBITDA break even.

  • Gross margin at 75%.

• 2024 Guidance

  • Revenue at 15 to 16 million which is up about 50%.

  • Adjusted EBITDA at 1.65 to 1.9 million.

News Release Points

• Management estimates that the CIM platform is currently being used for approximately 20% of the piggable pipeline infrastructure in the U.S.A. - i.e., approximately 150,000 of 660,000 piggable pipeline miles are now under multi year SaaS agreements with OneBridge. The balance of piggable miles is currently managed using legacy systems and processes and, with no known competing cloud solution, we believe this represents significant future opportunity for the Company.

• Approximately 81% of forecasted revenue for Fiscal 2024 is expected to come from existing customers, reflecting their projected consumption of CIM and associated services. The remaining 19% of revenue is expected to be derived from new sales to prospective customers which the Company anticipates will close in 2024.

• Use of the CIM platform by customers increased in accordance with Management's expectations during Fiscal 2023, with higher pipeline miles operated by customers and miles under SaaS subscriptions that drove revenue in Fiscal 2023. OneBridge onboarded five additional pipeline operators during Fiscal 2023, who became new CIM users due to direct sales efforts or after being acquired by existing customers who use the CIM platform. Some customers expanded their use of the CIM platform to include ICM and other new functionality modules, a trend we believe will generate additional revenue in future periods.

• The Company's client services team addressed 17 projects during Fiscal 2023, primarily involving 6 clients and 5 core CIM platform implementations, collectively involving 15 divisional operators and more than 700 pipeline systems. Projects included work associated with integrity management and compliance, geographic information system ("GIS") integrations, loading of more than 3,700 ILI assessments and 67 million anomalies into CIM, migrating data from legacy systems into CIM, integrations with various customer software applications and training.

• The Company's development team consisted of 21 employees and a 7-person offshore team as at the end of Fiscal 2023. This team released 6 major CIM platform updates during the year, evolved the ICM, ECM, CM, RM and GS functionality modules, evolved various data science and machine learning projects and assisted customer service and implementation teams to onboard five new pipeline operators during Fiscal 2023. During Fiscal 2023, this team addressed 221 User Stories, 180 Bugs and 2,496 commitments for customers and upgraded the CIM platform to .NET 6 status. One new customer presented an atypical challenge, requiring more than 18,000 pipeline data miles to be ingested into CIM, "go live" with the CIM platform within a 6-month period (which was essentially completed in early 2024), and the customization of various integrations between CIM and the customers' internal systems.

My Thoughts

I was happy with the news. I am glad they are now at a scale where they produce cash. I will be much more critical of capital allocation now moving forward. Particularly on a per share basis. The news release mentioned they are going to put some resources to win customers in South American and Europe. This is positive as they are under penetrated there.

I am doing my best to shed my valuation lens with OSS, but I can’t help mention that they are at about 7x EV/2024 revenue. Due to them being just on the other side of EBITDA positive, they trade at 65X EBITDA. If they can continue the revenue growth, then 2025 EBITDA should be well ahead of 2024.

Thanks for reading.

Dean

* long OSS.v