Pointerra provides an end-to-end Data as a Service (DaaS) solution for managing, visualising, working in, & analysing 3D point clouds and datasets.
Pointerra is a market leader in 3D data management, providing services that reduce the time and cost of owning, using, and analysing 3D point cloud data. Pointerra is demonstrating early traction with enterprise customers, and is rapidly growing recurring revenue with early adopters.
Pointerra uses patented technology to view, compress, process, and store spatial data. This innovation, Pointerra refers to as their three pillars of innovation (refer to diagram below), allows Pointerra store 3D spatial data cost effectively, and to allow customers rapid access and visualisation of the data. This saves customers significant storage, processing, and visualising costs.
In addition to this, Pointerra provides “Analytics As a Service”, utilising proprietary machine learning algorithms to process 3D data, in order to reduce the customers cost to process 3D spatial data.
About the Sector:
The infrastructure / facilities / construction industry is at an early stage of adopting 3D surveying, based on Laser / LIDAR scanning technology, to develop accurate 3D representations of existing infrastructure, sites, and buildings. LIDAR scanners are increasing in capability, and reducing in costs over time, and the technology remains in the early phase of adoption in the sectors.
This is providing tremendous benefits to the sector, reducing costs in surveying & monitoring, as well as reducing risks associated with removing uncertainty and unknowns in construction. However, this has created a new problem in the sector, as managing and processing vast amounts of data, demands expensive resources and time.
Pointerra was founded in June 2016, and was founded by Dr Robert Newman, Mr Ian Olson, and Mr Graham Griffiths.
Dr Robert Newman is the current Managing Director of Nearmap, and has founded to technology businesses, based on technology developed in Western Australian Universities. Dr Newman resigned from Pointerra board to focus on his burgeoning role at Nearmap.
Graham Griffiths was also had a key role in the growth and development of Nearmap, and had been heavily involved in the Geospatial technology sector for many years. Graham Griffiths passed away in early 2019 after a short illness.
Ian Olson remains as the Managing Director of Pointerra. Ian has an accounting background, and has been involved in the geospatial sector for many years, through his business WKC Spatial.
Currently, management own approximately 10% of the company shares.
Pointerra began North American operations in early 2018, and began reporting annualised contract value in early 2019. Early 2018 was when Pointerra began to market it’s platform to potential customers, and was investing approximately $1 M in R & D annually. Pointerra has reported that Annualised Contract Value (ACV) had grown to $4.0 million by July 2020, and reported a healthy sales pipeline.
There are key metrics to be aware of:
Annual Revenue per Customer. Not specifically reported, however, some anecdotal evidence indicates that ARPC growth is very high, namely:
Key customer, Precisionhawk, 400% increase in expenditure over 6 months
US Utility customer spend US$350K of revenue over Q2/Q3 2020, with further opportunities to expand scope and services over time.
Australian utility company has expanded hosted 3D data through Pointerra.
Roll out of a 500 terabyte service to a US state utility company – the largest contract in Pointerra’s history.
Pointerra reporting existing customers are expanding their usage of the Pointerra platform, as they add more 3D data hosted on Pointerra.
High gross margins of 70-80%.
Cost control is excellent, remaining steady over 12 months. The MD has a good reputation in this regard, and is known for being frugal with company cash.
Revenue is lumpy with client payments often 6 monthly or annually.
There is a lag of 3 to 6 months between contract award, and customer onboarding, hence receipts lag Annualised Contract Value (ACV) by 3 to 6 months.
With a capital injection from a strategic investor in July 2020, and having achieved a cashflow inflection point, Pointerra are investing in their technology platform and sales capacity to drive further growth.
Based on the early success, recurring revenue model, and increasing use by customers of the Pointerra platform, my thesis is high growth rates can be maintained over the medium term, and, with the benefit of high gross margins, will increase cash flow margins as the business scales.
Pointerra have developed a platform that can save its customers significant resources in handling, managing, and analysing 3D point data. The platform is based on patented technology, that may be difficult for competitors to replicate. It is in the very early phase of monetising the platform it has developed, but has achieved early success, with acquired customers rapidly expanding their use of the platform. The platform also has a number of areas of optionality, such as the expansion of its point cloud marketplace (reselling 3D data), and expansion into facilities management (point cloud for existing buildings).
High growth rates can be sustained by the significant market opportunity, however, there is a high degree of execution risk. For it maintain high revenue growth rates, it will need to scale from a sub 20 person organisation to a +300 person organisation over the next 7-10 years. This will require organisational structures, and work culture to be established that can be scaled. It is unclear at this early stage whether Pointerra can achieve this transition, and is a significant risk to consider when investing at it's current valuation. Pointerra is currently trading on a forward EV/S multiple in excess of 25, and will need to maintain revenue growth rates in excess of 50% per annum to justify its present valuation.
However, there are significant risks:
Competition – The addressable market is huge. Large players, such as Autodesk, or the like may seek to enter the space.
Technology disruption. A new technology or platform may be developed, rendering Pointerra’s technology obsolete.
Scaling Risk - Transitioning from a small scale start up to an international enterprise is a difficult journey, requiring different skills and strengths in the leadership team. The leadership team will need to grow and change with the business. The departure of key people will be a sign that Pointerra is experiencing growing pains, or having difficulty scaling.
Financing risk. Pointerra has only recently achieved cash flow break even, and is investing heavily to maintain growth and build its competitive advantage. However, slowing revenue growth may impose financial stress on the balance sheet, and threaten the viability of the business.
Indications the thesis is broken include:
loss of contracts;
deceleration in ACV growth;
Emergence of a significant competitor.
A failure to improve the above metrics in the next 12 months will be a warning sign.
Pointerra also needs to improve its reported metrics around Average Revenue per Customer (ARPC), Customer Acquisition Costs (CAC), and churn, and as shareholders, are keen to see improved reporting of these performance metrics. .
Pointerra is a holding in Luke's Fund, with the investment initiated in June 2019.