As mentioned previously here on the blog, a few of the more recent IPO’s where I have subsequently invested have to date, thankfully gone rather well.
Calnex is a case in point and it delivered some further positive news yesterday morning where the shares, even in these turbulent times are trading at £1.58p against my entry point of 54p.
Speaking of turbulent times, there could well be an exciting growth opportunity ahead with another relative newcomer to the AIM, in the shape of Windward, which floated as recently as December of last year.
In terms of timing, it could well be the case that the company really couldn’t have chosen a better period to come to the market, given that its technology is firmly focused on and serving the global maritime industry that is currently experiencing an unprecedented number of ongoing and protracted issues.
Additionally, whilst historically it is an industry that has very much been happy to chug along and do things in a away that it has always done, things are now changing and fast.
Like me, in relation to the maritime industry you will probably currently rightly conjure up images of shipping supply chain problems, increasing costs and the obvious mayhem that current geo political friction has thrown up and these of course come on top of the pandemic fall out that continues to be endured.
Such turbulence however, would appear to play into the hands of Windward, which boasts what seems to be some very smart and highly supportive technology that provides real-time data, mapping and complex analysis of shipping traffic, which is proving invaluable to its customers.
Not only is it able to identify a ship and its cargo’s location, it can highlight the owners, where the vessel has come from and where it is destined and also, in the likes of oil identify the cargo.
That is of real significance to those operating across the space, particularly when it comes to the important area of risk management.
With something like ninety per-cent of the global trade being transported by sea, which in turn is supported by in excess of four hundred billion containers per year, it would appear that the market Windward is addressing is ripe for the kind of offering provided.
Speaking with CEO and co-founder Ami Daniel along with CFO Ofer Segev earlier this week, it is apparent that significant growth is firmly on the agenda here and the intentions are to accelerate that substantially in the coming years.
As what is a SaaS platform focused business, the company’s AI-powered product utilises predictive intelligence, best in class shipping data & industry expertise to provide specific and necessary insights across the entire maritime space to its clients.
The company, which raised £26.3m on coming to market at £1.55p quickly saw its share price increase to £2.25p, before falling back in the wake of wider market uncertainty and now sit at £1.40p, which looks interesting territory given the growth opportunities ahead and the fact that the current environment actually strengthens the case for product adoption.
Although as a pre-profitable business that is sporting a market cap of £116m it could be argued that the valuation at present looks high enough, those delving deeper and looking to the medium-longer term, could perhaps do worse than seriously consider the investment case here.
The company has only recently reported its full year results for the year ended December 2021 and this saw an impressive 18.6% increase in revenue to $17.4m against the previous $14.6m, highlighting a building momentum.
Looking ahead to the current financial year, broker Canaccord, which describes Windward as entering a “Golden Age” is forecasting a 30% jump in revenue to $22.6m which represents an upgrade to their initial expectations.
Although at this stage of its development cycle Windward is loss making due in part to heavy investment and an accelerated sales push to service demand, Canaccord expects the company to be EBITDA positive by 2024 against an expected $7.7m EBITDA loss for this year.
Importantly though, on the financing front Windward looks extremely comfortable on the cash side of things with a current $39m on the balance sheet, which although expected to decrease to $24m next year, should then track northwards again as the business reaches that inflection point of turning EBITDA positive and delivering on cash generation.
As a former Israeli naval officer, Daniel is clearly passionate about all things maritime and appears to have positioned the company in a spot with little in the way of real competition and where it already boasts some punchy customers. These include BP, Danske Bank, HSBC and Shell amongst others that also includes significant business with Government agencies.
The CEO outlined to me Key drivers that are playing to its strengths and providing significant opportunities for Windward and these include amongst others greatly increased regulatory requirements that take in sanction compliance along with the ongoing road to decarbonisation.
The latter is assisted by Windward in terms of assessing and determining the best commercial decisions in specific situations to meet obligations, such as the most efficient way of moving cargo and meeting compliance.
Speaking of the business as a whole, Daniel says that when they first embarked on the journey some eleven years ago it was at a time when the commercial maritime space was very much under digitalised, with little in the way of supply chain issues to contend with.
Fast track to the current and everything has changed, with a much- increased need for visibility along with fast and accurate information across an industry which has left many grappling in what are complex and difficult logistical challenges amongst others.
In terms of why chose Windward to solve or manage such maritime specific issues, Daniel says, commercial players such as freight forwarders could elect to embark on creating their own technology, but such a decision would take years to develop along with heavy investment, both of which make such a route unviable and leaves Windward ideally placed to capture a large slice of a massive market.
The company already had the foundations firmly laid on the back of significant VC investment and the CEO says that with some very sophisticated technology he now expects the market will see a lot of roll out from them in the next coming year.
Investment has been and remains key on further developing the AI infrastructure and technology, which in turn will drive significant revenue growth.
Having in its early days derived mostly all of its revenue from various government sources, Windward now encompasses an increasing end user commercial customer base that extends from law enforcement, to marine insurance, energy and oil, freight forwarders, ports and terminals and commodity traders.
Clearly in a good spot, the ambition now is to substantially grow the business and predominantly via organic means as the opportunities are, according to the CEO extensive and where he has no wish to see the company competing merely as a small AIM player.
Acquisitions aren’t ruled out, but there is more than enough from the organic perspective on which to concentrate and given the limited competition, the right earning enhancing purchases may be hard to find, save for some complementary technology.
To highlight part of the offering here, particularly in light of the current ongoing Ukraine war situation, Windward’s AI driven tech is able to show and determine the current level of commercial port operations in the Black Sea and exactly how activity has decreased since the onset of the war.
And in contrast to that decrease, it equally reveals how port operations in Romania have increased, along with substantial data on other adjacent geographies including Turkey as a direct result of the current situation.
Such in-depth information, connectivity and assistance to existing and would-be customers is invaluable, particularly given that Russian and Ukrainian ports on the Black Sea are such major export hubs for a number of commodities.
The software suite already on offer appears tailor made for a fast developing and evolving market that is only going to grow over the longer term, whilst near term, unprecedented disruption provides for major opportunities.
Daniel tells me that the company was very quick to move in relation to the unfolding and developing Ukraine/Russia conflict and it has already rolled out a specific technology solution to its client base to support their operations.
As part of that solution, Windward can specifically identify shipping that is related to Russia, which although this does not necessarily mean that they are wholly Russian, it can reveal that they are related or connected in a broader definition.
This may for example see a vessel flying a flag of another specific country, but which is still aligned in some way to Russia and this in turn will see Windward highlight and flag the connection, providing important and vital information.
In terms of customers signing up, typically a new win will initially commit for a year, before extending for as long as five and the company is experiencing low churn, where there is understandably an increasing element of stickiness.
According to Canaccord, Windward's SaaS model accommodates a sector-leading 99% recurring revenue share and in its initiation note, cited its own estimates as looking well underpinned on the back of 3Q21 ACV/ARR of ~$20m, up +35% yoy.
Right now, there appears ample in the way of opportunities ahead for Windward across the maritime space and both the CEO and CFO sound very confident regarding ongoing progress and meeting current broker numbers.
Interestingly, the technology it transpires has been developed in such a way that it could quite easily be applied to other areas aside marine such as rail, which could provide for a potentially attractive additional and substantial revenue route.
This could well be something to keep an eye out for in the future as the connectivity of marine cargo arriving at port and subsequently being transported across rail networks looks to be a natural extension of where Windward currently sits.
As with any market newcomer, particularly at the pre-profitability stage there are execution and delivery risks to weigh up.
But, Windward looks to have stolen a march in an underserved market with big opportunities on which to capture, where it is already generating notable levels of revenue.
Some well known and respected Institutional investors are already on board here, including Gervais Williams- Miton and Ken Wotten -Gresham House.
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