SG&A appears to be out of control, significantly exceeding top line revenue. Then there are huge R&D expenses on top of that.
Despite relatively robust gross margins, if the company is unable to exercise discipline around costs, its GAAP financials are likely to remain a sea of red.
To fund a company that is cash flow negative and which has negative working capital requirements has meant continually raising new capital. This is the part I find most interesting, they are not using debt - it is all funded via equity issuance. The dilution is eye-watering. I guess that debt isn't available to them because they are not cash flow positive so can't service the debt.
This is a business with a serious solvency issue.
I wouldn't invest until it demonstrated that it's economics were at least half as good as its drone technology.
I understand your concerns, but they have a 2-year runway with their present cash. Given the world we live in and the number of customers they already have, which can ramp production depending on government programs, finances are likely to improve significantly over that time frame. Add in the high-margin software which just scored its first integration deal in that equation as well. Agree that it's speculative and some things need to happen, but I think it's quite likely that these things actually do happen.
Also, they are an Israeli company... I don't know how much any "boycotts" would impact them given the nature of their business (e.g. the Starbucks operator here in Malaysia has taken a hit along with many other Western brands) BUT after what happened with the pagers, using Israeli software in cars may make some people/countries nervous!
Nice summary. The have enough cash for 2 years, that’s positive. And in their business, R&D is the heart of their survival. Mobilicom just reported earning on 27th. Kind of wondering if you have done any follow up on that ? Don’t seem to have any forward guidance /no forecast of anything promising. Would be great if you will be able to follow up with the company/ eg talk to ceo?
This is a fairly simple situation, in my view. The wait is for one of its customers to scale as a result of defense programs. That is likely to happen, given what's happening in the world, and given the low cash burn, there are no reasons to get nervous yet. What's also nice is that they managed a first deal for their SaaS cybersecurity solution. While that might not scale immediately, it's high-margin stuff and it's reassuring it's getting traction.
I also linked to your post in my Monday emerging market links collection post: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-march-17-2025 Plus your previous piece about them in my Jan 21 post: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-january-21-2025
Thanks, appreciated!
SG&A appears to be out of control, significantly exceeding top line revenue. Then there are huge R&D expenses on top of that.
Despite relatively robust gross margins, if the company is unable to exercise discipline around costs, its GAAP financials are likely to remain a sea of red.
To fund a company that is cash flow negative and which has negative working capital requirements has meant continually raising new capital. This is the part I find most interesting, they are not using debt - it is all funded via equity issuance. The dilution is eye-watering. I guess that debt isn't available to them because they are not cash flow positive so can't service the debt.
This is a business with a serious solvency issue.
I wouldn't invest until it demonstrated that it's economics were at least half as good as its drone technology.
I understand your concerns, but they have a 2-year runway with their present cash. Given the world we live in and the number of customers they already have, which can ramp production depending on government programs, finances are likely to improve significantly over that time frame. Add in the high-margin software which just scored its first integration deal in that equation as well. Agree that it's speculative and some things need to happen, but I think it's quite likely that these things actually do happen.
Also, they are an Israeli company... I don't know how much any "boycotts" would impact them given the nature of their business (e.g. the Starbucks operator here in Malaysia has taken a hit along with many other Western brands) BUT after what happened with the pagers, using Israeli software in cars may make some people/countries nervous!
Doesn't seem to be an issue, at least not for the main markets they are selling into (US, Isr).
Nice summary. The have enough cash for 2 years, that’s positive. And in their business, R&D is the heart of their survival. Mobilicom just reported earning on 27th. Kind of wondering if you have done any follow up on that ? Don’t seem to have any forward guidance /no forecast of anything promising. Would be great if you will be able to follow up with the company/ eg talk to ceo?
This is a fairly simple situation, in my view. The wait is for one of its customers to scale as a result of defense programs. That is likely to happen, given what's happening in the world, and given the low cash burn, there are no reasons to get nervous yet. What's also nice is that they managed a first deal for their SaaS cybersecurity solution. While that might not scale immediately, it's high-margin stuff and it's reassuring it's getting traction.