Investment Thesis

• Requirement for ultrasound disinfection. Ultrasound transducers must be disinfected between patients to prevent cross-infection. Trophon EPR is a significant improvement above traditional methods (soak, spray, wipe or other manual reprocessing/disinfection method). For instance, traditional soaking takes ~25 minutes versus Trophon which takes ~7-8 minutes to disinfect ultrasound probes.
• Potential addressable installed base of ~120,000 Trophon EPR units globally (~40,000 in the US, Europe and Rest of World each).
• New guidelines and regulation drive pathways to reinforce requirements for high level disinfection. For instance, new guidelines in Australia and New Zealand setting Trophon as the standard in high level disinfection.
• Continued growth in North America to be driven by its direct sales team with adoption remaining strong and Trophon becoming the standard of care.
• Large and credible distribution partner is retained in GE Healthcare with demand for safety inventory.
• Managed Equipment Service business model (MES) in the UK overcoming capital budget constraints by clients.
• Progress with geographic expansion. 
• Strong balance sheet to support growth strategy.

Key Risks 

• Competitive pressures as potential entrants enter the market. 
• Non-receptive markets where NAN’s product is considered overkill compared to traditional disinfection methods such as using sterilised wipes.
• Key customer risk as one customer is NAN’s largest customer 
• Product faults or incidents where recalls are required.
• Adverse foreign currency movements in AUD/USD.
• Poor execution of R&D with no progress.
• Nature of business makes it prone to easily reaching a natural penetration rate, where growth becomes subdued.  

1H22 Results Highlight

• Revenue of $60.6m, up +41%, driven by strong growth with capital revenue of $19.0m, up +102%, and consumables and service revenue of $41.6m, up +23%.
• Global installed base up +12%.
• Continued investment in the strategic growth agenda resulted in operating expenses of $42.7m, up +29%.
• Operating profit before tax of $3.3m, significantly improved from the $0.2m in the pcp.
• NAN has no debt and its cash position continues to provide a strong foundation to support its growth plans – 1H22 free cash flow reflects net outflow of $3.8m with Cash and cash equivalents of $92.0m at 31 December 2021.
• R&D investment of $10.7m, up +41%, with a focus on NAN’s new endoscope reprocessing product platform, Nanosonics Coris.

Company Profile 

Nanosonics Ltd (NAN) is an ASX-listed company which focuses on developing and commercialising infection control devices. NAN’s first device, the trophon® EPR is a proprietary automated device for low temperature, high level disinfection of ultrasound probes. The device is approved for sale across major markets including, Australia and New Zealand, US, Europe, Japan, Hong Kong, and South Korea. The trophon® EPR is sold through distributors including GE Healthcare, Philips, Samsung, Siemens Toshiba and Miele Professional.

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Business Strategy and Outlook

CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities’ weak-point into better protection for all of its clients. CrowdStrike’s cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. It is anticipated that CrowdStrike’s customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world. 

CrowdStrike’s endpoint protection platform melded the needs of next-generation antivirus, threat intelligence, endpoint detection and response, and other features like managed threat hunting into a consolidated management plane. The lightweight agents, installed on physical devices like servers and laptops, or in virtual machines and cloud environments, are continually improving through its cloud database algorithms, becoming more capable as more data is received. In analysts view, CrowdStrike’s solutions establish customer switching costs and its network effect makes changing vendors a challenge as clients rely on having the latest threat protection. 

Alongside a persistent talent shortage in cybersecurity and firms attempting to manage disparate toolsets for various parts of endpoint security, entities are challenged to stay secure in networking environments without distinct security perimeters. CrowdStrike’s experts supplement these overwhelmed or short-staffed teams, and the firm also offers breach remediation and proactive testing services. It is likely that CrowdStrike is in the early stages of becoming a market mainstay as businesses and governments rapidly adopt cloud-based endpoint protection platforms.

Financial Strength

It is seen CrowdStrike as a financially sound company that will be able to generate solid free cash flow and expand its margin profile throughout the 2020s. CrowdStrike had its initial public offering in June 2019 and has historically operated at a loss on a GAAP basis. It is viewed CrowdStrike’s capital deployment efforts true to a land-and-expand strategy, whereby CrowdStrike initially has elevated sales and marketing expenses to gain a customer cohort before expanding its revenue per customer while lowering its operating costs per customer (on a revenue percentage basis). In analysts view, CrowdStrike can benefit from cross-selling and up-selling tangential products to its existing base and new clients, while also converting breach remediation service clients to be product customers. As of the end of fiscal 2022, CrowdStrike had $2.0 billion of cash, cash equivalents, and marketable securities and $740 million of debt. With a strong balance sheet and free cash flow generation, it is anticipated CrowdStrike to pay its obligations on time.

Bulls Say’s

• CrowdStrike’s innovative endpoint security solutions, delivered as a platform, are quickly attracting customers as clients want to consolidate their myriad legacy security tools. Its threat remediation services are a powerful tool in landing new subscription clients. 
• After landing a client, CrowdStrike can gain significant margin leverage via the cross-selling and up-selling of additional security modules. 
• CrowdStrike’s products become more capable as new clients are added, and its threat intelligence and hunting can become a core part of customer’s cybercrime defense.

Company Profile 

CrowdStrike Holdings provides cybersecurity products and services aimed at protecting organizations from cyberthreats. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, identity protection, and log management. CrowdStrike went public in 2019 and serves customers worldwide 

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.