AL3 signs a deal with Australian Defence and industry supplier
Our 2024 Tech Pick Of The Year AML3D (ASX: AL3) just signed a $280K deal with an Australian Defence and industry supplier.
The deal announced today was to convert one of AL3’s existing robotic welding systems to its more modern ARCEMY® metal 3D printing system.
We also noticed AL3 mentioned that the upgrade order included 12-months of software support which is a strong validator of the change in AL3’s sales strategy which we have talked about several times before.
For context - AL3 recently switched its sales strategy towards adding more recurring revenues to compliment the sale of its 3D printing systems.
The announcement doesn't explicitly say it would be a recurring revenue stream for the company but we feel confident that the customers would look to keep software support beyond the initial 12 month period.
Seeing AL3 add recurring revenue is a big part of our Investment Thesis for AL3.
Tech investors love to see recurring revenues and as AL3 locks in more of these recurring revenue deals we would hope its valuation moves higher.
Another interesting takeaway from today’s announcement was that it came from an “Australian Defence and industry supplier” which had us thinking about the Quick Take we wrote yesterday:
In that Quick Take we touched on the recent headlines about the prospects of supply chain delays affecting the AUKUS submarine deal.
We also touch on how we think the news could place additional focus on the companies that are trying to sell into these supply chains - like AL3.
Check out that Quick Take here:
(Source)
How today’s news impacts our AL3 Investment Memo:
New sales strategy already driving revenue growth
AL3 has moved from a “sell the 3D printed parts” to a “sell the 3D printing system” strategy. This new strategy means bigger contracts for AL3 and gives customers what they want because the parts are made closer to where they are needed.
Source: “Why we Invested” section - AL3 Investment Memo 27 June 2024
The deal announced today came with a 12-month software support sale which relates directly to this reason in our AL3 Investment Memo.
“Sell the 3D printing system” strategy opens up yearly recurring revenue
For new orders of the ARCEMY system, AL3 will now build in ARCEMY services to include software and services fees on a recurring revenue basis. This includes software licensing fees, hardware maintenance, and tech support. This is an untapped stream of revenue for AL3 and a potential source of upside for the company as the company grows.
Source: “Why we Invested” section - AL3 Investment Memo 27 June 2024
Today’s deal was to upgrade an existing robotic welding system which we consider a sale of AL3’s 3D printing system.
Just as we mentioned in our AL3 Investment Memo, the sale also added a new revenue stream to AL3’s top line (software support).
What’s next for AL3?
- 🔄More sales to US Navy pushing out to wider US defence industrial base (ongoing)
- 🔄Opening of Ohio facility (next 3 months)
- 🔄Expansion into new industries with new clients (such as Oil & Gas, aerospace)
Read more about AL3 in our first note on the company:
