The Envirosuite share price dropped 5% today. Here's why

The Envirosuite share price dropped today after a company briefing and new listing on the S&P ASX All Technology Index (ASX: XTX)

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The Envirosuite Ltd (ASX: EVS) share price dropped lower today, down 4.88% to 20 cents. This came after the company answered investor questions arising from a series of briefings recently. In addition, it was announced that Envirosuite would be added to the S&P ASX All Technology Index (ASX: XTX). The index was down 5.17% at the time of writing.

Envirosuite provides solutions for the monitoring and management of environmental challenges. It has been listed on the ASX since 2008.

What were investors told?

Envirosuite CEO Peter White and CFO Matthew Patterson answered questions from shareholders and analysts about the company.

Investors were told Envirosuite had a steadily growing sales pipeline of more than $30 million. This did not include China which is on track for $10 million in sales by December 2020 as previously announced.

Envirosuite's plans to move toward profitability over the next 9 months were outlined in the briefing notes. These include a cost reduction of $8 million and plans to realise operating synergies with the EMS business worth $3 million. Profitability also had been affected by one-off non cash costs incurred in the previous year, the executives noted.

When asked if the company's proposals and conversions were increasing, they said: "With positive feedback loops we're continually evaluating our pipeline and the effectiveness of our sales activities to increase conversion along the entire sales cycle."

The executives said the company's growth target was based on a business as usual compound growth rate of 20% per year with new acquisitions potentially adding to that growth.

Despite 65% of the company's revenue being from airports, the company portfolio has been resilient through COVID-19 with a churn rate of 1.5%.

Investors were told the company had an addressable market in the tens of billions per year. In addition, the company had clearly identified potential revenue of $2.3 billion.

The company reported a gross margin of 31% but management was working to reduce operating costs through automation.

The executives said they did not anticipate a need for further capital raisings.

About the Envirosuite share price

In the 2020 financial year, Envirosuite had revenue of $24 million, 75% of which was recurring. Envirosuite had earnings before interest, tax, depreciation and amortisation (EBITDA) of -$15,136 in FY20 compared to -$10,313 in FY19.

In August, Envirosuite announced it had acquired technology that could reduce water treatment plant costs by up to 35%. It paid total consideration of $1.35 million for the acquisition.

The Envirosuite share price is up 185.71% from its 52-week low of 7 cents. It has fallen 9.09% since the beginning of the year. The Envirosuite share price is up 53.85% since this time last year.

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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