Carl Data Solutions Inc. · 2017-12-12 · In 2016, market research firm IHS estimated that the...

Carl Data Initiation ReportDecember 12, 2017

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Equity ResearchSoftware | Canadian Small Cap

December 12, 2017

Chris Thompson | Head of Research | Ubika [email protected] | 1 (416) 574-0469

Patrick Smith | Analyst | Ubika [email protected] | 1 (647) 444-5506

Price Performance

Market Data (CSE:CRL)Price (December 11, 2017 close) $0.3952 Week Range $0.25 - $0.49Market Cap (M) $21.5Shares Outstanding (basic, M) 55.2Shares Outstanding (fully diluted, M) 74.5Free Float 79%Average Daily Volume (3 months) 380KAverage Daily Volume (30 days) 1.1M

Total Debt (M) $0.8Cash & Short-Term Investments (M) $1.7Total Assets (M) $3.1

Headquarters Burnaby, B.C., CanadaWebsite http://carlsolutions.com/

Top ShareholdersBrad Scharfe 9.1%BDirect Online Communications Inc. 3.8%Greg Johnston 2.6%Jason Scharfe 2.2%Kerr Wood Leidal Associates 1.6%

ManagementGreg Johnston CEOAlastair Brownlow CFOPiotr Stepinski CTOMike McDonald VP of EngineeringKevin Marsh VP of Business Development

All figures in CAD unless otherwise stated.Source: Thomson Reuters

Figure 1: Rainfall Intensity-Duration-Frequency Analysis (Web App)

Carl Data Solutions Inc.(CSE:CRL)

Industrial IoT Data Collection and Analytics Company

Company Description Carl Data Solutions Inc. is a Canada-based company focusing on the next generation of data collection, storage, monitoring and analytic solutions for data-centric Industrial IoT enterprises. The Company develops cloud-based software analytics and dashboard solutions to provide Big Data-as-a-Service (BDaaS) solutions for industry and governments. Carl Data’s applications can collect any type of data from any sensor or source to produce detailed reports, predictive analytics, and real-time insights into infrastructure status. Carl Data’s current industry focus is water and wastewater infrastructure, and is expanding into power, mining, and the Oil & Gas industry.

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Investment Highlights• Big Data and IIoT are fast-growing industries: IHS estimates that 75 billion

devices will be connected by 2025, and 50+ billion devices will be connected by 2020, with “Data Analytics” as the highest growing industry sub-set, projected to grow annually by 60%.

• Sticky and high-quality client list, generating long-term recurring SaaS revenues. Clients consist of municipalities (e.g City of Toronto, City of LA, York Region), mining clients (e.g Teck), and expansion opportunities into the Oil & Gas industry.

• Forecasted to generate $3M-$4M in revenue for CY2018, 180%+ growth from $1.1M reported in CY2016.

• Ability to leverage technology over several verticals. Since the acquisition of FlowWorks in 2015, the Company has made significant moves into Mining and Oil & Gas. Using its new Flood Risk Forecaster, Carl Data is advancing to the second version of the project (moving to five mine sites from one) with Teck Resources, its first mining customer. The tool was built using the Company’s BDaaS infrastructure. Its primary function was to predict the impact of environmental events on Teck’s tailings ponds as far as seven days in the future.

• Signed a Letter of Intent for a pilot project with Peak Disposal Services Inc. for the development of “industrial-grade solid waste management monitoring system” to increase operational efficiency. Peak Disposal manages ~140 containers in the movie and construction industries and is the first monitoring system used by the company.

• Purchase of AB Embedded’s assets strengthens data collection hardware. In December, the Company acquired certain IP and manufacturing assets to enable it to now build lower-cost data collection devices to gain better insights for end users.

Financial Analysis & ValuationTo accelerate growth, Carl Data recently closed $1.7M, offering units at $0.26/unit, consisting of 1 share and ½ warrant, exercisable at $0.40/warrant for 2 years. The Company trades at 5.2x 2018E sales of $4M, which is lower than the ~5.5x multiple commanded by high-growth SaaS companies. Source: Company Website



Table of Contents

Carl Data Summary .....................................................................................................................1Industry Overview & Investment Thesis .................................................................................. 3

Big Data, IIoT and the Forth Industrial Revolution .............................................................................. 3The Internet of Things (IoT), the Industrial Internet of Things (IIoT) and Big Data ....... 4-5Company Overview .................................................................................................................... 6Machine Learning at the Core of Carl’s Data’s Analytics ................................................. 7-10

FlowWorks ..................................................................................................................................................................... 8-9Oil and Gas Industry ....................................................................................................................................................... 9FlowWorks Cycle ........................................................................................................................................................... 10

Focus on Mining Water Management ................................................................................ 11-13IIoT CyptoCurrency Technology ............................................................................................. 14 Competition ............................................................................................................................... 15Financial Analysis and Valuation ....................................................................................... 16-17Risks ........................................................................................................................................... 18Appendix A: Recent News ................................................................................................... 18-20Appendix B: Management ....................................................................................................... 21Appendix C: Directors .............................................................................................................. 22Disclosure ................................................................................................................................... 23



Figure 2: PwC’s Industry 4.0 Frameworks

Source: PwC 2016

Big Data, IIoT and the Fourth Industrial RevolutionThe Fourth Industrial Revolution, or Industry 4.0, is often used to describe the fourth major industrial revolution that encompasses Big Data, Analytics, Cognitive Computing, the Internet of Things, Robotics, and the digital connection framework, whereby both the physical and digital worlds are integrated.

Industry Overview & Investment Thesis

According to PwC’s Industry 4.0 framework, the fourth industrial revolution will focus on the end-to-end digitization of physical assets to generate, analyze and communicate data seamlessly within an organization and between value chain partners. Digitization will occur in three (3) primary areas: (1) digitization and integration of vertical and horizontal value chains; (2) digitization of product and service offerings; and, (3) digital business models and customer access. Surrounding these areas are the core capabilities of data and analytics. According to the report, companies expect benefits from digitization to include revenue gains, lower costs and increased efficiency.

Figures 3: Building the Digital Enterprise – Company Expectations

Source: PwC 2016



The Internet of Things (IoT), the Industrial Internet of Things (IIoT) and Big DataThe Internet of Things (IoT) is the network of physical devices embedded with technology that allows these devices to connect and exchange information. Each physical device is uniquely identifiable and could be located in automobiles, home appliances, trucks, smoke stacks, waterworks, etc., and are embedded with software, sensors, actuators, and network connectivity. Data communications and network connectivity allows the devices to connect and exchange data while cloud computing is required to store the volume of information, known as Big Data, generated by the devices. The IoT allows the remote control of physical devices and data gathering from distant sensors. Data gathered from the remote devices can be directly loaded into computer-based systems for storage and processing. These datasets of information, usually referred to generically as Big Data, are so large and complex that traditional data processing software is inadequate to process in a timely fashion. Typically these large datasets are processed by utilizing sophisticated algorithms, machine learnings, and predictive analytics.In 2016, market research firm IHS estimated that the number of connected devices will double from 15.4 billion in 2015 to over 30 billion devices connected by 2020, and doubling again to over 75 billion devices connected by 2025 (Figure 4). For IoT deployments, opportunities exist to connect both existing devices that were not previously connected as well as increase the number of connected points in the environment through software, sensors, and actuators that can now be deployed due to the newly-pervasive underlying communication infrastructure. However, the multitude of sensors, generating millions of petabytes of information, create Data Volume challenges - the need to manage, process and analyze very large amounts of data. In addition, IoT applications must handle both Data Diversity (different types of data – i.e. structured versus unstructured data, or machine data) and Data Velocity (handling time-sensitive data) issues.

According to a 2016 IoT report, Forrester predicts that facilities management, security and surveillance applications in government, and facilities management in utilities will be the “hottest” areas for IoT growth (Figure 5). Forrester also found that technology providers should focus on business drivers such as solutions for reducing risk and addressing regulatory requirements. As an example, ThyssenKrupp created a dashboard of critical events by adding connectivity to sensors in its elevator and escalator systems as a means for detecting emerging problems and to schedule preventive maintenance rather than have customers endure unplanned downtime.

Figures 4: IHS Estimates 31 Billion Connected Devices By 2020

Source: IHS 2016



According a 2017 IDC report, Canadian IT Spending will focus on industry and functional solutions embracing Industry 4.0. Companies plan to implement solutions that automate business processes in order to boost efficiency and eliminate human error, and vendors, like solutions by Carl Data, with well-defined, vertical solutions will win over companies with horizontal offerings. By 2018, IDC expects 75% of enterprise applications to be cognitively enabled, utilizing Big Data and Analytics. IDC also predicts Global IoT revenue will reach $7.1B by 2020, from $2.7B in 2015, attaining a compounded annual growth rate of 21%.

Figures 5: Heat Map of Key IoT Opportunities by Industry and Application

Source: Forrester 2016



Company OverviewCarl Data Solutions Inc. is a Canada-based company focusing on the next generation of data collection, storage, monitoring and analytic solutions for data-centric Industrial IoT enterprises. The Company develops cloud-based software analytics and dashboard solutions to provide Big Data-as-a-Service (BDaaS) solutions for industry and governments. Carl Data’s applications can collect any type of data from any sensor or source to produce detailed reports, predictive analytics, and real-time insights into infrastructure status. Carl Data’s current industry focus is water and wastewater infrastructure, and is expanding into power, mining, and the Oil & Gas industry.

As shown in Figures 6 & 7, Carl Data provides a fully-encompassing turnkey solution for IIoT devices and Big Data applications. Across all governments and industries, sparked by the significant development of data storage over the last decade, there is a plethora of information. Most of the time, due to its excess and lack of organization, a company does not know what to do with it. Carl Data recognized this problem and designed a unique suite of applications and features to collect and analyze information using predictive analytics and machine learning that is convenient and hosted on a single web-based dashboard that a customer can view anywhere. Specifically, Carl Data differentiates itself by moving deeper into data by finding patterns from a combination of multiple sensors, historical data and publicly available data sets.

Figures 6: Carl Data Collects Data From Multiple Data Point To Monitor & Protect Industrial and Infrastructure Assets

Source: Company Presentation

Figures 7: Collect, Store and Analyze Big Data




Machine Learning at the Core of Carl Data’s AnalyticsMachine Learning can be applied to solve extremely hard problems by processing large datasets to discover patterns and predict possible outcomes. Machine learning is an application of artificial intelligence (“AI”) based around the principal that computers, coupled with data and knowledge sets, have the ability to learn and improve from experience without human intervention or assistance. In addition, these learning algorithms can find hidden insights and patterns without being explicitly programmed. Big Data is a recent development that provides a depth of information that allows complex mathematical calculations in real-time to provide actionable insights. Carl Data’s industry experience provides examples and instructions to their computational models. As models are exposed to new data, they are able to independently adapt and Machine Learning uses previous computations to produce reliable, repeatable decisions and results.Carl Data’s Polish subsidiary receives European Union (“EU”) Research and Development (“R&D”) grant to develop software employing machine learning algorithms to predict storm water sewer system efficiency in real time. The goal for the project is to further development of an intelligent sensor to measure storm water flow, to optimize detection and quality of data collected, and improve the prediction of infrastructure failures by storm events. Technology that can then be utilized by local water utilities around the world.

Figures 8: Carl Data’s Solution Platform

Source: Company Website



Focus on Water and Waste Water ManagementFlowWorks: FlowWorks, a SaaS-based water management software company, was a company acquired by Carl Data for $2.4M in October 2015. With this acquisition, the Company expanded its web-based applications to analyze environmental data for solid waste management. Today, the application provides a platform of data collection, monitoring and reporting tools, which enables users to monitor systems using one web interface (any web browser). In turn, the app significantly improves the ability to collect and aggregate “raw data into actionable information.” FlowWorks requires no software installation, is real-time, easily integrates with SCADA systems, and works with data from any source or sensor. Shown in Figure 9 is a screenshot of the web application, using real-time alarming and threshold monitoring, which shows the city client has a sewer site with an urgent active alarm (red) and a water site with a non-urgent active notification (orange). Setting Carl Data apart from its competition is the predictive analytics functionality that integrates machine learning and real-time data to predict potential issues before they occur. Some waste and storm management customers include the cities of LA, Toronto, Dallas, and Boston. The market opportunity for FlowWorks is significant; for example, the U.S. is estimated to require $1 trillion in water infrastructure upgrades.

Another vertical serviced by FlowWorks technology is solid waste management.To improve real-time data collection, the Company’s lazer level sensors and data loggers with wireless communication embedded (datalogger) are installed on collection bins, which are then tracked by the app. As a result, waste management companies save resources by improving efficiencies. The Company is currently working with the Harmon Group, a subsidiary of Samsung, in order to generate a waste management solution in Bhopal, India. The solution has already passed technical review of the proposal process.

Figures 9:“Event Finder” Web-Application Tool


Figures 10: FlowWorks Web Application - Predictive Analytics


Since acquiring FlowWorks, Carl Data has added additional features, such as Inflow and Infiltration, which allows customers to review the overall performance of a respective city’s infrastructure with respect to its limitations and degradation over time. With this information, city engineers are provided with significant utility to allocate resources to regions that are most desperately in need of upgrades and repairs. As part of the overall FlowWorks service, Carl Data also offers client site setup, data export capabilities, multi-site reporting, and training. As an example of the web app’s features, Figure 10 illustrates how Carl Data’s predictive analytics generate on the web application. This graph shows how FlowWorks uses regression analysis and machine learning to forecast river discharge and generate a risk rating.



Recently, Carl Data signed a Letter of Intent (“LOI”) for a pilot project with Peak Disposal Services Inc. For the project, the Company is developing “industrial-grade solid waste management monitoring system” to increase operational efficiency. Peak Disposal manages ~140 containers in the movie and construction industries and is the first monitoring system used by the company. Carl Data expects to install laser sensors, networking to wireless communications devices, which will allow Peak Disposal to review current and historical waste levels via analyzing data trends, location based forecasting, and prediction analytics. According to Carl Data, the waste management industry is anticipated to grow globally to US$562 Billion by 2020.

Marquee clients include City of LA, City of Toronto, City of Dallas, City of Boston, Trans Canada and Teck Resources. It is estimated that the water infrastructure in the U.S. requires US$1 trillion in upgrades. Applications include CSO (combined sewage overflow) and Oil & Gas pipeline stream crossings.

As cities age over generations, aging infrastructure sometimes goes unnoticed or under-managed and can have serious consequences. Subsequently, significant problems arise, such as sewage overflow into homes or local waterways, which are generally preventable. The issue at hand is that there is too much data and not enough resources. Carl Data takes all this data (historical and current), aggregates it using machine learning, and then forecasts how likely a future storm would cause a Combined Sewage Overflow (CSO) up to seven days in the future. In addition, the Company utilizes this software in the Oil & Gas sector, primarily related to stream crossings for Liquid Natural Gas (LNG) pipelines. The application assists in detecting adverse reactions to storms, as embankments that surround a stream crossing could become unstable.

Figures 11: Current FlowWorks Clients


Oil & Gas Industry: FlowWorks is also applicable in the Oil & Gas sector for using data analytics, primarily related to stream crossings monitoring for pipelines. Carl Data is currently in dicussions with several engineering firms that work for Kinder Morgan. The opportunity for the app would be detecting adverse reactions to storms, as embankments that surround a stream crossing could become unstable. Today, to illustrate market potential for the app, Kinder Morgan has over 1,300 stream crossings in British Columbia. Carl Data is developing an anomaly detection app. In general, the app would be complimentary to Carl Data’s data suite, but would be particularly ideal for a new Oil & Gas vertical for the Company. The app employs Machine Learning to automatically identify and reduce the amount of “noise” or “anomalies” within datasets. The Company estimates this app could eliminate up to 90% of the repetitive work done by data analysts and will reduce human error and improve accuracy related to generating models and reports. Carl Data believes this could significantly improve operational efficiency and reduce labour costs. To fund work on this app, the Company’s Polish Subsidiary was accepted for a ~$393K R&D grant from the European Union (“EU”). The grant will be used towards a project with an estimated cost of ~$508K.


Get Additional Ubika Research Reports on SmallCapPower.comSource: Company Website

Figure 12: FlowWorks Cycle



Focus on Mining Water ManagementWater Management: In spring 2017, Carl Data developed a new vertical from FlowWorks powered by Carl, which began as a Flood Risk Forecaster and Risk Assessment tool, built specifically for Teck Resources, its first mining customer. The tool was built using the Company’s BDaaS infrastructure. Its primary function was to predict the impact of environmental events of Teck’s tailings ponds as far as seven days in the future. Consequently, the pilot succeeded, and Carl Data now anticipates releasing a second version of the product to a total of five mine sites in British Columbia. This achievement opens opportunity for the Company, as it could result in a significant revenue-generating vertical.

For reference, tailings ponds are required for every mining operation, and are also used in the oil sands. The pond is used to pump waste by-products that remain after extracting a resource. Many tailings ponds are toxic and are intentionally placed in isolated locations to not react with the environment, and are often impounded with a tailings dam to ensure maximum protection. The most significant concern for these dams are tailings breaches. For example, water levels can rise quickly when snow melts in the spring, which causes flooding and potential damage to dam sites. Carl’s water management system is intended to mitigate or prevent disasters like this in the future. The Company aggregates data by combining public weather information with snowpack data and sensor data from the site where streams are connected to the tailings pond. As a result, Carl Data’s machine learning technology predicts the likelihood of damage caused by snow melting.

The most significant tailings failure in recent Canadian history is Imperial Metal’s Mt. Polley copper-gold tailings pond breach, which occurred in August 2014. As shown in the before and after NASA space photos below, years of mining waste were released into Polley Lake, which flowed into Hazeltine Creek and Quesnel Lake. In February the following year, a report by the Global and Mail determined the collapse occurred due a lack of ground conditions, which were unaccounted for by the original contractor. The estimated total cleanup cost for the disaster was ~$40M to clean up the spill. Perhaps with Carl’s software, this capital and social cost may have been mitigated or prevented entirely.

Figures 13: Mt Polley Tailings Dam Photos from Space (Before and After)

Source: Wikipedia, NASA



New mines are beginning to employ significant amounts of automation to optimize costs and increase safety. For instance, Falco Resources, a ~$180M market-cap Feasibility-Stage gold-silver-zinc-copper developer, is advancing the Horne 5 project located in Rouyn-Noranda, Quebec. The company is not expecting to be in production until 2022, but construction is anticipated to begin soon. The capital costs for this project are substantial at US$802M of initial capital, with US$418M over the life-of the mine (15 years). In the Company’s mine plan, Falco is proposing a state-of-the-art operation that offers several IoT monitoring aspects, these include: Monitoring of ventilation, paste backfill distribution, water pumping, and staff & equipment location services. In addition, as shown in Figures 14 and 15, the Company is anticipating

Figures 14: Remote Mining Operator

Source: Falco Resources Presentation

Source: Falco Resources Presentation

automating some of its loaders, scoop trams, and or haulage trucks. This is especially important underground, as it could prevent fatalities. Regardless, this system raises efficiencies as trucks can continue to operate when miners traditionally would have to vacate the area temporarily due to health and safety reasons. Falco is an important example to illustrate the value opportunity for Carl Data in this data niche, as recurring revenues could occur for longer than a decade. In addition, older operating mines in Canada are attempting to employ cost-cutting measures as well. Operational mining data management, which is rather new today, could be a major shift moving forward.

Figures 15: Remote Mining Operator



Figures 16: IoT Technologies in Mining

Source: MaRS Market Insights 2014



IIoT Cyptocurrency Technology Blockchain & Cyprocurrencies: On December 7, 2017, Carl Data entered into a letter of intent to purchase cryptocurrency mining hardware. The Company anticipates partnering with the seller, Connected Fintech Inc., to joint develop innovative IIoT Blockchain technology. The Company’s goal is to integrate the Blockchain technology & fintech with its machine learning, predictive analytics and operational metrics to create the most optimal cyptocurrrency mining hardware. For the acquisition, Carl Data is expected to pay $250K and 2M in shares, spread out upon three milstones. Connected Fintech Inc. will also be granted a 15% royalty on revenue generated from cyptocurrrency mining activities for one year. While it is still early days, the business model for Carl Data’s Blockchain mining technology may look similar to HIVE Blockchain Technologies Ltd, which is one of the largest public cyptomining companies in the world. A overview of HIVE’s business model is shown below on Figure 17.

Figures 17:HIVE Business Model

Source: HIVE Presentation



CompetitionA strong indication of the importance of IoT is the strategic activity of most major Information & Communication Technology (ICT) vendors (telecom, networking, industrial infrastructure, enterprise system, and cloud computing) in developing and offering IoT platforms. Examples for high-tech companies that have introduced IoT platforms include: Amazon, AT&T, Cisco, Deutsche Telekom, Ericsson, Fujitsu, General Electric, Huawei, IBM, Salesforce.com, and Vodafone.

In the Canadian marketplace, Carl Data is competing with companies such as BlackBerry (TSX:BB), Sierra Wireless (TSX:SW), BSM Technologies (TSX:GPS), Memex (TSXV:OEE), OneSoft Solutions (TSXV:OSS), BeWhere (TSXV:BEW) and Internet of Things (TSXV:ITT). For a more comprehensive comparison chart, see Figure 18 “Comparable Table” and Figure 19 “Canadian Publicly-Listed Comparables.”

Figures 18: Comparable Table

Source: Capital IQ

Prev. Mkt Cap Cash EV Revenue EBITDA EV/Revenue EV/EBITDA EV/EBITDAName Ticker Close C$ (mm) (mm) (mm) 2016A 2017E 2016A 2017E 2016A 2017E 2016A 2017E

Carl Data Solutions Inc. CNSX:CRL $0.34 $15.7 $0.5 $15.8 $1.1 n/a -$2.6 n/a 14.1x n/a -6.1x n/a

BlackBerry Limited TSX:BB $11.19 $5,946.3 $2,352.0 $4,333.3 $1,566.0 $983.2 $271.4 $135.1 2.8x 4.4x 16.0x 32.1xSierra Wireless, Inc. TSX:SW $26.89 $865.5 US$75.9 US$789.6 US$613.8 US$681.8 US$37.4 US$52.6 1.3x 1.2x 21.1x 15.0xSandvine Corporation TSX:SVC $4.39 $542.2 $111.6 $430.6 $120.9 $120.9 $24.4 $22.4 3.6x 3.6x 17.6x 19.3xPure Technologies Ltd. TSX:PUR $5.27 $288.2 $8.3 $279.9 $123.7 $135.4 $18.9 $24.6 2.3x 2.1x 14.8x 11.4xPhoton Control Inc. TSXV:PHO $1.37 $150.7 $27.0 $123.7 $38.5 $40.4 $11.1 $13.3 3.2x 3.1x 11.1x 9.3xBSM Technologies Inc. TSX:GPS $1.43 $117.9 $6.5 $113.3 $1.9 $67.1 -$2.1 $8.9 58.5x 1.7x -54.1x 12.7xPatient Home Monitoring Corp. TSXV:PHM $0.29 $107.6 $13.5 $116.0 $129.4 $98.5 $12.3 $19.8 0.9x 1.2x 9.5x 5.8xProntoForms Corporation TSXV:PFM $0.38 $41.8 $7.3 $37.8 $12.4 $13.8 -$3.4 -$3.2 3.0x 2.8x -11.1x -12.0xIntrinsyc Technologies Corporation TSX:ITC $1.60 $33.9 $7.7 $26.2 $17.4 $20.3 $0.7 $1.0 1.5x 1.3x 39.2x 27.6xTrakopolis IoT Corp. TSXV:TRAK $1.01 $26.0 $3.2 $24.4 $4.8 $5.4 -$3.4 -$3.7 5.1x 4.5x -7.2x -6.5xMemex Inc. TSXV:OEE $0.21 $23.8 $1.6 $22.8 $3.1 $0.0 -$2.8 $0.0 7.4x n/a -8.2x n/aOneSoft Solutions Inc. TSXV:OSS $0.26 $21.8 $0.9 $20.8 $0.6 $0.0 -$1.5 $0.0 36.4x n/a -13.4x n/aTrackX Holdings Inc. TSXV:TKX $0.29 $20.9 $2.3 $18.5 $1.9 $4.3 -$2.1 $0.0 9.6x 4.3x -8.9x n/aBeWhere Holdings Inc. TSXV:BEW $0.32 $17.1 $1.2 $15.9 $0.7 n/a -$1.4 n/a 23.9x n/a -11.0x n/aAnalytixInsight Inc. TSXV:ALY $0.21 $13.1 $0.5 $12.6 $1.9 n/a -$1.8 n/a 6.7x n/a -6.9x n/aInternet of Things Inc. TSXV:ITT $0.05 $8.1 $0.0 $8.6 $0.0 $0.0 $0.0 $0.0 n/a n/a n/a n/aHealthSpace Data Systems Ltd. CNSX:HS $0.05 $4.3 $0.2 $5.4 $1.9 $0.0 -$2.1 $0.0 2.8x n/a -2.6x n/a

Mean (excluding CNSX:CRL and negative EV/EBITDA) 10.6x 2.7x 18.5x 16.6xMedian (excluding CNSX:CRL and negative EV/EBITDA) 3.4x 2.8x 16.0x 13.9x

Figures 19: Canadian Publicly-Listed Comparables

Source: Capital IQ



Financial Analysis and ValuationCarl Data’s primary revenue driver is sourced from four major verticals, which are water flow management, smart cities, pipeline monitoring, and dams & reservoirs. In 2016, more than 77% of the Company’s revenue was generated by reoccurring licensing fees, with the remainder from set up fees and custom programming. This business model is beneficial to shareholders as future revenue projects are more predictable and easier to understand. Some technology companies face lumpy revenues and are subject to speculative trading on a quarter-to-quarter basis.

Based on the existing corporate structure and sales opportunities, Carl Data’s forecasted revenue for CY2018 is $3-$4M, 250%+ growth from $1.1M reported in CY2016 and 180% growth YoY from $1.2M in F2017. Of this, the most major components are water flow management and smart city revenues, which are anticipated for $1.9M and $1M, respectively.

Carl Data is a relatively new company, founded in January 2014, with material revenue starting in FQ2/2015 (ending Dec. 31, 2015). For reference, the Company’s year-end is June 30. Quarterly revenue growth is strong as the Company posted 58% growth QoQ in Q4/2017, with a record of $379K. Year over year, Carl Data also generated 28% growth. We estimate gross margins will steadily improve from 51% in FQ4/2017 to 71% in FQ4/2018 (ending June 30). As of December 11, 2017, Carl Data had 55.2M shares outstanding and 74.5M fully-diluted shares outstanding. As at December 5, 2017, the market capitalization of the Company was $21.5M with an Enterprise Value of approximately $20.6M.

Inorganic growth should helps fuel the company. The FlowWorks acquisition in 2015 provided a Software-as-a-Service (SaaS) based monitoring, data collection, alarming, modelling and reporting system for waste & storm water management. Revenue model is 80% reoccurring from North American-based clients. Solutions are hardware and control system agnostic and can be integrated with existing sensors and data loggers.

To accelerate growth, Carl Data recently closed $1.7M, offering units at $0.26/unit, consisting of 1 share and ½ warrant, exercisable at $0.40/warrant for 2 years. The Company trades at 5.2x 2018E sales of $4M, which is lower than the ~5.5x multiple commanded by high-growth SaaS companies.

Figures 20: Mergers & Acquisitions – Public Deals in the Big Data, IoT and IIoT

Source: Capital IQ



Figure 21: Income Statement

Source: Company Reports, Ubika Research



RisksAbility to Raise Capital Carl Data is an early-stage tech company and as such does not generate enough revenue to self-fund its growth targets. As a result, the company is reliant on financing from outside sources to develop and grow sales. Should costs increase above budget, Carl Data would have to raise additional funds through the issuance of debt or equity. Our future expectations are based on historical estimates as well as comparable operations.

Threat of Competition As previously mentioned, competition in the market seems fragmented, with several other players such as BlackBerry (TSX:BB), Sierra Wireless (TSX:SW), BSM Technologies (TSX:GPS), Memex (TSXV:OEE), OneSoft Solutions (TSXV:OSS), BeWhere (TSXV:BEW) and Internet of Things (TSXV:ITT). Other examples for high-tech companies that have introduced IoT platforms include: Amazon, AT&T, Cisco, Deutsche Telekom, Ericsson, Fujitsu, General Electric, Huawei, IBM, Salesforce.com, and Vodafone.

Market Liquidity

The market price for the shares of Carl Data could have wide fluctuations. Events such as the announcement of new contracts, technological innovations, patents, commercial productions, quarterly financials, announcements of future sales, or changes in regulation, could result in wide movements in the stock price. Additionally, in general, geopolitical events could adversely affect the financial markets, which could result in significant share price variation that may be unrelated to the Company’s operating performance.

Appendix A: Recent NewsCarl Data Solutions Signs LOI for Acquisition of Cryptocurrency Mining Hardware and Partnership for IIoT BlockChain Technology DevelopmentDecember 7, 2017See Page 14. Carl Data Solutions Signs Letter of Intent for Solid Waste Management PilotDecember 5, 2017See Page 9. Carl Data Solutions Completes Acquisition of Assets of AB Embedded SystemsDecember 4, 2017The Company completed its acquisition of a portion of AB Embedded Systems, a hardware company, which owned part of the intellectual property (“IP”) involved in Carl Data’s technology. With the acquisitions completed, this furthers the Company’s core competencies in hardware design, development tools and source code for more advanced development of its custom devices. The Company believes this acquisition should result in improved data collection devices with lower costs. For the acquisition, Carl Data issued 400K shares at $0.32/share and will issue AB Embedded another 400K on November 30, 2018, with the same terms as the most recently closed financing.Carl Data Solutions Announces Closing of Private PlacementNovember 28, 2017The Company closed its most recent private placement for $1.7M at $0.26/unit (6.5M units), including one two-year warrant with a $0.40 strike.



Carl Data Solutions Announces Closing of Second Tranche of Private Placement and Debt SettlementOctober 25, 2017The Company closed the second and final tranche of its previously announced financing at $0.26/unit (one two-year warrant with a $0.40 strike). The second tranche concluded for proceeds of $420K. Proceeds were expected to be used towards development of new advanced features on its FlowWorks app, as well as for general working capital. Of note, there is an acceleration clause on the warrants; if the stock trades above $0.75 for a period of 10-consecutive days, the Company has the right to force a 30-day expiry period. In addition, Carl Data also converted $79,500 worth of debt to three holders into ~306K units with the same terms. Carl Data Solutions Announces Rights OfferingNovember 24, 2017The Company announced a rights offering available to shareholders of record as of December 1, 2017. Each common share will receive one right to acquire one unit in exchange for five rights, for the same terms as the closed financing below. The offering consists of 11.0M units for proceeds of up to $2.9M and is subject to a minimum of 8.5M units or $2.2M. In conjunction, Mackie Research agreed to commit from up to $1.7M, dependent on whether $550K of the rights have been exercised. The rights will expire at 2:00 PM (Vancouver time) on December 28, 2017 and closing is anticipated by January 5, 2018.

Carl Data Solutions Completes Custom Control System to Refine Machine LearningNovember 28, 2017As part of its EU funded grant, the European subsidiary completed its “custom closed control system” for wastewater monitoring and to refine machine learning products. See Page 7 for further discussion on machine learning.

Carl Data Provides Solutions for Market Worth Billions Addressing Aging North American and European InfrastructureOctober 8, 2017Carl Data provided an update on its corporate strategy and its market opportunity. It stated that the EPA estimates $275B and $105B in infrastructure upgrade investments in the US and in Western Europe over the next 25 and 5 years, respectively.

The Company estimates there are millions of km of aging water and waste water infrastructure in Europe and North America, which are becoming hazardous and at risk of failure. For example, in the US, many cities are passing the 75-100 year infrastructure lifespan, as well in Europe, where 4.8M km of networks are anticipated to need rehabilitation. In addition, old sewer systems are overflowing and leaking, which cause environmental damage and health risks by dumping waste into waterways and oceans.

As such, this is Carl Data’s opportunity, as the Company is positioned to service government bodies with its growing FlowWorks app. To-date, Carl Data has signed LA, Boston, Dallas, and Seattle to predict and monitor areas that are in most need of replacement and repair. Moreover, a highly important by-product of Carl Data’s app is that it optimizes labour resources, allowing technical and engineering resources to focus on problem solving rather than searching for them.



Carl Data Creates App to Enhance Environmental Monitoring of Mine SitesOctober 4, 2017Carl Data announced it completed the development of an environmental mine monitoring app. The application was already in use at Teck’s Fording River Operations in B.C. At this operation, the app assists with monitoring of site water levels and predicative analysis on future water levels up to seven days. This could be instrumental in preventing environmental events that would otherwise result in high costs via fines through the province or through rehabilitation and cleanup. As discussed earlier in the report, there is a very large Canadian market for apps like this. As such, if the contract with Teck, one of the largest public mining companies in the world, continues to be successful, it could lead to many more opportunities for mining companies that want to either ensure optimal environmental protection and/or to mitigate chance of negative future events (floods, chemical spills, etc.).

Carl Data Solutions Polish Subsidiary Accepted for EU Development GrantSeptember 20, 2017Carl Data announced its Polish subsidiary was accepted for a ~$393K R&D grant from the EU. The grant will be used towards a project with an estimated cost of ~$508K. The goal for the project is to improve continuous predictions of infrastructure failures by storm events, to optimize detection and quality of data collected, as well as the further development of an intelligent sensor to measure flow (machine learning). Once the project is completed, the Company anticipates reselling the technology to EU and in North America.

In addition to raising international awareness by support by the government, from a capital markets perspective, this was an important development as it prevented a dilutive event through an equity raise. At $0.26/share, it would have equated in an additional 1.5M shares issued.

Carl Data Solutions Announces Closing of First Tranche of Private Placement, Debt Settlement and Royalty SettlementSeptember 9, 2017The Company closed the first tranche of its previous financing at $0.26/unit (one two-year warrant with a $0.40 strike). The first tranche concluded for proceeds of $534K. Proceeds were expected to be used towards development of new advanced features on its FlowWorks app, as well as for general working capital. The Company also announced it settled $291K of royalty payments owed to noteholders via an equity issue of 1.1M units at $0.26/unit (same terms as above).



Appendix B: Management Greg Johnston – President & CEO Mr. Johnston is an experienced technology professional with a 25 year track record of leadership success within both large multi-national corporations and small startup technology ventures. He was formerly the Director of eCommerce Marketing for Global Hyatt Corporation, based in Chicago, Illinois where he was responsible for the management of all Internet based marketing programs, online analytics and reporting. Mr. Johnston doubled traffic to all Hyatt branded sites, increased online revenue by 34% and launched a centrally managed global paid search campaign targeting 37 international markets in 8 languages. He was also Principal at BDIRECT Online Communications, Director of Database & Loyalty Marketing for Choice Hotels Canada, and Vice President of Antarctica Digital Marketing, where he led the Operations Team functions and worked with all corporate stake holders, employees and clients to ensure project profitability. Currently, he is a Partner and VP of Professional Relations for Revenue Automation Incorporated, which provides strategy, creative development and custom programming for Marketing Automation and CRM applications.

Alastair Brownlow, CPA – Chief Financial OfficerMr. Brownlow has over seven years of public account experience, specializing in financial and regulatory reporting. He previously worked for a Canadian chartered accountant firm that focused on the mining sector. He was previously Senior Auditor at Baker Tilly Ltd and Davidson & Company LLP.

Piotr Stepinski – Chief Technical OfficerMr. Stepinski has a MSc in Electronics Telecommunications and Informatics with over 10 years of experience with software engineering, data processing, and cloud computing. He was previously Senior Software engineer for Kainos Group plc, Atena and Telzas.

Kevin Marsh – VP of Business DevelopmentMr. Marsh brings 20 years of technical sales experience. Formerly, he was VP of Sales for Marsh-McBirney, Hach Company (Data Delivery Services division), and VP of Sales for OptiRTC, Inc. Importantly, Mr. Marsh also had numerous positions in the Water Environment Federation and the American Water Works Association.

Mike McDonald – VP of EngineeringMr. McDonald has over 10 years of software development experience, with specialization in data analysis and engineering. Mr. McDonald was instrumental for designing and building national award-winning custom software solutions for engineering projects. He previously was the founding program and development team lead for FlowWorks Inc. As well, Mr. McDonald was a Senior Software Developer Engineer at Kerr Wood Leidal Associates Ltd.



Appendix C: DirectorsGreg JohnstonSee description above.

Chris Johnston

Mr. Johnston has more than 27 years of experience as a Professional Engineer in infrastructure management and civil engineering. He currently is VP of Kerr Wood Leidal Associates Ltd and previously co-founded FlowWorks Inc.

Craig Tennock Mr. Tennock brings over 30 years of experience as a civil engineer, with specialization in flow monitoring and pipelines. He currently is the consultant for corporate mid-cap divestitures, business development, management review, and financial forensics. Mr. Tennock was awarded the Order of Merit by Industry Canada. He was previously President and Founder of SFE Global.Rick Sanderson Mr. Sanderson has over 30 years of experience in advertising and marketing. He is currently the Senior VP and Director of Media Innovation at MacLaren McCann. He was previously Marketing Director at Global Relay and General manager of Omnicom Media Group.Kevin MaMr. Ma is a CA with over 10 years of senior management experience in corporate finance, including public company reporting and regulatory compliance. He was previously CFO at Gatekeeper Systems Inc. and Director of Finance at Alexco Resource Corp.



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Carl Data Solutions Inc. · 2017-12-12 · In 2016, market research firm IHS estimated that the...

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Transcript of Carl Data Solutions Inc. · 2017-12-12 · In 2016, market research firm IHS estimated that the...