Conversation 165: Elsight [ASX:ELS]

Is Elsight finally ready to take off and just how high could it go?

Staying properly connected to the devices we use has never been more important.

Losing control of a drone or autonomous vehicle or having a critical communications link fail, can be catastrophic.

Yet despite boasting the world’s most compact, next-generation communication technology, Elsight has struggled to find sales traction.

Until now.

The global pandemic has seen a skyrocket in demand for telemedicine, particularly in rural and remote areas.

In Australia alone, more than 4.3 million health and medical services have been delivered to more than 3 million patients via telehealth.

So for Elsight, that’s meant a unique opportunity, especially in remote areas with poor communication networks.

In simple terms, its technology is able to send a very high quality signal on the back of existing signals like 2G, 3G or 4G.

In fact, it splits the signal across these networks to create a military grade level of security and reliability.

But having cool tech is never enough.

You need to find the right commercial form to place that tech in, and as a result, create a compelling reason for people to want to not only use it, but actually pay for it.

Ideally, a lot of people.

COVID-19 may well have delivered that opportunity to Elsight as the company believes rural populations represent a huge and untapped market for their tech.

For example, 13 million people in France, 60 million in the USA, 600 million in China, 35 million in Russia, 25 million in Brazil, and 7 million in Australia are estimated to live in rural areas which are often not serviced well, or at all, with decent communications networks.

This is where Elsight’s opportunity is greatest, thanks to its decision a while back to miniaturise their system onto a chip, which they have called HALO.

As I write this piece they announced a deal with a French company Alrena, reporting that Elsights HALO technology has been integrated into a backpack version of Alrena’s “Smartmedicase” for use by nurses in rural France.

A good example of the right form.

IT’S ALL IN THE TIMING.

In my interview with David Furstenberg, a board member of Elsight, he explained to me when COVID hit Israel, where the company is based, the government restricted all office staff numbers to just 15% of the workforce.

Elsight decided this presented an opportunity to take their new, flagship product, called HALO, and give it to potential customers.

Not so much as a Proof of Concept, but as a proof of Elsight’s willingness to improve and enhance the new HALO chip to create a “compelling use case”.

HALO not only contains the full technology operating system of Elsight but it has shrunk it down to be very small, stays cool and with a fairly low appetite for power.

All good stuff in a chip that offers the sort of always-on tech HALO does.

Following the old axiom “the customer is always right” and driven by the drastically reduced staff numbers it faced under COVID, Elsight sort of “outsourced” it’s work capacity to potential customers, getting “them” to test and provide enhancement feedback on HALO.

At the same time, remaining Elsight staff pushed regulatory certification and Elsight now has Federal Communication Commission approval in the United States.

COMMERCIAL DRONE DELIVERIES WILL START BEFORE END OF 2020 ACCORDING TO DAVID FURSTENBERG

In light of the special challenges of COVID-19, Furstenberg told me Elsight is aiming at the American drone, remote learning, and telemedicine markets during the second half of 2020 and he is very bullish about it.

He is especially optimistic around the rural and under served community areas across the US where accessibility to medical and hospital services, and school learning is poor.

Elsight has been given a great opportunity in this area due to a newly created US company called Kinetx Prime.

Furstenberg said Kinetx Prime was created specifically due to the COVID outbreaks and to introduce Elsight’s technology into rural America.

Kinetx Prime is parented by a company that owns power pole infrastructure across rural America.

These poles will hold small specially constructed communication boxes containing the HALO chip system, providing high quality, stable communication where it doesn’t exist.

Elsight has already announced an initial order of USD$1.6M (A$2.3 million) from Kinetx Prime prior to the remote service launch. Elsight expects repeat orders of up to the same value over the course of the next 36 months.

The revenue model for the deal is based around an initial payment for each system and then ongoing fees for use, thus creating a nice long tail of revenue for Elsight, although they haven’t revealed how much that could be worth.

THE BIGGEST CHALLENGES FACING ELSIGHT

Supply chain restrictions caused by COVID present the biggest anchor on the Kinetx Prime Elsight growth according to Furstenberg.

But he believes this will be resolved by the start of 2021.

My interview ran 25 minutes but I have highlighted and labelled some key moments along the time line of the video, should you wish to jump straight them.

In particular I commend the last two minutes of the video to you.

Useful blog navigation links.

HOW DOES ELSIGHT’S TECH WORK l SHARE PRICE TREND OVER 200/100/9 DAYS l ANALYSTS VIEWS l TECH AND COMMERCIAL READINESS INDEX

ABOUT ELSIGHT:

Elsight’s mission statement: We are on a mission to create a seamless, secure, connected world. We develop cutting-edge technology that delivers secure, real-time, adaptive data transmission over multiple IP links, allowing high-bandwidth, on-the-move connectivity anytime, anywhere. Our in-house R&D team specializes in developing end-to-end solutions that meet unique connectivity and operational requirements, propelling the limits of data transmission technology into a future of endless possibilities.

USEFUL LINKS

Elsight website

Kinetx Prime website

TECHNOLOGY AND COMMERCIAL READINESS.

Based on the Technology Readiness Level [TRL] developed by NASA and the Commercial Readiness Index [CRI] that grew out of it. ELSIGHT would fit somewhere around 39 on the TRL and 3 on the CRI.

SOME OF THE RECENT MARKET ANNOUNCEMENTS BY ELSIGHT:

Elsight Receives First Halo Order from Alrena for Portable Telemedicine Technology

June 2020 Quarterly Report

Elsight and Kinetx Prime, LLC Reach A Distribution Agreement in Principle for the United States