Conversation 176:

The strategy behind the creation of Vection Technologies could ber one of the most astute I’ve seen and here’s why.

To me, the most appropriate description of Vection Technologies [ASX:VR1] is that it’s a turnkey operation. Or at least it started out that way.

However, the founders might be shocked to read this because they describe the ASX listed business as a 3D, Virtual Reality, Augmented Reality, Industrial IoT business that creates solutions to help companies and organisations to innovate, collaborate and create value.  So why am I equating this 21st century business with a 1930’s phrase?

So why am I equating a 21st century business with a 1930’s phrase?

The beauty of a turnkey operation is that you don’t have to go through the whole concept of development, testing and building phase.

Avoiding all that is exactly what Vection’s two founders, Umberto (Bert) Mondello [Chairman] and Gianmarco Orgnoni did by acquiring an Italian software business called Officine 8k Srl, later renamed as Vection Technologies.

According to Orgnoni, a Director and COO, the business started more as a strategy in the mind of its two founders .

Based on that strategy, in late 2017 through a private consortium, the two joined the board of an ASX listed company, then known as ServTech Global.

ServTech was focused on some legacy replacement technology for the real estate industry and the consortium extended thema $1 million loan for a shares deal, which led to Orgnoni and Mondello eventually joining the board.

But by January 2019 the two had divested most of the old business and announced they’d purchased an Italian company called Officine 8k Srl.

What they acquired in Italy was a going concern - a turnkey business - that had developed “advanced Augmented Reality and Virtual Reality software and a commercialised VR platform that was ready for global scaling.”

If they had started that type of business from the ground up it would have taken years and cost a lot to develop. [I haven’t been able to get an acquisition cost so if anyone knows the answer shoot it over and I will add it.]

But the astute element of this strategy, in my mind, was they acquired a bedrock technology that they believed they could mould into multiple forms and scaled globally

Working on the idea that VR and AR are here to stay, at least for business and industry, Vection set about leveraging the Italian technology to suit multiple industry sectors.

They started adapting it using their Indian based development business and through a US office of computer aided design company called Mindesk, which they acquired after the Italian business.

They also used the US business to set about making some big name global partnership pals which today include Esports, HTC Vive and Dell.

Driven by the Mindesk acquisition they have started a pretty strong push into the CAD design and Industry 4.0 space.

They are also making inroads into health through a trial with an Italian Hospital.

Plus there’s talk of gaming, dentistry, real estate, sales, education and interior design.

And while there’s no shortage of possibilities in the VR / AR space, Vection say it is determined to make itself a key player.

I spoke with Gianmarco Orgnoni to find out how they intend to turn that determination into reality.

SOME HIGHLIGHTS FROM FY2020 RESULTS

● Continued triple digit revenue growth of +131% compared to FY19, despite COVID-19 lockdowns commenced in Q3 FY20.

● FY20 total revenue was a record $3.1M.

● FY20/FY18 CAGR of +157%.

● FY20 Underlying EBITDA increased by 120%, compared to FY19, to $173,078.

WHAT THE VECTION TEAM WANTS TO DO IN THE NEXT SIX MONTHS AS OUTLINED IN FY2020 FINCIAL REPORT

• Strong focus on advancing the Company’s solutions across the healthcare, education and automotive sectors and entry into new verticals including the defence industry.

• Accelerating the North American and Australian market development and continued growth in the European market segment. Executing commercial partnerships with existing and new Tier-1 global technology companies.

• Focus on development of the existing technology suite, with renewed emphasis on cloud and LAN collaboration.

• Integration of Mindesk suite with leading CAD and BIM software.

• Launching new products and third-parties software integrations towards the stated objective of building a 360° product suite.

• Further expanding and consolidating the global sales infrastructure and footprint to further advance the global client outreach.

• Strong acceleration of recurring revenue sales initiatives aligned with the Company’s goal to achieve 50% Annualised Recurring Revenue (ARR) by June 2022.

ACTIVE CHART [Delayed by 15 minutes when market open]

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SHARE PRICE TREND OVER 200/100/9 DAYS l ANALYSTS VIEWS l TECH AND COMMERCIAL READINESS INDEX

SOME RECENT MARKET ANNOUNCEMENTS:

VECTION SECURES TOP 10 GLOBAL SOLIDWORKS PARTNER TOWARDS STRONG ARR GROWTH

VECTION COMPLETES FIRST BUNDLE SALES TO DELL OEM PARTNER

VECTION SHARE PLACEMENT FINALISED TO SUPPORT GLOBAL GROWTH STRATEGY

VECTION JOINS AUTODESK / MICROSOFT PROGRAM

VECTION FULL YEAR INVESTOR PRESENTATION 2020 (ASX:VR1)

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 Vection Technologies would appear to fit around 3 on the CRI.