Irisity AB (IRIS) - Security cameras smart with SaaS

Stocks
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Sain hyvän vinkin yhtiöstä nimeltä Irisity AB (kiitos @aspee).

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Firma on suora verrokki SmartEye AB:lle, mutta toimii hieman eri sektorissa.

Yhtiö on ohjelmistotalo, jonka päätuote on algoritmiperhe ”IRIS”. IRIS voidaan asentaa uusiin sekä jopa 5-7 vuotta sitten asennettuihin turvakameroihin jälkikäteen (Hardware-riippumaton algoritmi). Sektori on siis kova turvallisuus (Security).

IRIS-tuote-esittelyvideo

Security-as-a-Service esittely

Homman juju on tässä:

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Sekä erityisesti tässä. G4S on maailman suurimpia vartioimisliikkeitä, mutta heitän tähän alkuun pienen ”tiiserin” siitä, mistä tässä on oikein kyse. Lisää myöhemmin alla.

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Tässä ei puhuta edes vuosilaskutuksesta, vaan KUUKAUSILASKUTUKSESTA PER KAMERA PER ALGORITMI. Yhdessä kamerassa voi olla useita algoritmejä (toiminnallisuuksia mukana), mutta yleensä 1-2 kpl.

NANO-CAP

Yhtiö teki liikevaihtoa noin 3,7 miljoonaa euroa. Yhtiön markkina-arvo on noin 150 m€ ja tulos on ollut toistaiseksi tappiollinen. Yhtiö on T&K sekä markkinointipanostuksista johtuen kassavirtanegatiivinen, mutta nettovelaton (käteistä 5,6 m€ Q1’21).

Teknologian tyypillisiä käyttöympäristöjä

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IRIS-algoritmiperhe

Huom. Näitä kehitetään jatkuvasti lisää, mikä mahdollistaakin jonkinlaista cross-sellingiä / softapäivityksiä pilvestä. Yksi tuoreahko kehityksen tulos oli ”fall detection” eli putoavan ja paikalleen makaamaan jäävän henkilön tunnistaminen.

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Asiakaskunta ja kumppanit

Huomio kannattaa kiinnittää esim.:

  • Axis on länsimaiden johtava HW-kameravalmistaja. Softa on integroituna IP-kameroihin jatkossa.

  • G4S on globaalisti suurimpia vartioimisliikkeitä. Myös vastaavia muita sopimuskumppanineuvotteluja on käynnissä (oletettavasti esim. Securitas?).

  • Intelistä tuskin on haittaa

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G4S on yksi maailman suurista vartioimisliikkeistä. Perinteisesti vartioimisala on hyvin henkilöintensiivistä bisnestä, joten kiinteiden kulujen osuus on korkea ja marginaalit alhaiset. Vartioimisliikkeet ovat jatkuvassa paineessa lisätä liiketoiminnan kannattavuutta ja tehokkuutta turvapalvelujen kysynnän kasvaessa epävakaassa maailmassa.

“In the Baltics, G4S has already implemented IRIS, resulting in significant reduction in the number of false alarms which are raised within the operating center, therefore downsizing related costs and allowing officers to be more reactive to incidents.”

Case G4S Liettua

G4S:llä Liettua on ollut ensimmäinen playground, jossa teknologiaa on testattu. Kokemuksia alla:

“After testing the real-world performance of IRIS™ on customer sites for a number of weeks, G4S Lithuania decided to rapidly upgrade all outdoor surveillance cameras connected to their video monitoring center to intelligent video surveillance driven by IRIS™. The goal was clear: Significantly reduce the amount of man-power needed to monitor all outdoor cameras while providing a better service to the end customer.”

G4S-sopimus on globaali, eli maakohtaisesti edetään. Olen saanut tietää em. maahan liittyen, että:

  • IRIS otettiin käyttöön 95%:ssa kameroista, kokemukset olivat erittäin hyviä (”extremely happy”)

  • G4S:llä on noin 500.000 kpl ”kohteita” EMEA-alueella

  • Keskimäärin yhdessä kohteessa on 3-5 kameraa, ts. EMEA-alueella n. ~2 milj. kameraa käytössä. Näistä kaikki eivät ole riittävän uusia, että softan voisi takautuvasti asentaa (5-7 vuotta tai sitä uudempia).

  • Irisityn CEO:n arvio on, että näistä 100.000 kohdetta, eli noin 400.000 kameraa on kyvykkäitä ottamaan softan vastaan jälkiasennuksena.

Case Logistiikkahubi Virossa

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Videoesittelyjä

Suosittelen ehdottomasti katsomaan. Nämä avaavat enemmän keissiä mm. kilpailukentän sekä teknologian ominaisuuksien näkökulmasta.

Vator Tech Days maaliskuu 2021:

Penser Bank Bolagsdag maaliskuu 2021:

Mobotix and Irisity

https://register.gotowebinar.com/register/5042798345210219791

Lainsäädännön myötätuuli?

EU komissio voi olla rajoittamassa videovalvontaa niin, että henkilöiden anonymiteetti täytyy säilyttää yleisvalvonnassa (kun ei esim. selvitetä rikoksia jne).

Tämä voisi olla ongelmallista suurimmalle osalle olemassaolevista turvakameroista, koska niissä ei ole älyä mukana.

Mikäs tähän auttaisi? No tietysti kameroihin jälkikäteen asennettava IRIS, jossa on mukana AI:n tekemä blurraus. Uusiin kameroihin se sitten tietysti tulisi aina mukaan…

Markkina

Videovalvonnan markkinasta toteamus alla

The report " Video Surveillance Market by System, Offering (Hardware (Camera, Storage Device, Monitor), Software (Video Analytics, Video Management System) & Service (VSaaS)), Vertical (Commercial, Infrastructure, Residential), and Geography - Global Forecast to 2025" is expected to grow from USD 45.5 billion in 2020 to USD 74.6 billion by 2025, at a CAGR of 10.4%. Increasing concerns about public safety and security has spurred the growth of video surveillance market, other driving factors include growing adoption of IP cameras, and rising demand for** wireless and spy cameras. Rising trends of artificial intelligence and deep learning is important factor to drive the market during forecast period.

Penserin raportista:

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Kilpailu

Kilpailijoita riittää länsimaissakin muutamia. Tässä hyvä esimerkki

Sekä graafisesti

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Omistajarakenne

Hallituksella sekä operatiivisella johdolla on vaihtelevasti, mutta kuitenkin hyvin omistuksia firmassa. Pääosin johdon ja osakkeenomistajan tahtotila on varmasti yhteinen. Yhtiössä on myös mukana yliopiston (Chalmers) sekä T&K- alan pääomia (TIN Ny Teknik).

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Omistuksista on kerrottu henkilöittäin vielä täällä

Analyytikkoseuranta:

Toukokuun raportti, vapaasti luettavissa (SWE sekä ENG versiot):

HUOM: Penser oli mahdollisesti IPO:n järjestänyt pankki (?), minkä johdosta analyytikko nojaa aika paljon johdon kommunikoimaan näkymään. On olemassa aina riski, että johto maalaa kasvusta liian optimistisia kuvia, mikä voi tällaisessa tilanteessa heijastua myös optimistisina ennusteina… en ota vastuuta näistä.

Q1’2021 tulos sekä CEO kommentit:

https://irisity.com/company-investor-relations/press-release/?id=68800C8AA491490A

Pääpointit:

  • IRIS:n käyttöönotto G4S:llä EMEA-alueella etenee.

  • Liettuassa kokemukset ovat olleet erittäin positiiviset.

  • AXIS, länsimaiden johtava kameravalmistaja (hardware), on integroimassa algoritmin osaksi IP-kameroitaan. Lisäksi Mobotix tekee samaa uusille kameroille. Tämä alkaisi kasvattaa volyymeita H2’2021 alkaen.

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Tapahtumia Erik Penserin analyysin jälkeen

https://irisity.com/company-investor-relations/press-release/?id=C4DA773BB461A8C4

“At the vanguard of rail infrastructure safety, metro and rail operators globally are adopting AI-based analytics. In the Nordics, IRIS Rail is already being implemented in the Stockholm metro system. In addition, metro and rail operators in several countries internationally including France, Italy, Spain and Chile are also looking into implementing IRIS Rail.”

Numeropuoli

Esimerkkilaskelma (G4S potentiaali EMEA-alueella 5v. aikana)

  • Oletetaan, että yhteensopivista kameroista 50%, eli 200.000 kpl, varustetaan AI:lla 5v. aikana

  • keskimäärin jokaiseen kameraan menee 1-2 (tässä laskennassa 1,5) algoritmia.

  • yhteensä käyttöön asennetaan 300.000 algoritmia

  • oletetaan ASP € 10 per KUUKAUSI (kyllä, kuukausi!).

  • Tästä syntyy € 36M ARR per vuosi. Bruttomarginaalit vähintään 85%.

  • OPEX nousee nykyisestä 3m€ sanotaan 10m€ à EBIT noin 20m€ / vuosi.

  • Tällaiselle bisnekselle sallisin 20x EBIT-kertoimen à M-CAP noin 430 M € eli ~170SEK per osake.

  • Laskelma huomioi ainoastaan G4S lähivuosien tiedossa olevan potentiaalin. Siitä puuttuu esim. AXIS, Mobotix, Garda sekä neuvotteluissa olevat kaikki muut vartioimisliikkeet.

  • Huom: Jos katsot edellä Q1’21 CEO kommenttia, on Gardan kanssa jo pilottiprojekti käyty läpi.

ERIK PENSERIN NUMEERISET ENNUSTEET

Katso tarkemmin analyysiraportista. Free float 31%.

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RISKIT

Keissin ilman muuta suurin riski on, kuinka hyvin yhtiön markkinointi onnistuu, eli lähtevätkö volyymit kasvamaan Q2’21:lla (raportti tulee 6.8.2021) sekä erityisesti H2’2021 aikana. Yhtiö on tällaisen ohjeistuksen vahvistanut viimeksi Q1’2021 raportissaan.

Myyntityössä onnistumisen riskiä pitäisi merkittävästi pienentää softan integroiminen Axis ym. toimijoiden kameroihin sopimuksen kautta. Kyseiset firmat hoitavat itse markkinoinnin viedessään tuotteita asiakkailleen globaalisti.

FUN FACT

SmartEye AB ja Irisity AB ovat molemmat kameroihin algoritmejä tekeviä softataloja. Molemmat myös sijaitsevat Göteborgissa. Itseasiassa firmojen konttorien välinen etäisyys on todella lyhyt. Ei ole epäilystäkään siitä, etteikö nämä kilpaile kaupunkitasolla samanlaisista osaajista

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DISCLAIMER

OMISTAN PIENEN MÄÄRÄN OSAKKEITA. TÄMÄ OLI VAIN PINNALLINEN RAAPAISU AIHEESEEN YLEISTÄ TUTUSTUMISTA VARTEN. KEHOITAN JOKAISTA TEKEMÄÄN OMAN TUTKIMUSTYÖN (”DUE DILIGENCE”). TÄMÄ KIRJOITUS EI SISÄLLÄ SIJOITUSNEUVOJA. TÄSSÄ KIRJOITUKSESSA VOI OLLA ASIAVIRHEITÄ, JOISTA EN OTA VASTUUTA. ERITYISESTI KOSKA KIRJOITUS ON JULKAISTU PERJANTAINA KLO 22.30 JÄLKEISENÄ AIKANA. MUUTENKIN KOKO RÄKÄISY OLI AIKA HÄTÄINEN. KIRJOITUS SISÄLTÄÄ MYÖS SPEKULATIIVISIA ELEMENTTEJÄ OSAKKEEN HINNOITTELUSTA TULEVAISUUDESSA, MUTTA EN OTA NIISTÄ MITÄÄN VASTUUTA.

Sitten vain toivotaan parasta… perjantain osarilta. Mukavaa viikonloppua

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Sounds really interesting. Thanks for the great opening, timontti! I’ll have to look into it more, but a small note: let’s not all see wads of cash too quickly in our minds, the company’s market cap is about 150mEUR, not 15mEUR. When I was crunching the numbers, it didn’t quite make sense how this 15mEUR market cap could be: D too good to be true

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MA 152M€. If that’s corrected in the opening, it’ll be pure gold again. This can be flagged, so it doesn’t mess up future discussion.

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Corrected :gem_stone::folded_hands: thanks for the heads-up. You can flag this now.

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Quite interesting, but there should be more growth.

I haven’t had time to look into it very closely yet, but they seem to have acquired a company called Visionists in 2018-2019. Apparently, it’s an AI consulting firm that seems to specialize in cameras/vision. I couldn’t immediately find out how many employees they had, but I found 10 on LinkedIn.

I’ll have to continue when I have more time.

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Was it really listed last year? Nordnet shows the listing date as 2013, and quotes and reported figures for the period 2013-2021 are also available.

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Correction: the share issue was, if I recall correctly, last year. The wrong term was used.

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@timontti I could create a company page for this so you get the press releases :slight_smile:

update: Alright :slight_smile: Irisity - osake - Inderes

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Thanks! Let’s do that, I would have asked for it soon anyway :gem_stone::folded_hands:

The company is also on social media, e.g. twitter.com/irisitycorp

kuva

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More information about the collaboration between Mobotix and Irisity can be found in a webinar. The material is from spring 2021. The duration was something like 35-40 minutes

School Guardia has been installed in 250 schools in Sweden (mentioned in the webinar)

Below is an example story from Gothenburg

In addition, I would like to highlight the RAIL defender algorithm, which has been implemented in the Stockholm metro.

Driven by security and automation/digitalization, these algorithms have enjoyed the greatest demand based on the news flow.

I brought up these algorithms because they don’t fall under “traditional guarding” but through AI, one can consider the interest and need for schools, road networks, railways, etc., in the future. For example, autonomous vehicles in the future… The industry’s CAGR is 10% 2020-2025… what then :man_shrugging:

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The directed share issue was in October 2020.

Through the Private Placement, Irisity will receive approximately SEK 50 million before issue costs. The issue proceeds are intended to be used for continued sales, development and marketing activities of the Company’s deep learning algorithm services.

Since the news, new algorithms, a cooperation network with Mobotix, AXIS, etc., and a strengthened sales and marketing team have started to pour in.

Regarding the directed share issue and the news, I emphasize transparency from the company towards investors. The story has progressed quite rapidly and in line with the guidance/news.

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To me, this is a significant cornerstone that warrants further analysis: How much does one algorithm per camera save in labor costs? And is Irisity’s customer willing to pay €10/month per algorithm?

Another potential risk: How easy or difficult is it to develop these algorithms? If, for example, the most typical and useful ones, such as detecting a person moving in an area, are easy to develop, then algorithms might suddenly become a commodity. In that case, an ASP of €10/month would remain a pipe dream.

I’m not dismissing the case, but until I better understand the two aspects above, I wouldn’t be willing to invest my own money.

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The market is at least big enough that others will surely want a piece of the pie, and competition will arise. After all, €10/month per camera sounds like a software dream business.

But an interesting company in an interesting phase.

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I did a completely different type of subcontracting for a similar algorithm-developing startup, which unfortunately went bankrupt. At least they burned mega amounts of money on development, and they were really skilled people who got to pilot with really good companies. Still, the results just weren’t good enough to secure further funding. Based on this, I got the impression that making algorithms is not easy, and I would almost consider it a bigger risk at this stage that the IRIS algorithms might not work well enough for commercial use. Compared to SmartEye, for example, the environment is significantly different in each installation, and there are more things to consider.

A really interesting case nonetheless, and if these work, the company certainly has a rosy future, even if they end up getting only 3-4€/month from volume installations.

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I’ll speculate a bit on this. The security company’s perspective is also important here.

Response actions:

On average, a site has 3-5 cameras. Let’s say 4 cameras at €10-12.5/camera/month makes about €40-50/month cost to the security company per site.

The cost of one erroneous call-out? Driving distance, patrol’s working time (1-2 people), cost of control room operator… let’s say the security company incurs a three-digit sum in costs, perhaps a range of at least €100-300? Driving distance can, of course, significantly increase costs.

From this, we can conclude that avoiding one erroneous call-out within approximately 2-6 months has paid back the technology. In large sites, erroneous inspection calls can occur weekly, elsewhere much less frequently.

Evaluating security control rooms is another aspect. Different countries have different salary levels, the question is how much security personnel can be reduced, etc.

One example could be that a control room with two operators becomes a one-operator control room because even with an alarm active, a single operator can still be sure that notifications of possible overlapping situations are received, even if attention is focused on the first situation…? In other words, a second person is not needed just to passively stare at “other screens.”

I’m not claiming to be right about this, but I have some idea from my work experience on the subject… so if the technology proves its effectiveness, like the experiences in Lithuania above, I can quite easily conceptualize the business case from the security company’s perspective… Penser’s analysis also numerically estimated the technology’s impact on the security company’s margins.

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The 2020 annual report includes a section on patents.

IRISpatents
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It’s difficult to assess the scope of the patents, but as is usually the case, not just any nonsense can be patented. This should provide some backbone.

These cost savings have been estimated in Penser’s report, but can also be found in Irisity’s materials.

These algorithms have the ability to
independently raise an alarm if there is an intruder at a protected property. The reduced staffing requirement
from this enables cost savings of 50–70% for a security company

Schoolguard and vandalism

Result

As a result of the implementation of the Mobotix cameras along with Irisitys analytics the city of Gothenburg have managed a drastic reduction in vandalization costs. Before the system was implemented the schools experienced annual costs of around €50.000 for vandalization. That has now nearly been eradicated. A fully functional, clean and safe school environment makes room for positive activities where the areas are able to be used as intended. Focus for the schools can be on education instead of dealing with destruction and vandalization of property.

A small demonstration of IRIS’s operation from Youtube

The system has been developed for ~10 years. From that schoolguard webinar, you can hear how, at the customer’s request, a new algorithm has been developed / additional features have been adapted in a few months. This is probably based on the system’s adaptability rather than “creating something new”. As for the functionality of the algorithms, I would say there is quite a lot of data.. The 2020 annual report contains a section from which one can start calculating the number of cameras.

SaaS income amounted to MSEK 32.2. MRR at
the end of the period amounted to MSEK 1.5.

Q3/2020 states…

Irisity’s international cooperation and partnership with the security group G4S has
begun in Greece, Belgium, Denmark, the United Kingdom and the Netherlands. The
initial planning covers optimizations of alarm centers as well as IRIS upgrades of
existing and new security assets. The IRIS installations have continued in G4S
Baltics, and Latvia and Lithuania are now fully integrated with IRIS.

And in connection with these, I understand that comments have been made regarding travel restrictions related to the coronavirus + a directed share issue has been utilized.

The latest Q1/2021 CEO comment regarding these due to the improved coronavirus situation

During the period, we, together with G4S, have laid the foundations of a broad rollout of IRIS, initially within G4S EMEA. We believe that the ongoing merger between G4S and Alliance will not lead to any delays, which is why a volume increase during the second quarter is expected.

And the whole case summarized

IRIS prevents and frees up monitoring → no need to monitor screens or watch recordings of how damage has already occurred (break-in, vandalism, etc.)

Head start in the product

Competitors: In China, they are moving towards “human tracking” and are not a competing product with Irisity because they prevent crimes instead of tracking people / violating individual freedom. Other competitors are practically in the US and can operate there. Irisity will likely be able to operate in Europe without local (direct) competition.

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And the size and significance of G4S can be considered

In addition, as a listed company, one can examine Securitas’ size on the list, as well as its strategies and news flow.

The H1 2021 results were published last week. Cost savings are also being called for there. In addition, there is a focus on digitalization. Even acquisitions had been made in this regard.

I haven’t seen any news about Irisity regarding Securitas… at least I can’t recall any at the moment. I would guess that discussions have possibly taken place, but presumably, G4S + Irisity results are being followed, at least by the competitor.

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I watched the clips at the beginning and didn’t get a wow effect, although the thermal camera and blurring function seemed good if legislation were to prohibit human identification from the camera. I could see the benefit of a movable camera, as more remote construction sites are attractive targets for thieves, and at least on the earthwork sites where I’ve been, there’s no camera surveillance. Often, the vibrators used were in poor condition because they were left at the sites, and if a newer one was in question, it would have been stolen. I heard from a security guard friend that he saw a drone circling at his construction site security target, and this wouldn’t even be recorded by a camera. Speaking of drones, at least the camera on the DJI FPV model has detection so that it doesn’t crash into trees with a certain model. There were also clips on YouTube about those free camera software that distinguishes cars, dogs, etc., even tree shadows, to avoid unnecessary alarms.

In shopping malls, a terrorist and bum-algo would be great :laughing: I also see potential if toilet vandalism could be brought under control, e.g., with sensors, as cameras are not allowed in toilets.

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These should also drive your suggestion…

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I watched those videos. As a general phenomenon, preventing vandalism could be a good business if sensor/camera applications could be integrated. For example, marker tags in restrooms. Attempts have been made to prevent terrorists from leaving bombs, for example, by reducing the openings of trash cans, but this doesn’t prevent leaving a backpack on top of a trash can (as happened once in Finland). In shopping centers, many people have backpacks, and they can be on the floor for long periods while having coffee, so a camera wouldn’t work well there. In this situation, it’s harder to replace a security guard. For example, that railway works well as a pilot for this company. The “grandmother case” has been implemented in many ways, for example, with “Grandma’s safety” and other alarm bracelets. What was “new” to me was the combination of a thermal camera and its ability to detect movement from a distance.

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