Kontrol Technologies (KNR.NEO) is an $85 million company that has developed propriety solutions to make buildings safer and more energy efficient.
The “smart city/smart building” market is experiencing parabolic growth.
“The global smart cities market size was valued at USD 98.15 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 29.3% from 2021 to 2028,” reports Grandview Research.
“Increasing investments by city governments, central/federal governments, and dedicated governing bodies have been primarily driving the market growth,” the report continued, “Financing and funding models, technology ecosystems, governance structures, and investments in infrastructure play an essential role in smart city deployment”.
On January 14, 2022, Kontrol announced that it is expanding its BioCloud technology global footprint with a Japan-based trading company.
Kontrol BioCloud – an operating subsidiary of Kontrol Technologies – is a real-time analyzer designed to detect airborne viruses and pathogens. It is “safe space technology” that samples air quality continuously.
“With a proprietary detection chamber that can be replaced as needed, viruses are detected, and a silent notification system is created,” stated KNR.
“BioCloud continues to garner international interest given the growing, ubiquitous need for creating safer spaces and monitoring of heating, cooling and ventilation systems (HVAC) in real-time,” stated Paul Ghezzi, CEO of Kontrol Technologies.
“In a paper published in the journal Science, 39 experts in various fields called for a “paradigm shift” in the design of buildings and their ventilation systems, a safety upgrade on par with the 19th century introduction of clean water supplies and centralized sewage systems,” reported the L.A Times on May 13, 2021.
The authors of the report believe that the coronavirus spreads through exhaled microscopic particles known as aerosols that can float in the air for hours — and that the risk is greatest indoors.
With the exception of hospitals, few large buildings have been designed to limit the spread of airborne pathogens.
“Office towers and other commercial buildings are typically engineered for energy savings and odor and temperature control, but not public health,” added The Times.
“The scientists envision futuristic buildings with systems that could detect a crowd gathering in a room and immediately adjust the ventilation to increase air turnover. Monitors would display air quality measurements in real time.
The paper cited estimates suggesting that the systems would increase the construction cost of a typical building by less than 1%.” – End of L.A. Times.
Kontrol and the unnamed Japanese company are negotiating a distribution agreement and are currently planning technology demonstrations in the region.
Kontrol is also shipping BioCloud units to distributors in Qatar and the Czech Republic. In a nod to a manageable regulatory environment, Kontrol reminds investors that “BioCloud is not a medical device.”
If you are expecting Kontrol to be another tech company with an embryonic idea, extrapolated onto a technicolor Power Point – think again.
Kontrol is mature company with diverse revenue streams.
Q3 and Year-to-Date 2021 Highlights:
- Record revenues of $21.5 million in the third quarter of 2021, up 614% year-over-year
- Record net income of $2.1 million in the third quarter of 2021, representing second consecutive quarter of positive net income
- Record adjusted EBITDA* of $2.8 million in the third quarter of 2021, up 224% year-over-year
- Cash flows from operating activities of $4.8 million in 2021 year-to-date
- Strengthened balance sheet by eliminating $4.0 million in debt in 2021 year-to-date
- Completed acquisition of Global HVAC & Automation, the largest acquisition in Kontrol’s history
- Raising Fiscal Year 2021 Outlook
- Revenues of $43 million to $46 million, up from previous $38 million estimate
- Adjusted EBITDA of $6 million to $7 million, up from previous $3.7 million estimate
“Our ability to integrate Global into the Kontrol platform while maintaining financial discipline allowed us to not only achieve our highest-ever revenue quarter, but importantly, we also delivered the highest net income quarter in our history,” stated Paul Ghezzi, CEO of Kontrol.
“We continue to drive strong organic growth supported by heightened demand from our expanding blue-chip customer base and compounded by Government policy,” added Ghezzi, “underscoring the importance of and necessity for enhanced intelligence to operate better, safer, and more sustainable buildings.”
In this interview with Proactive, Ghezzi talks about the Q3 earnings report and the 2022 business objectives of Kontrol.
“There’s really a number of factors [driving record revenues]”, explained Ghezzi, “The primary factor is the industry tailwinds, which are really driven by the shift in government policy around emissions, and smarter buildings, healthier buildings, more sustainable buildings, shareholder activism around corporate sustainability.”
“You combine all that and it creates greater organic growth for our technology platform, in the Smart Energy and air quality side of our business.”
Last summer on August 3, 2021, Kontrol purchased Global HVAC & Automation and a record revenue order book of $155 million.
Kontrol anticipated full year revenue for 2021 in the $38 million range up from $13 million in 2020.
For 2022 Kontrol anticipated revenues in the range of $65 to $70 million and Adjusted EBITDA* in the range of $4.5 to $4.8 million.
Heating, ventilation, and air conditioning (HVAC) systems can account for up to 70% of overall energy consumption in commercial buildings.
Global traditionally focused on larger projects, with one-time project revenues. Kontrol is seeking to grow Global’s recurring revenues through vertical integration with its current software and ongoing service agreements.
Transaction Details
Kontrol to acquired all the outstanding shares of Global HVAC & Automation Inc. for the purchase price of $7.25 Million.
Ghezzi spoke to Proactive about the acquisition of Global.
“Typically, a project company would not have recurring revenue in their platform, stated Ghezzi, “We are driving recurring revenues through software and service.”
Using IoT (Internet of Things), Cloud and SaaS technology, Kontrol provides a combination of software, hardware, and service solutions to its customers to improve energy management, air quality and continuous emission monitoring.
The Internet of Things (IoT) refers to the exploding network of physical objects that have an IP address for internet connectivity, and the communication that occurs between these objects.
It may not be intuitively obvious why a toaster-oven needs to converse with a rectal thermometer – but the IoT spaceship has landed and is doing brisk business with the earthlings.
“Right now, buildings are responsible for about 40% of global greenhouse gas emissions,” stated Ghezzi, “In the next decade, buildings are going to use half the world’s energy. So that’s the big challenge that we’re tackling with our technology solutions.”
