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Axios Mobile and its “educated pallets”

Tuesday, January 10, 2017 8:01
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The outlook for Axios Mobile Assets Corp (CVE:AXA), the pallets and logistics solutions provider, is, if you’ll forgive the pun, looking increasingly “palletable”.

A map of the USA pinned on the wall with markers representing Axios’s areas of operation would show the Midwest and North-East regions well covered, and now the plan is to penetrate the South-East and South-Central regions.

Eggs in more than one basket

You might think that providing pallets – those load-carrying platforms that can be easily ferried around warehouses and building sites by fork-lift trucks – would be a fairly low-tech business, but this is one of those businesses that has been irrevocably altered by the Internet of Things.

Axios’s pallets use sensors to communicate with a sophisticated logistics system that reduces spoilage, breakage and other risks inherent in cold storage supply chains.

The technology makes the company’s services particularly suitable for the perishable food suppliers, especially eggs producers and suppliers.

The company supplies pallets and logistics to four of the five largest egg producers in the US and also numbers ten of the top 40 US egg suppliers among its customers.

Company history

The company started as a pure-play pallet manufacturer, with an initial focus on design, tooling, materials, product testing and durability.

A change of direction came at the end of 2017, when it switched from being a pallet manufacturer to a pallet pooling service provider.

The change in business model gives the company greater access to recurring revenue streams, and therefore provides investors and management alike greater visibility on future income.

In the company’s own words, it now provides “a holistic supply chain solution featuring a highly engineered and tested composite platform, industry proven service offerings and a proprietary pallet and data management system”.

Management believes Axios is the first to provide both the pooling and pallet markets with a full-service pooling platform with a vertically integrated logistics and data offering.

The service is, to use an industry buzz-phrase, disruptive.

Disruptive to its competitors, that is; for the customers, it is all about making life easier and things more efficient.

By providing access through client dashboards to data that the client might previously not had access to, the Axios platform can drive efficiencies and process improvements.

Recent trading

The third quarter of 2016 saw revenue rocket by 68% from the same period of 2015.

Pallet rentals rose to C$729,000 from C$360,000 the year before.

The product offering goes far beyond simple pallet renting, though; data, software-as-a-service (SaaS), sensor sales and freight transport also provide opportunities to add revenue on top of the core pallet leasing service.

Freight services revenue also rose in the third quarter, to C$205.000 from C$196,000, providing a boost to total revenues of C$934,000 from C$556,000.

It’s a well-known feature of fast-growing companies that rapid growth puts a strain on working capital and requires heavy investment, and this was the case in the third quarter with Axios.

Operating expenses more than doubled from a year earlier to C$4.86mln, which meant the comprehensive loss widened to C$3.88mln from C$1.3mln the year before.

“Given the contracts currently in place and the strong demand for the Axios pallet solution, the company plans to raise additional capital to finance operations and to further increase the size of the pallet pool,” it said in its third quarter statement.

Fresh capital would provide the wherewithal to bring new customers on stream and to increase the amount of work it can take on from existing customers.

During the third quarter the company secured a lease for a new pallet-washing facility in Atlanta and it revealed in its operational update it is working to install wash and sanitization equipment of the kind used in its two other washing facilities (in Ohio and Pennsylvania).

The company believes that one of the main drivers for adoption of its services in recent months, as cited by both egg vendors and retailers, has been the safe quality foods (SQF) certification the company received for the wash/sanitization process at the Ohio wash facility, which ensures a bio-secure pallet delivered to the company’s client production sites.

The certification was granted following a third party audit of the sanitization process and facility in Ohio, and the company plans to seek SQF certification at each new wash facility it opens to ensure consistency of bio-security qualifications across its entire pallet pool.

Axios boasts the only pooled pallet service and offering to wash/sanitize its pallet after each and every use, the company said.

Among the milestones passed in the third quarter was a US$5mln loan facility that will enable the company to invest for growth.

“Our ability to secure capital allowed us to meet some of the increasing demand for our products, and we are confident that we can continue to drive revenue growth and improve operational efficiency in the fourth quarter and beyond,” said Richard MacDonald, Axios’s president and chief executive officer.

Story by ProactiveInvestors


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