Qatar's world cup should be helping the profile of Perth-founded sports technology business HITIQ.
As soccer’s world cup kicks off in Qatar some of those taking the field could soon be wearing a device developed and made by Perth-founded sports technology business HITIQ.
Less than three weeks ago, ASX-listed HITIQ announced the signing of a two-year deal with the English Premier League soccer competition to use its CSX concussion assessment technology and deploy 100 of its digitally connected mouthguards which record head impact when worn.
The Premier League is regarded as the world’s best competition and many of those competing in the world cup play for one of the 20 clubs involved.
The November 1 announcement, a fortnight ahead of the Qatar tournament’s start, was something that might normally considered great timing by the participants.
Piggybacking on one of the globe’s biggest sporting events could be expected to offer a boost to the company which is run from Perth although most of its research, development and manufacturing is done in Victoria.
And it comes on top of heightened awareness of chronic traumatic encephalopathy (CTE) a progressive brain condition that's thought to be caused by repeated blows to the head and repeated episodes of concussion, something that administrators of contact sports are scrambling to understand as potentially big future liabilities emerge.
However, the current headwinds in technology are stiff and the announcement appears to have done little, beyond a brief blip, to improve the medium-term trajectory of HITIQ’s share price, despite being closely followed by a deal with the WA Football Commission.
However, the two sports deals also coincided with a $6.35 million rights issue, offering eight shares at 3 cents each for every five shares held. A free attaching option with an exercise price of 4 cents about 12 months hence was also to be included with each new share acquired in the issue.
HITIQ is a business intent on proving its technology. That comes with a cash burn as any startup will know. According to its annual report, it had almost $3 million in cash at June 30, down from almost $9 million at the end of the previous financial year. New deals do have revenue, but last year’s sales income represented less than a tenth of its outgoings.
Having raised $10 million for its June listing, last financial year it lost almost $7 million, the vast bulk of that due to expenses related to staff, research and testing. On the income side, a $1 million research and development grant dwarfed the sales revenue.
The best an observer of the stock might conclude is that the flurry of announcements at the start of November simply brought the stock back to the 4 cents mark below which it had dipped for much of October, a correction which is still well below the original 20 cents investors paid in last year’s IPO led by brokers Shaw and Partners.
HITIQ founder and managing director Mike Vegar is clearly disappointed at where the company’s share price sits despite the consistent goals it has scored as part of its strategy to be an end-to-end concussion management platform, detecting the events, assessing impact and playing a role in rehabilitation.
Mr Vegar admits that listing so early in the company’s technology development cycle was not perfect but he said there was a lack of venture capitalist money to follow the early high net worth individuals and family offices that were seed investors.
“We are early, there is no doubt about it,” he said of the ASX float last year, amid the Covid crisis and supply chain issues such as shortages of semi-conductors.
HITIQ’s chairman Otto Buttula summed up this frustration in late August with the release of the company’s annual results.
“I am personally a shareholder in a number of other ASX listed and unlisted entities, many have no current revenues, and many have far less revenue than that of HITIQ, yet they have significantly higher valuations or market capitalisations,” Mr Buttula said.
“Whilst I strongly believe these other companies’ outlooks are appealing, does the investing public or our departing shareholders seriously think that HITIQ, as a global leader in concussion management technologies and management has a limited future!”
Of course, HITIQ is no orphan either. Tech companies the world over have suffered as the market has favoured alternatives in what has been a trying year.
While HITIQ is by no means revenue positive, it earned more than $600,000 in the year ending June 30, from a string of deals with leading sports bodies that appear to be at the core of its significant niche market.
That includes the AFL, US university grid iron administrator National College Athletics Association, the recent rugby league world cup and a host of other important organisations in professional sports such as rugby union and ice hockey.
The AFL is one of its most enduring customers, having four years of work including a full season of data collection from most men’s and women’s teams.
The Collingwood Football Club was even an early investor in the business.
More recently, health insurance giant Bupa has been involved in agreements which will help HITIQ reach sports consumers outside the elite level.
And, also on the retail side, HITIQ signed a memorandum of understanding with major US mouthguard maker Shock Doctor with the aim to produce an off-the-shelf version of its device.
Furthermore, HITIQ has not limited itself to just developing the connected mouthguard originally created by Mr Vegar, a sports science consultant, and Dentistry Plus founder Lucas Lang.
A year ago, it acquired New Zealand firm CSX which had concussion assessment software and a well-established customer base that helped HITIQ broaden its reach in the sector both horizontally through sports organisation relationships and vertically as a value adding step in its product suite.
That purchase, while integral to the HITIQ strategy, cost about $1 million and, with the company still burning cash as a startup, is undoubtedly a key reason it has gone back to shareholders to raise more funds.
