Active Control Technologies (ACT.V) Begins to Burn Backlog

Tdoay the Company announced that it would begin deploying two mines next week (Kentucky and Illinois) in the wake of MSHA approval of its entire underground wireless network and peripherals. To review, the Company has indicated in past investor conference calls that it had approximately $6 million of backlog Purchase Orders pending MSHA approvals. MSHA approvals were granted last week.

We estimate that the average size of a typical deployment, measured as revenue, is approximately $400,000 with approximately 25% per year in recurring maintenance. Essentially, investors could conclude that the Company has burnt just under 15% of its declared backlog. The Company has been working diligently to structure favorable upfront payments, which could be higher than 50%, which may benefit its cash position as the backlog is deployed.

Management has aligned its supply chain to receive payments on the same terms and conditions as negotiated by ACT with its clients. As a result, the Company utilizes cash in a relatively efficient manner.

Investors should view the speed of backlog burn as positive, and the stock is likely to respond positively today.

Disclosure: I own shares of ACT

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