Arqit Quantum (NAS:ARQQ) — mrkt cap $51mm; Price $.3; EV/EBITDA NA
PASS. The company specializes in developing software for quantum-safe encryption. The “quantum threat” is real —consider a quantum computer potentially collapsing 30 years of computation into mere seconds. Encryption methods will require a complete overhaul to remain secure. While quantum encryption and infrastructure protection against this threat will eventually become critical, it’s not an immediate concern. ARQQ has secured some government contracts, but their cash burn remains high, and they will likely need to issue more shares to raise funds. Despite announcing customer renewals and potential contract wins in their latest earnings report, the amounts are not significant. We are staying away from this one for now.
Allient (NAS:ALNT) — mrkt cap $350mm; Price $20.67; EV/EBITDA 9.6
PASS. Allient manufactures motion, control, and power systems used across a range of industrial products in the medical, aerospace, and industrial sectors. Over the past decade, ALNT has doubled its sales, growing at a faster pace than the industry, primarily driven by mergers and acquisitions. However, revenues have recently started to decline, and operating margins have fallen to the low single digits due to a slowdown in industrial automation. In response, the company has initiated a “Simplify to Accelerate” strategy, focusing on more profitable segments—essentially restructuring after underperforming M&A activities. We generally maintain a cautious stance toward companies that rely heavily on M&A for growth, as it adds complexity to both operations and accounting. ALNT is no exception, particularly given the debt they have accumulated and the ongoing restructuring. M&A remains a priority for management, and it is likely they will continue facing sim
VirTra (NAS:VTSI) — mrkt cap $67mm; Price $6.17; EV/EBITDA 8.4
PASS. VirTra provides photorealistic simulation technology to assist law enforcement in conflict resolution and decision-making. They sell high-end equipment to police departments, ranging from $250,000 to $500,000, and are praised for their realistic scenarios and extensive content library. However, the stock has declined due to a 20% YoY revenue drop, largely driven by a weak international segment. VirTra has also faced long delivery times and supply chain issues. The company plans to introduce VR headsets as a lower-cost alternative to their flagship 300-degree wraparound 2-D simulators, though it’s unclear how this will be complementary. With strong competition from Axon, we are choosing to pass for now.