The junior tech market is getting serious love from investors–finally! Positive cash flow among Canadian small caps meant nothing for years until about early 2024–and then a wave of companies–who were executing really well–started to move.
The stocks of BeWhere (BEW), Blackline Safety (BLN) and others have done very well and stayed near 52 weeks highs consistently.
Add Tantalus Systems GRID-TSX to that list now. With several new contracts with US utilities for their products–which provide both hardware and recurring revenue. The stock has moved from 80 cents to $3.50 in the last 18 months–and I think this growth curve is ratcheting up.
We’re up 50% in just two months, so I’m posting our June initiation report here. The day we published there was news that morning of a new US$8 M contract with an existing utility client, which would also provide US$320,000 in annual recurring revenue (now 29% of all revenue).
They also just announced–on Jun 25–a new analytics contract with a small group of municipal utilities in Ohio/Indiana. These analytics contracts help grow the high margin recurring revenue.
One of the members of Ian Cassel’s Micro-Cap Club (a great resource!) pointed out recently–and I confirmed with management–that Tantalus gets 90 day terms from its Phillipine contract manufacturer, and gets 45 day terms from almost all its utility clients–a great way to handle the cash when you’re growing quickly!
I buy everything I talk to subscribers about, and I now own 120,000 shares.
QUICK FACTS (from June 12)
Trading Symbols: GRID
Share Price Today: $2.40
Shares Outstanding: 50.8 million
Market Capitalization: $122 million
Cash: $16 million
Debt: $10.4 million
Enterprise Value: $116.5 million
POSITIONED TO MODERNIZE THE GRID
There is something of a renaissance happening in the power generation industry.
Datacenter power consumption is growing at 10% annually. It is expected to account for more than 10% of overall electricity demand by 2030.
Source: Mckinsey
That is driving overall power demand in a way we have not seen in years. It is a strain on the grid that is going to require BIG investment from utilities.
Worries about where the power will come from is a big enough worry that we are now seeing hyperscalers like Microsoft (MSFT – NASDAQ) and Meta (META – NASDAQ) signing long-term power purchase agreements to guarantee they have access to power.
Money is bound to flood into new projects, and we are seeing that in the stock prices of companies like Nuscale (SMR – NASDAQ) and GE Vernova (GEV – NASDAQ), companies that will build that infrastructure, going through the roof.
I also expect money to pour into the existing grid as utilities look to optimize their power distribution.
That is where Tantalus Systems (GRID – TSX) could shine.
Tantalus supplies solutions that are almost entirely geared towards giving utilities more insight into grid operation and let them make more informed adjustments to their grid.
Tantalus is at their own growth inflection. For 4 years they have poured capital into developing their flagship product, called TRUSense Gateway. That product is now in the hands of utilities.
TRUSense Gateway sits on top of the meter box and provides a wide range of measurements that utilities did not have access to before.
Tantalus thinks that TRUSense Gateway is a game-changer. They peg the opportunity at >$500M of revenue.
That is BIG-TIME upside for a company that did US$44M of revenue last year. They are in trials with 33 utilities today and expect to begin to generate faster growth in H2 25.
Once sales of TruSense Gateway begin in earnest, I believe a network effect could begin to take hold. That’s because the rest of the Tantalus business is about selling software that makes the most of that data. Tantalus offers a SaaS platform of analytics, troubleshooting and optimization.
The other thing to note is that almost all Tantalus customers are SMALL utilities; co-ops they’re called. But they are now getting attention from larger IOU–Investor Owned Utilities–and gov’t owned utilities.
It will take time to play out, and Tantalus has to execute and deliver TRUSense Gateway sales to the market, but if they do, that is bound to drive high-margin SaaS revenue. Put that together and this stock has all the makings to be a big winner.
