Aspen Technology Acquires Mnubo For IoT Tech

Quick Take

Aspen Technology (AZPN) announced it has acquired Mnubo for approximately $78 million in cash.

Mnobu operates as a provider of artificial intelligence and analytical infrastructure solutions for Internet of Things [IoT] applications.

With the acquisition, AZPN is adding significant analytics capabilities as it targets the traditional industrial customer with new cost-saving technologies.

Target Company

Montreal, Canada-based Mnubo was founded in 2012 and enables organizations to deploy enterprise-scale AI-driven IoT applications.

Management is headed by Co-Founder and CEO Frédéric Bastien, who is also a Co-President at Technopolys.

Below is an overview video showcasing some of the company’s offerings:

Source: Mnubo

Mnubo’s primary offering is its SmartObjects Platform, which is complemented by IoT advisory and data science consulting IoT bootcamps and workshops as well as data science, AI and machine learning services.

Source: Mnubo

Investors have invested about $17.3 million in the company and include White Star Capital, McRock Capital, Fonds de solidarité FTQ, Investissement Quebec, Munich Reinsurance, and Isomer Capital. Source: Crunchbase

Market & Competition

According to a market research report by Grand View Research, the global industrial IoT [IIoT] market was valued at $161.1 billion in 2018 and is projected to reach $949.4 billion in 2025.

This represents a very strong CAGR of 29.4% between 2019 and 2025.

The main drivers for this expected growth are the growing demand for machine-to-machine systems, the need to contextualize Operation Technology [OT] data, and decreasing hardware cost as well as the preference for predictive maintenance.

Additionally, various government policies, such as ‘Industry 4.0’ in Germany, ‘Make in India’ and ‘Smart Cities Mission’ by India, the ‘Industrial Value Chain Initiative [IVI]’ in Japan, as well as the ‘Made in China 2025’ by China boost the demand for IIoT solutions.

Moreover, the need for better inventory management and optimization of logistics and supply chain is another major driver for the adoption of IIoT-based analytical solutions.

The Asia-Pacific region is projected to expand at the fastest rate due to the various government investments and initiatives, encouraging the implementation of IIoT in the region.

The services segment is anticipated to grow at the highest CAGR of over 30% during the period due to huge volumes of data generated by the massive number of connected devices.

Major competitive vendors that provide IIoT solutions include:

Source: Sentieo

Acquisition Terms and Financial

Aspen disclosed the acquisition price as CAD102 million ($77.92 million) but didn’t provide a change in financial guidance as a result of the acquisition.

A review of the firm’s most recent 10-Q filing indicates that as of March 31, 2019, Aspen had $65.6 million in cash and equivalents and $513.4 million in total liabilities, of which borrowings represented $220 million.

Free cash flow for the nine months ended March 31, 2019, was $152.9 million.

In the past 12 months, AZPN’s stock price has risen 36.3% vs. the U.S. Software industry’s rise of 24.4% and the broader overall U.S. market’s increase of 3.4%, as the chart below indicates:

Source: Simply Wall Street

Earnings surprises have been uniformly positive vs. consensus estimates, so it may be that management deliberately underestimates earnings in order to produce ‘beats,’ as shown in the chart below:

Aspen Technology Acquires Mnubo For IoT Tech

Source: Seeking Alpha

Analyst sentiment in recent earnings calls has been mostly neutral, as the linguistic analysis chart shows below:

Aspen Technology Acquires Mnubo For IoT TechSource: Sentieo

Commentary

AZPN acquired Mnubo for its embedded AI technologies for its industrial Internet of Things customers.

As Aspen’s CEO Antonio Pietri stated in the deal announcement,

With the current pressures on margins, our customers need to yield higher outputs and drive higher efficiencies with existing assets. When expertly applied, AI offers a significant competitive advantage in managing operations to the limits of performance without compromising safety. By bringing the deep domain expertise of AspenTech together with Mnubo AI-driven IoT expertise and Sabisu visualization, we can deliver innovation that helps our customers drive greater value from their existing data at scale. The actionable insights from AI-powered applications will help AspenTech customers to achieve a truly smart enterprise.

Whenever I see the word “AI” I really believe it is a fancy term for using machine learning software to improve operations. That is, the software improves or ‘learns’ over time as a function of the data it receives from whatever is being monitored.

Industrial firms have enormous inefficiencies within their property, plant, and equipment processes, so the combination of connected sensors with machine learning software is a powerful approach that can reduce costs, improve CapEx budgeting, and increase profits for customers.

With the deal for Mnubo and Sabisu, AspenTech will be able to speed up the development of its IIoT offerings as it targets traditional industries looking for new cost efficiencies.

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