𝛼SK or SearchTotal Brain Limited: In the Final Stages of Securing IBM/GRIT Sales
Total Brain Limited
In the final stages of securing IBM/GRIT sales
Total Brain (ASX:TTB) is the developer of a neuroscience-based mental health & fitness platform powered by the largest standardized neuroscientific database in the world formed over almost two decades and with $50m of R&D funding. Total Brain reported Q1 FY21 cash receipts of $0.8m, up 15% on Q1 FY20 cash receipts after adjusting for the annual payment from AARP. Including AARP, cash receipts were down 24% on Q1 FY20. Monthly cash burn was $1.25m in Q1 FY21 versus $0.8m in the same period in FY20, chiefly due to increased employee costs from selected hires in sales and technology and increased expenditure on intellectual property. Importantly, Total Brain announced that it has entered the procurement stage of the contracting process with the first paying government client of the IBM/Mental Fitness 360 platform, for an initial rollout of its GRIT application. Total Brain estimates this represents $0.65m in Annual Recurring Revenue (ARR). We have made some modest adjustments to our employee cost forecasts and revenue rollout with the IBM Mental Health 360 program and this has resulted in our base case valuation tempering to $1.28/share (prev. $1.29/share).
Business model
Total Brain operates a subscription as a service (SaaS) model for its mental health and fitness platform. The science behind the platform has been developed over almost two decades with input from the leading academic institutions in the field. This has generated a proprietary neuroscientific database of scale which underpins the scientific validation that differentiates Total Brain from other brain training and wellness applications. The app assesses the 4 core brain capacities (emotion, feeling, cognition, self-control), pre-screens 7 common mental health conditions & delivers personalised brain & mind/body training.
Significant progress on IBM/Mental Health 360 rollout
Total Brain has entered the procurement (final) stage of the contracting process with the first paying government client of the IBM/Mental Fitness 360 platform, with this first application representing an initial $0.65m in ARR to Total Brain. The company doesn’t mention the agency in the announcement but it is likely to be US Veterans, for which TTB successfully completed a pilot late last year. This rollout constitutes 10% of the estimated 250,000 US Veterans which transition out of the armed forces annually. Total Brain expects the procurement phase to be completed in this current quarter and first revenues to be received in the first quarter of CY2021. This opening phase is expected to lead to an expanded rollout to the client’s eligible population as well as accelerate other opportunities in the joint Total Brain/IBM pipeline.
Base case valuation is $1.28/share
We use the discounted cashflow methodology to value Total Brain. We have made some adjustments to our employee forecasts, timing of revenues from IBM and net cash position following the Q1 cashflow statement resulting in a minor reduction in our DCF valuation to $1.28/share (previously $1.29/share). In our view, continued momentum with new contracts, in particular with the IBM/Mental Fitness 360 platform, should underpin Total Brain’s share price performance in the short to medium term.
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- Total Brain Limited: In the Final Stages of Securing IBM/GRIT Sales02 Nov 2020