Airship AI: An Edge AI Opportunity

seekingalpha03-26

Airship AI is a niche AI company specializing in surveillance solutions for government, law enforcement, military, and commercial enterprises.The company offers cutting-edge hardware and software ...

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From chipmakers to software giants, everyone wants a piece of the AI pie. Nvidia (NVDA) recently reached a staggering $2 trillion market capitalization, largely attributed to its focus on AI chip production. While AI-focused semiconductor companies have been the focal point in the AI momentum, “niche AI” has presented a lot of alpha as well. By “niche AI,” I mean AI companies with a focused market niche or vertical offering. We have seen the interest that stocks like C3.ai (AI) and Palantir (PLTR) have garnered. One AI company with a focused niche market worth analyzing is Airship AI (NASDAQ:NASDAQ:AISP). Airship AI went public recently and subsequently got listed on the Nasdaq after a successful business combination with BYTE Acquisition Corp. in December 2023. Airship AI - Company Overview Airship AI was founded in the U.S. in 2006 and is currently headquartered in Redmond, Washington. The company specializes in providing surveillance solutions in the areas of video, sensor, and data management for government, law enforcement, military, and commercial enterprises.   Airship AI's blimp-like logo (company website)The company’s logo sports an image of what resembles a blimp. The backstory shared by the company’s president, Paul Allen, on the logo choice relates to the historical use of balloons or blimps in surveillance. While the logo may not look like it conforms to the typical schematic imagery associated with AI, don't let the simplicity fool you; the company offers cutting-edge hardware and software products and solutions. Airship AI Products Airship's products are developed for and specifically target law enforcement, military, and commercial enterprise organizations. The products help organizations respond proactively and to quickly ingest and analyze video and associated metadata at the edge, ensuring seamless distribution of such data when and where it is needed. Airship Acropolis OS Acropolis is an operating system (OS) that provides a single integrated framework for high‐performance IP and analog video surveillance. The OS includes an Enterprise Management System (EMS), an Evidence Discovery System (EDS), an Evidence Archive Server (EAS), and a Health Monitoring Server (HMS) which together provide comprehensive surveillance and data management solutions. There is a special law enforcement edition of the Airship Acropolis OS which features workflows for evidence preservation, advanced auditing capabilities, and individualized cases for sensitive data management. The Acropolis OS is designed to scale, ensuring that the system can accommodate varying deployment sizes and grow to meet expanding needs. Other standardized features of the Acropolis OS are its compliance with US/Canadian cybersecurity cryptography standards, including FIPS 140-2, NIST 800-53, and DHS 4300A Sensitive Systems Handbook. This cybersecurity compliance ensures that data transmission and system operations adhere to stringent security protocols, protecting sensitive information from breaches. The OS also boasts an intuitive, easy-to-use user interface. Airship Command Airship Command is a suite of visualization tools that allow users to view and analyze data ingested from the edge. Edge computing involves processing data at the source of the data generation. In the context of Airship AI, the edge refers to devices where surveillance data is generated. Visualization of data from the edge reduces latency and enhances privacy and security. The Airship Command suite includes a thick client called Airship Nexus Client, a thin client called Nexus Video Portal, and mobile clients for Android and iOS called Nexus Mobile. By providing multiple client types, Airship ensures that users can access the Command suite across a variety of platforms and devices. Different client types cater to different user needs and preferences. For example, the thick client (Airship Nexus Client) offers advanced features and capabilities for power users who require extensive control and functionality. In contrast, the thin client (Nexus Video Portal) and mobile clients (Nexus Mobile) offer simplified interfaces optimized for accessibility and ease of use, making them suitable for users who may prefer a more streamlined experience. Airship Outpost Outpost is Airship’s specialized hardware device designed specifically for edge computing applications. The device is optimized to perform data processing and storage tasks and is equipped with built-in analytic capabilities for processing and analyzing data at the edge of the network (where data is generated). Outpost analytics capabilities include advanced object detection and recognition algorithms that can identify and classify objects, people, or events in real-time without requiring data to be sent to centralized servers for analysis. Edge AI Market Opportunity Advancements and the explosion of IoT (Internet of Things) devices are creating a parallel demand for edge AI. Both industries are bound to experience cross-industry growth. Just like the proliferation of smartphones created a huge market for mobile applications, leading to the growth of the mobile app development industry, IoT will lead to growth in edge AI. As more IoT devices (sensors, cameras, and connected cars, among several others) are deployed and generate vast amounts of data at the edge of the network, there is a growing need for edge AI solutions that process and analyze data near the data source and in real time. Processing real-time data locally is imperative for applications like automated vehicles and smart cities.   Global Edge AI Market (market.us)While projected growth figures for the AI edge market differ among market researchers, several research firms put the CAGR between 21% - 26% by 2032. Market.us projects a 25.9% compound annual growth rate for the edge AI market. Grand View Research projects a 21% CAGR, with the market reaching $66.5 billion by 2030. Airship AI boasts some blue-chip customers and is well aligned within the edge AI market to capture significant market share in the AI surveillance and intelligence sub-segment of the growing edge AI market. The company’s customers include the U.S. government. The company has secured several US government contracts and has continued to expand its customer base, which includes Fortune 500 companies like FedEx (FDX) and Home Depot (HD). A noteworthy U.S. government contract last year involved the delivery of multiple fixed-price contracts worth $10.9 million, awarded by an agency within the Department of Homeland Security (DHS) in September 2023. The company secured another significant sole-source U.S. government contract early this month. An agency within the Department of Justice (DoJ) deployed the Acropolis OS for use in its investigative operations. The contract was an expansion of a pilot program started with the DoJ agency last year. Outside the U.S., Airship AI recently won a multi-year contract with a government agency in Singapore, in which the agency will utilize Acropolis to support the country’s border security initiatives. Airship AI Financials and Valuation Airship AI’s SPAC merger was just three months ago; as a company that recently went public, there isn't ample financial data yet to analyze post-merger performance. In the Airship AI corporate update released in January, management is guiding for triple-digit top-line growth and positive EBITDA in 2024, to be driven by an $11.8 million backlog (mostly composed of U.S. government contracts) and $140 million expected revenue pipeline of opportunities that Airship AI has going into 2024. Airship AI was valued at around $225 million in pre-money equity value at the time of its business combination with BYTE. Currently, with a market capitalization of around $256 million, AISP seems to have maintained its valuation trajectory since the merger. The current enterprise value stands at $258 million, suggesting a low and manageable debt level. Airship’s  EV/sales (TTM) seems high at 26.6x. However, considering the momentum AI stocks have seen this past year, I think this EV/sales multiple is on par with what is obtainable among several AI-focused stocks. Peers like C3.ai, Palantir, and Cloudfare Inc. (NET) all trade significantly higher than sector EV/sales. I expect Airship AI's forward EV/sales to be much lower, considering the company's current backlog and deals pipeline. As management currently guides for triple-digit growth in sales, forward EV/sales should be around 13x or lower, which shows a potentially more attractive valuation for investors. Risks Airship serves a vertical market and would potentially face minimal direct competition, at least for now. This has been seen with the sole-source contracts the company has been awarded by U.S. government agencies. One risk I envision is supply chain disruption. Components of the company’s Outpost appliance are made of third-party chips. Outpost runs on Nvidia’s advanced system-on-chip (SoC), the Jetson Orin module. General supply chain disruption could affect the timely delivery of Outpost orders. It will take a while for the U.S. to become self-reliant in chipmaking, according to experts. Political or economic instability in Asia could result in a semiconductor supply chain disruption. Takeaway In conclusion, Airship AI presents a promising investment opportunity in the rapidly growing edge AI market. With its specialized surveillance solutions, government contracts, impressive backlog, and revenue pipeline, the company is poised for growth. There are no more limitations to this company’s growth moving forward. Going public gives it the ability to raise capital and expand. There are real-world needs and use cases for Airship AI’s products and solutions. The ongoing situation at the U.S. southern border is a practical example of one of such urgent needs for such a solution offered by Airship.  Airship AI checks most of the essential qualitative boxes. AISP is a small-cap stock with a huge edge AI market potential. Investors need to monitor financial results over the next quarters and fiscal year to make continued informed decisions about AISP.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.23.1","shortVersion":"4.23.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2422306520"}