- Big Technologies generates 98 percent of its revenue from the criminal justice sector and 2 percent from healthcare.
- The company’s stock is not cheap and currently trades at a P/E ratio of 30.
- Big Technologies is not alone in this market, it competes with others such as G4S and BI Incorporated, offer similar electronic tracking services.
Big Technologies is a British company that markets monitoring tags to track offenders who are released on parole.
The criminal justice sector accounts for 98 percent of its revenue, with the remaining 2 percent coming from the healthcare sector, where the tags are used to monitor older adults for security purposes.
An eight-year monitoring contract with the New Zealand Department of Corrections signed in 2021 began generating big revenue for Big Technologies and helped drive it to increase its turnover by 33 percent.
Meanwhile, monthly recurring revenue rose 44 percent to £4.6 million by the end of 2022 (about $5.7 million).
investing in Big Technologies?
The most impressive thing about Big Technologies’ business is its margins.
Gross margin rose 1.7 percentage points to 72.5 percent, while adjusted cash earnings margin (Ebitda) increased six percentage points to 60.7 percent.
This profitability translated into cash generation from operating activities: up 61 percent to $34.3 million and a year-end net cash position of $86.7 million.
However, its fast-growing, profitable, cash-generating business does not come cheap.
Its shares currently trade with a FactSet consensus forward price/earnings forward ratio of 30. Although, it has to be said, recent weakness in the share price means it is below 37 at the time of the latest results.
The upside for Big Technologies is that it’s cheaper to monitor a prisoner than it is to incarcerate him.
Presumably, this is why the company could (always speaking in potential) generate even higher margins.
However, high margins usually generate competition, and there is nothing about its technology that seems exceptional.
Nonetheless, the company has performed well and, given a 29 percent discount to the consensus price target, these days it would be best to holdover.
Competition from Big Technologies
As justice systems in all countries (especially those in the first world) look for ways to improve public safety and reduce recidivism rates, technologies to track parolees have become increasingly popular.
One such technology involves the use of tracking tags, which are used by parolees to monitor their movements and ensure compliance with the terms of their release.
Big Technologies is one of the leading companies in this market and offers a variety of tracking solutions that use GPS and other technologies to monitor parolees.
However, it is not alone in this space. There are several other players in the market, such as G4S, for example, a company that also provides electronic monitoring services for parolees.
Another rival is BI Incorporated, a subsidiary of GEO Group that provides virtually the same services in the United States.
Satellite Tracking of People, meanwhile, is also a UK-based company that offers GPS monitoring solutions for parolees.
Growing monitoring market segment
While the market for parolee monitoring technologies is relatively small compared to other technology sectors, it is growing rapidly.
In 2022, the segment was valued at $4.06 billion, with a projected compound annual growth rate of 9.8 percent through 2027. Very good numbers indeed.
One of the key drivers of growth in this market is the increasing use of alternative sentencing and community supervision programs, which rely on electronic monitoring technologies to ensure compliance.
In addition, many jurisdictions are looking for ways to reduce the prison population and associated costs, and electronic monitoring is seen as a cost-effective alternative to incarceration.
Investments in this market are also on the rise. In 2021, G4S announced that it was expanding its electronic monitoring operations in the United States, investing $100 million to upgrade its technology and expand its workforce.
BI Incorporated has also made significant investments, one of them in the development of a mobile application for monitoring. New sensors and algorithms are also being developed to analyze movement patterns.
It’s a segment to invest in. Of course it is. As technology continues to improve and costs decline, even more jurisdictions are likely to turn to electronic monitoring as a key tool in their efforts to reduce recidivism and improve public safety.
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