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Good morning and welcome to mCloud Technologies' Fourth Quarter 2021 Earnings Conference Call. At this time, I would like to turn the call over to Wayne Andrews, mCloud Head of Investor Relations. Please go ahead.
Thank you, operator. Today, we will discuss the audited results for the 3 months ended December 31, 2021. Presenting from mCloud is Russ McMeekin, our Chief Executive Officer; and Chantal Schutz, our Chief Financial Officer; and Vincent Higgins, President, Oil and Gas Digitalization. Before we proceed further, please note that remarks made on this conference call may contain forward-looking statements about mCloud Technologies' current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements or any other future events or developments. Forward-looking statements are based on information currently available to management and on investments and assumptions based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, levels of activity, performance, achievements, future events or developments to differ materially from those expressed or implied by the forward-looking statements. As a result, mCloud Technologies cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on any forward-looking statements. Except as may be required by law, mCloud Technologies has no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise. For additional information on these assumptions and risks, please consult the cautionary statement regarding forward-looking information contained in the company's most recent MD&A available on SEDAR and with the SEC. A presentation that can be used to follow along with our discussion today can be found on our website at www.mcloudcorp.com under the Investor tab. There is also a link to the presentation in our press release. I'll now hand the call over to Russ McMeekin. Russ, please go ahead.
Thank you, Wayne. And one quick correction, it's 12 months of audited financials that we will be reviewing today. Thank you, Wayne, and welcome, everyone, to the Q4 and Year-end 2021 mCloud Conference Call. Let's first, before we get into anything forward-looking, take a look back and look at items from Q4 and 2021. AssetCare Over Time recurring revenues ended the year at $23.5 million. That's compared to $12.8 million. That's up 83%. We added 323 assets -- new assets in Q4, so quite a de minimis number. We ended the year at 63,776 connected assets. That's compared to 59,642 at year-end 2021 -- 2020. Full year 2021 total revenues were $25.6 million compared to $26.9 million for the full year 2020. Key factors that caused this de minimis performance on a year-on-year basis, effectively flat: constrained technical project services, which lingered all through the year; challenges in connecting assets, which lingered all through the year, in fact, carried through to about mid-March. Now that's behind us, pretty much everywhere -- in fact, everywhere is behind us. And then certain customers experienced limited uses in the period of 2021. We went back and validated those use periods, and therefore, adjusted accordingly. The good news is we had a lot of scope additions. We had a lot of extensions. We had a lot of carryovers and no churn. So net-net of it all, we see all these contracts carrying forward and customers making full use here in 2022. Now let me move to things going forward that will drive growth. First of all, we do work very hard on the ESG capabilities and connected worker capabilities, which created the groundwork that had Aramco select us as their vendor of choice around ESG decarbonization for a digital hub in the Kingdom. I will be discussing in more detail items around this. Secondly, we worked a lot on demand response, working closely with the utility demand signals, which affords us now the ability to do EV optimization and charging. We recently announced some pretty major deals and very major deals. Again, I'll be discussing these in more detail later in the call. And thirdly, our artificial lift optimization is definitely coming into light. Oil prices are off the charts. And we've asked Mr. Vincent Higgins, our President of Digital Oil and Gas, to join the call. He'll be presenting more details on this later in the presentation. Let me now turn the call over to Chantal. Over to you, Chantal.
Thanks, Russ. I don't need to tell anyone here about the business conditions in 2021. Restrictions hampered completion and delivery of technical services project work at customer sites and also limited access for customers to utilize the benefits of AssetCare solutions. In 2021, we did complete our NASDAQ listing, and we're now subject to PCAOB audit standards. We note additional expenses resulting from our SEC registration and NASDAQ listing in Q4 2021 and $2 million in annual insurance and professional services expenses related to our U.S. listing. Restrictions prevented us from fulfilling the full scope of connected deliverables and also delayed execution of new customer contracts. This has had a negative impact on our revenues from about May 2021 until mid-March of 2022. We do anticipate having greater access to customer sites moving into Q2 2022 and resuming normal operations with existing customers and contracts. These impacted revenues are expected to be realized later in 2022. As Russ previously noted, for the full year, AssetCare Over Time revenues were $23.5 million in 2021 compared to $12.8 million in the full year of 2020. This is up 69% year-over-year. As site access becomes less restrictive in 2022, we anticipate that our engineering services and AssetCare initialization will resume at a brisk pace. Expenses tied directly to customer acquisition, product development and new market development increased slightly year-on-year. The $4 million increase in expenses in the second half of 2021 has partially resulted from activities related to NASDAQ uplist and the concurrent USD 10 million financing, expanded R&D and international expansion. I'll turn things back to you now, Russ.
Thank you, Chantal. So looking at the activities in 2022. First, let me start with the big -- the very big deal with mCloud and Aramco. We started on December 15 by signing a agreement with Virtual Vision to host AssetCare in the Kingdom under Saudi Arabian law. Just for -- if we hadn't mentioned this before, but Virtual Vision is largely owned by Aramco. So this makes this a very close to Aramco, highly secure cloud, to provide our cloud applications to them. When you do get a chance to look at your slides, you will see a diagram that shows the entire scope of what is provided as part of the digital hub. These are things like 3D Digital Twins, connected worker, items around methane detection and ESG reporting, very specifically around LDAR and LDAR reporting. We'll talk a little bit more in the next slide. On January 25, we then signed the MOU with Aramco. This week -- or this past week, we then received our official full registration -- vendor registration with cybersecurity on the initial applications. So now starting -- post Ramadan, this is Ramadan month this month, we will be prepared to scale all these applications starting at a number of sites going into the second half or the middle of the year, second quarter here 2022. We also signed an agreement with the Ministry of Investment in Saudi Arabia. That makes us effectively a Saudi Arabian operating company. That allows us to hire people locally, do many things locally that many other companies cannot. And that puts us in a very, very unique position with Aramco, which is a key component of many things that they want to achieve. Putting Aramco into context. If you look at all the assets they have, we'll call it LDAR connectable assets, which are things such as asset pumps, compressors, wells, flanges, things of that nature, there are 39.1 million connectable assets in the Aramco fleet of assets -- or of operations. They have 64 gas-oil separation plants. Just one gas-oil separation plant is bigger than most, if not any, gas-oil separation plants in most parts of the world. They have 10 full gas plants, which have 18 trains per plant. They have 17 refineries. They have 186 petrochemical plants, and they have 19 power plants. So putting it into context just from a market cap point of view, they are larger than Shell, Exxon and Chevron combined. Their revenues are one of the largest in the world and, as you probably saw in the last reported quarter, one of the most profitable oil and gas companies on earth. So we are definitely aligned here with the major player, and we're ready for business on that front. Again, if you get a chance to look at the slide, you'll see the chronology of buildup of ARR velocity. Beginning of midyear, as I mentioned, we will start the deployment of AssetCare within their assets. We expect by end of 2022 that 5,000 assets will be connected. That will add in AssetCare ARR velocity -- $9 million of ARR velocity. And we expect the exit velocity at 2023 to be closer to 15,000 connected assets, which is $27 million of ARR velocity. And then putting things into context for a 5-year plan, our 5-year target horizon is 75,000 connected assets, which is approximately $135 million of ARR velocity -- of asset exit at the end of 5 years. We mentioned in our press announcement last week that we had received some alternatives for strategic financing from the Middle East, so we did receive a term sheet. We are currently evaluating the term sheet. Each component of the term sheet are considered very closely -- growth capital for us to expand in Saudi Arabia to be very well positioned to really grow this agreement with Saudi Aramco. As I mentioned, we have this legal entity now, so we're able to hire locally and operate locally. This was very key to receiving this term sheet to being able to perform at a local level. Saudi Arabia, as part of their Vision 2030, is very keen on American companies establishing themselves in Saudi Arabia and expanding. And there are a lot of initiatives to make that happen. And they also acknowledge in -- within the term sheet that we have a convertible debenture due in June -- on June 30, 2022. And the capital that they are proposing in the various scenarios contemplates the ability to use capital to do that -- to make that exercise on or before June 30. Next major strategic service agreement -- or major master agreement that we signed was with Carbon Royalty Corp. This allows us to pursue without any capital constraints the EV optimization for auto dealers. First of all, a bit about Carbon Royalty Corp. They are a streaming company -- a royalty streaming company that has over $100 million of funds today. The principals within Carbon Royalty consist of people who were under Obama's administration in the EPA, under Bush's administration in the secretarial of energy, policies makers in the United -- in the European Union. So they're very, very powerful people that understand very well the mandates for carbon credits, for capturing carbon revenues from tax credits and things of that nature. So they're very keen on supporting us and going after these auto dealers. The number of auto dealers just within the state of New York and California that we have line of sight to is over 2,000. The current deal allows us to -- is fully funded for the first 30 dealers. Putting that into context, that's $45 million of TCV. Using the ARR velocity, that's $2.5 million of ARR velocity. As we sit here today, we have 42 LOIs in place, so beyond the 30 AssetCare dealership that we have aligned with Carbon Royalty Corp. The 42 LOIs are in the state of New York, in the state of California. The agreement with Carbon Royalty is not [ cat. ] So as we perform those 30 or we get close to going live on those 30, there is the ability to continue to reload and re-up for the next set of car dealerships. And all of the carbon incentives, credits and green rebates, we split 50-50 with the Carbon Royalty Corp. So that aligns us very well to make sure we not only get deployed quickly, but we also capture all the benefits that are available to us at each of these dealerships. We also signed, as you know, earlier this year a deal with Mercedes. We expect that, as part of these dealerships, there will be several Mercedes dealers that will be part of this fleet of 30 dealerships. And there are desires for this business model around EV charging, around EV dealerships to be a global solution, and we'll be looking to expand on that as the year progresses. Using numbers again, like I did with Aramco, if you're -- when you get a chance to look at slides, you'll see a chronology of build. But we expect that midyear 2022 to have 3 dealerships up and running. The ARR velocity of this is $252,000 of ARR velocity. By end of 2022, we expect to have 45 dealerships up and running. That's $3.8 million in ARR velocity. By year-end 2023, we expect to have no less than 500 dealerships, which is $43 million of ARR velocity. And again, setting the 5-year horizon here of what we expect, we expect 1,500 dealerships at least, which is $126 million of ARR velocity. And as part of this, we expect a number of them to be Mercedes dealerships and for them to continue to promote these to many, many dealers around the world. Let me now turn the call over to our special guest, Vincent Higgins, who will walk us through the digital oil wealth initiative. Vincent?
Thank you, Russ. First of all, great to be here. Joined mCloud a few months ago from Honeywell, where I led the digital transformation offering for our industrial customers, doing -- building -- bringing to market a number of products and services very similar to what we're doing here at mCloud. So quite familiar. The landscape for mCloud in the digital oil field is quite positive. The Department of Energy in 2022 has recently published the notion that oil and gas will continue to grow in terms of consumption and demand and that the oil price will continue to be high over the next several years. At the same time, there's a tremendous amount of pressure on oil and gas companies, particularly from the EPA and the SEC, around emissions, particularly on methane, things like EPA Method 21 and the SEC around new rules for reporting and registration. So with that panorama in mind, the digital oil field is ripe for opportunity for mCloud. Together with a number of major oil service companies collaborating with the new ESG-Digital Hub in Houston, which I've been getting off the ground, we've developed a product similar to other AssetCare products that connect directly to the oil wells and associated facilities. And this allows both increase in production at the wellhead, but also reporting of ESG type of metrics to the cloud, allowing the oil and gas companies to report in a better way, down to the asset and sub-asset level, which is very important. When you're talking about ESG reporting, we need to be able to drill down to the asset level and look at methane levels and leaks and things like that. We're estimating in North America, of the 1.2 million wells that exist, these unconventional wells, based on the current oil price, that about 50% of those wells are prime targets and will benefit substantially from the mCloud Technologies. And again, similar to what we're doing with other types of assets, we connect to the wells using edge devices, along with adding other sensors -- methane sensors and other sensors. We connect to other systems and applications -- business applications, historical data and other things. That all goes to the cloud where we look at well and well monitoring. We detect equipment failures, predict those. We have visualization tools, et cetera. Also taking advantage of the live operations center and the mobility platform, we bring advice back to the well in 3 different forms: first, through advisory back to the operators of the well where they take the action; secondly, through live operations center where they may take action or the AI engine will take action; and also through the mobility platform from mCloud, all of this under a specific subscription model, number of -- cost, the dollars per well, similar to other assets and a very strong measurable return on investment. Regarding the forward-looking ARR velocity, we'll have online by mid-2022 the first 35 wells, which brings $210,000 in ARR velocity; by end of year 2022, 500 wells, which is $3 million in ARR velocity; by end of 2023, 3,000 wells with $18 million in ARR velocity; and across the 5-year horizon, 15,000 wells with an estimated $90 million in ARR velocity. It's a perfect time for mCloud to join the digital oil field and to really have an impact and make a difference. Back to you, Russ.
Thank you very much, Vincent. So in summary, we are positioned in 2022 and beyond with the technologies we've developed and with the customers we are aligned with and the validation we received from the largest player, in fact, the largest corporation on planet Earth to really move forward in 2022 and beyond on a very, very strong basis. AssetCare solutions, as you just heard from Vincent and from my prepared remarks, are timely and relevant to many people, in fact, the most relevant companies on earth. If you look in the auto -- in the building space where EV charging is becoming a major thing attached to many, many retail operations, auto dealers being one very key one, that's very relevant today in all of the policy making. We didn't discuss much today about wind, but we will be. That's a fourth master agreement we are working on with the largest wind producer in the world -- technology producer in the world. That will be coming later this summer where we will be well aligned with them. And then in the oil and gas upstream, you've just heard from Vincent that AssetCare is extremely well positioned, and timing could not be better. There's a confluence here of the lifting of pandemics. You've heard from Chantal. You've heard from I, much more than you probably care for the last 4 quarters, all of the history of pandemic stuff. That's now behind us, and that is no longer going to be a factor going forward. It should no longer be a factor going forward. High energy prices is playing perfectly into our strategy. And the adoption of very, very strict ESG mandates down to the SEC levels with very strict policies fit perfectly into our strategy. So this, put all together, creates a very optimal environment for mCloud growth in 2022 and beyond. I'm going to turn the call back to the operator for questions.
[Operator Instructions] And your first question will be from Brian Kinstlinger at Alliance Global Partners.
A lot of great exciting things going on. But my first question, I want to start with your quarterly results and what looks like a restatement that you discussed. Can you talk about where that reduction of revenue comes out of? Is it asset recurring over time? Is it something else? And then as I look at the slide in recurring revenue, I'm a little bit confused because second half is down from the first half, but assets are increasing. So if you can reconcile those 2 things.
That's because connected assets and the recognition of revenue are 2 separate things. So our -- we're deemed now 2 separate things. So are they connected? Yes. Are they collectible? Yes. Is the customer contract signed? Yes. There's a fourth validation of is it being fully used in accordance to under our standard of Results-as-a-Service? So I think you and Chantal have a plan to go over the model, to go back where all those changes were made. Going back -- going forward, those are the 4 tests we need to have. Are you connected? Yes. I mean, obviously, first of all, are you contracted? Yes. Are you connected? Yes. Are you connectable? Well, we wouldn't be connected if you weren't connectable. And are you operating -- receiving the results as a service under the standard of Results-as-a-Service? That's the standard.
Right. But where are the revenues coming out of that you -- in the first 3 quarters? Is it asset over time (sic) [ AssetCare Over Time? ]
Oh, AssetCare Over Time. I don't -- I think there are de minimis -- Chantal, you can jump in. De minimis changes to anything else, but AssetCare Over Time.
It was 100% AssetCare Over Time.
Yes, 100%.
And then can you talk about -- just because it's coming out of AssetCare Over Time, on your slide, you said recurring revenue is down in the second half versus the first half. Yet you -- in the third quarter, connected some. In the fourth quarter, you connected some, albeit a small amount. Why are those assets now generating less revenue even on those -- even when you have changed the numbers?
The net effect of the number of the ones that are not validated for the fourth test, use is greater than the net addition. So that's the net effect of the 2.
Okay. So then if I look at the fourth quarter, the average asset per month is at about $20. You were $35 in the quarter before, but that probably gets changed. So yes. So how do we think about, yes, going forward?
Yes. First of all, that -- there's noise in there, right? So if you take numerator divided by denominator, it won't work because you got some assets sitting there effectively. Think of it revenue paused or idled, just think of it that way.
Right. That's why I'm asking about going forward, how should we think about that [indiscernible] 12 months and 24...
Yes, yes, yes. Now I get the question. So we were at about $33 in change of blended value per asset, call it, before the noise. Starting in Q2, we should be back to noise-free, if that makes -- if that's a way of describing things.
Okay. Yes. Sure. And then any specifics on how close -- should I assume that the strategic capital is before the end of June? Because if I just take a look at your cash in 3 months, where you ended, it seems like that's not right.
No, a couple of things. One is as part of the Carbon Royalty agreement, there is fronted capital for projects. So now our model has switched, right? So the nuance, I don't think anyone's caught, that is with the Carbon Royalty agreement. And that type of model will be used for every growth vector we have, is capital before -- is capital as contract, or actually, in some cases, ahead of contract. So the model is totally flipped now. So in terms of your -- it's a very, very good question, is -- how are we looking at capital before rev rec? It's now the exact opposite. A lot more -- a lot of capital before even rev rec. And that started here with the Carbon Royalty agreement. That's number one. Number two, the answer to your question around the Middle East, their intention is to go gangbusters. So the more capital we have to go gangbusters within the agreement we have with Aramco, the faster we can grow and the more local people we can put in place. We already have a handful of technical experts in the Kingdom ready to hire. We want to hire more. It's Ramadan. So it's a bit of a problem during Ramadan. But post Ramadan, scale. So it's a win-win-win, right? We grow. They give us capital, and we hire locally.
And then I got 2 more questions. The first related to that. Your convertible debt ensured the end of December was just over $22 million. So I assume what you're talking about pays that off in addition to growth capital. Is that right?
Can pay that off in addition to growth capital, yes. It's -- the point that I'm trying to make is highly flexible, and the amount of -- and the size of the commitment is large enough to cover both, yes.
Okay. Lastly, you've got some aggressive goals. You had some really good partnerships -- or strategic partnerships, 30,000-ish plus connected assets. You've highlighted a lot of different things in how you get there. How much hiring do you need to do in order to meet this demand as I assume you don't have all the people in local geographies? What's the average cost to that? And then there's recruiting challenges all over the world. So how is that going to impact us?
So that's a brilliant question. And in North America, very -- yes? Sorry, I interrupt you, Brian. What did you...
I don't know how brilliant. But...
It is a brilliant question because Vincent's model relies a lot on third parties. And he mentioned quietly, but I'll say it louder. He's working with the world's largest oil services company on planet Earth, publicly listed oil services company. They have no shortage of resources. And the customers he's pursuing are well manned. So we are just the cloud provider. Similarly, with the EV initiative, as you say, it's a very large plan, but those are third-party people in the state of New York and the state of California. So we're the AI cloud people. So the new hiring is not as, call it, aggressive as you would think. So we're pretty well positioned from a resourcing point of view. An area where we are committed to hire, we will hire, and you will see headcount addition, but we are ahead of the curve. Our partner in Saudi Arabia is also the former dean of one of the largest universities in the Kingdom of Saudi Arabia, where we're going to be hiring to meet all the requirements -- not requirements, to all -- to meet the strategic ambitions of Saudi Arabia. So they'll be hiring there. So are we ahead of the hiring curve? The answer is yes. Do we have a good partnership network? The best of the best. And I don't know -- I hear what you're saying around there's problem in hiring. I don't think that, that's going to be that big of an issue for us because of how we're aligned with third parties, Brian.
Next question will be from Martin Toner at ATB Capital Markets.
I wanted to ask about the term sheet. In the language in that, it would be on a nondilutive -- or basis? Or I think you might have said accretive, please remind me. And can you kind of give us a little more color on that to the extent that you can?
Yes. It's accretive in that it's not like the 10% coupon and the $23 million is cheap, right? So it's accretive in the sense that it's going to cost significantly less than what it costs us now. So that's the definition of accretive. What else can I tell you? I think I pretty much described it all to Brian, right? I don't know what else I can say. I think I pretty -- I mean, I said pretty much all -- yes. It's tied to -- there are the metrics that we need to do in the Kingdom, but it's revenue-generating metrics, and it's tied to the world's largest customer so -- company. So beyond that, I don't know what else I can say, Martin, that I haven't said already.
Okay. Great. And should we expect it to be a convert similar to the old one?
No. Should you expect that? The answer is no. What exactly form it will take, I don't know. But no, the answer is not a convert like the old one. That's an easy one to answer.
Awesome. Wanted to ask about the language in the PR about enhanced accrual standard that is -- that's what's driving this decline in AssetCare Over Time. Was the revenue that you recognized in previous quarters, was it substantially different than the cash that you guys brought in, in those same periods?
Chantal?
There's no direct connection between revenue recognized in cash. They are 2 separate concepts. And the revenue that was recognized was simply adjusted for timing. There was no downgrade of the revenue. It's just an adjustment for timing. If you want to get on a call after this, Martin, I'd be happy to walk through all of those with you.
But I think -- but putting words in your mouth, Martin, you are wondering, is the cash going to be collected? The answer is yes or it's already been collected. I think you're making sure there is a cash component tied to whatever the revenue is. Is that correct, Martin? Ultimately.
Was just wondering -- so sometimes there's a mismatch between financial revenue and what actually comes in the door in that quarter. Just wondering to what extent that...
It's always that case. So I think what Chantal is saying, it's always the case where we accrue -- revenue does not align with cash. Cash catches up, or in some cases, ahead, rarely, but is ahead. But cash is not aligned with revenue. But they are -- they never were. So it's not -- hasn't to do with the standard. It just never is.
Yes, yes, right. Understood. Okay. Super. And how much of the cost in Q4 was related to the NASDAQ listing?
2-point-something million dollars. Chantal, do you want to -- I mean, we -- but 2-point-something million -- I think she said it in her remarks, right? So go ahead, Chantal.
For insurance, just wondering if there were other costs that...
Well, there's insurance, there's auditor costs, legal costs, there is -- we can go on and on and on. But yes, go ahead, Chantal.
Yes, there's incremental increases in our expenses related to all of the items that Russ just mentioned.
Great. And will any of those be onetime? Or should we think of them all as recurring?
The cost to be listed on the SEC will be recurring in terms of audit, legal, insurance.
It's not a full $4 million of recurring. It's close -- it's half that on and ongoing. Our increase to OpEx, one exchange versus the other, is slightly above USD 2 million.
Got it. Perfect. And when I look at your OpEx this past quarter, if I take out -- take that $2 million out, is that a good run rate going forward? And how will the -- how will expenses increase as you guys try and satisfy some of these new contracts that we've talked about?
You and Chantal can get on a call after this because there is increases in SG&A from Saudi Arabia. I mean there's a lot of gives and takes, right? There's Saudi Arabia. There's a bunch of things that we should factor all in. So I don't know that here on the call is that productive, but I think that's a good analysis you and Chantal should do after this call if you have time.
Next question will be from Jack Vander Aarde at Maxim Group.
So a lot of moving parts there, a lot of exciting things. But just a follow-up for a first question -- follow-up to a prior question that was asked. And maybe just for both Russ and Chantal, but I'm just not sure I understand the AssetCare Over Time economics or contract dynamics per se. It just seems like this revenue stream is very consistent for at least the past 5 consecutive quarters or so. So just looking at the over time portion of the revenue, it did decline despite being fairly consistent. So why -- how much volatility or how much wiggle room are in these contracts just -- that would allow this to happen? I'm just trying to understand the -- it seems like a one-off quarter or a dip down. I'm just not quite sure why.
Let me kick it off, and then Chantal can dig in. It hasn't to do with the wiggle room in the contract. It has to do with how we go back and look at was the AssetCare Over Time in full use in those periods of time? So if this was a normal year, let's assume -- let's say, next year, and there's no more crazy stuff going on, it -- there's no wiggle room in the contract. There's only -- did they use it or not? Is there weirdness in the -- in this case, it's a pandemic restriction but -- and the fact that they're not getting the results and the Results-as-a-Service. So we now know that as how we look at the rev rec standard, but it's not because they have wiggle room in the contract. In fact, what we've done is gone back and said, hey, because you weren't using it -- it's like a store credit, think of it that way. Because you weren't using it effectively in that period of time, we'll extend that for that period. And in those conversations with customers, they said if we're going to do that, let's talk about adding some scope. Let's do other things. So that's how that played out.
Okay. That's helpful. And then maybe just talking about future growth drivers. So very encouraging to see all these new growth opportunities with Aramco. I could just keep listing them. All the wells that you have, 3,000 targeted for 2023 and then the EV opportunities on top of it all. Clearly, this is an incredibly complex undertaking, I imagine. So maybe just from a strategic priority perspective and then a logistical kind of human labor capacity perspective, how do you stack up these opportunities and execute on connecting these assets, like actually going out and making this happen? Are you able to tackle it all at the same time? Or is it case by case? How do you -- what's your decision process? And how are you going to execute on all these?
Yes. Brilliant question also. Vincent was on the call deliberately as he's leading all the wells and under his kind of direction and with the partner network that he has, he has that in control, and we can let him add to what he's -- to your answer in a moment if you wish. In Saudi Arabia, we have a similar pedigree to Vincent, former Honeywell, former Yokogawa executive and has a core team and is working with actually another publicly listed major oil services company in Saudi Arabia, a U.S. company with a mega operation in Saudi Arabia to tackle that initiative in Aramco as well as we will be hiring locally, as I mentioned already. And thirdly, the EV charging initiative is ran with primarily third parties doing the equipment at the car dealerships in New York state and a separate group of people in California. So as big as it sounds in aggregate, Jack, they are managed by a, call it, a single accountable person for the 3 initiatives, and below them, the network of resources are there. So this is not kind of your normal garden variety. We go book a building. You need to add a building. You need to get the resources. These initiatives are managed as a stand-alone initiative with the targets we just went through with an accountable leader for each. Do I answer your question?
Yes. No, that's very helpful. That makes sense. So it sounds like this is a simultaneous kind of overall effort and initiative. And then just maybe...
One last thing I would say, this has been in the works for a long time. So we didn't just end up with the world's largest oil company saying we're going to put all of our -- ESG now to most oil and gas companies is like Sarbanes-Oxley was to publicly listed companies. It's a massive undertaking inside the company, and you cannot be wrong. There's no scenario you can be wrong. You can only be right when it comes to reporting. I'm sure you've seen that. So we didn't just land in Saudi Arabia and say, hello, I'm here. And here we are as the ESG provider, perhaps one of the smallest publicly listed companies in the space with the largest publicly listed in the space. There is a lot -- a lot of effort went into this initiative. Similarly, with auto dealers, similarly with upstream oil wells. So there's a lot of effort went in behind the scenes in 2021 to pull off those 3 mega initiatives.
Yes. Well understood. And then just maybe one last question. And I apologize if you mentioned this, but there's a lot of info here to absorb. So what I'm looking at is in terms of these new kind of AssetCare growth opportunities like with EV and the wells and then also in -- with Aramco, are the -- is there any sort of way you could kind of stack up what you expect for the ARPU or the expected kind of ARPU for these AssetCare revenue streams and contracts? Smart buildings, certain assets, they all have different ARPU profiles. How would you stack these up?
Let's go through that. Yes. The math -- you could just take the ARR divided by the numbers that are in the -- that I just gave. But yes -- so let's take on Aramco. Because of its workers, its assets of various types, on average, an asset at Aramco is about $150. Let's use that. Auto dealers -- for auto dealers, there's a number of assets below it, but we think of it on a dealer basis because there are the minimum set of assets that need to be connected to be able to optimize. So on a per dealership basis, it's about $6,000 per month. On the numbers that Vincent went through, there's a number of layers, levels all the way to audit, self-audit, reporting, applications that are provided to -- at each wellhead. On average, the monthly fee per well is $500 per well. Now in terms of contract duration at Aramco, it has no end. It -- the agreement is effectively -- I think of it as a 20 year -- our ESG capability at Aramco never ends. So as we keep adding to it, it keeps adding to this master purchase agreement, and it doesn't have like the other one 3-year term with renewal. It's just in perpetuity. In the case of auto dealers, they're 20-year deals. In the case of oil and gas, they are 5-year deals. You try to do a TCV on Aramco, you could quickly add up to $1 billion if you are imaginative about it, but it's not the way to think about it, which is why we've adopted the ARR velocity concept. That ties it to the single year concept. So it makes everything look the same.
Next is a follow-up from Martin Toner.
Real quick, can you kind of explain the ARR velocity? Is that sort of a -- it's sort of an ARR run rate type of concept? Maybe you can...
Yes. Yes, yes. That's -- for the reason I just outlined, now we have -- it used to be pretty easy, right? TCV was a good indicator because it was monthly fee times 36 months equals TCV, and they all -- 80% of our deals were like that. Now you have 20 years in perpetuity deals that are big, like very big. You have 5-year deals, very big. So the TCV would be misleading. You'd very quickly get to $1 billion of TCV, and it would look crazy, right? So it -- what you need -- so what we've done is said, okay, take the monthly fee, the number of things that are tied to the monthly fee times 12 months, that gives you an annual recurring revenue velocity. So to your point, run rate, yes. Run rate, if you had -- if you were in and connected for that 12-month period. So if you're connected on December 15 and you had, call it, $500 per month and it was -- you had 5,000 wells, you wouldn't have much benefit of the ARR -- or the MRR in the -- in that year, but the velocity value, you can do the math. Does that makes sense?
Next is a follow-up from Brian Kinstlinger.
I have a few more. Notwithstanding COVID, what are the other factors we need to think about in terms of what could cause delays in installations? I know a long time back, there were some weather issues. There's been some other challenges. So what are the other things 6 months from now we might hear or that keeps you up at night into installations?
Well, the obvious one, right, is EV chargers, right? So we can do all the connection of anything you want. But the world went from no EV to only EV or wannabe EV very quickly. Through our relationship with Carbon Royalty, the reason we have capital upfront is to get ahead of the curve and start placing orders, which we have done. But you're asking hypothetically what should you worry about, that's hypothetically one, is EV charging. It's not an mCloud problem. It's planet Earth's problem. The demand for EV charging is greater than -- by a long shot than supply. At the wellhead, I don't think there's much challenge there at Aramco. Obviously, if Houthis keep dropping bombs in Saudi Arabia, that's not a good thing. So that could be a problem.
So is it supply chain challenges on -- potentially on locating enough supplies? Is that an issue potentially?
Oil and gas, less so because what you're finding is, as Vincent will tell you, these wellheads are extremely well digitally connected. So I think -- I mean, maybe edge devices, but I've not heard -- you would know better than I if there are shortage of edge devices in the world. I don't know.
No. I would say that the wells are generally well-instrumented. At times, you have to put in sensors around ESG. But it's more about getting the data connected to AssetCare and start the data flow.
Which is not a supply chain problem -- which is not any problem actually.
Okay. And then I hate to ask this one more time, but just to make sure I understand. If I look at the restated numbers now on the AssetCare recurring, the real impact was only in December. So I guess I'm curious, why? Because I mean they're very small. Like for example, in the September quarter, you did $6.3 million of revenue in AssetCare recurring. In this quarter, you did $3.9 million...
Pretty easy to explain, though, right? Those same customers...
No, no. I just want to make sure -- it sounds to me like we're all confused. So I just want to make sure I have this right out loud. It sounds like in the December quarter, some of the assets, more so than any other quarter, were off-line or not being used even if they were installed. And so that's why the fourth quarter number is so low compared to the other quarters. Is that right?
That's correct, and that continues to -- so it's basically -- it's almost all in one province, Alberta, 100%, almost all. And it continues to -- the reason we're very deliberate continues until the middle of March, right? So I'd just be very clear that, that pause -- cloud is more accurate than disconnected, but pause continues to middle of March. Yes, you're 100% correct in what you've just said.
That helps. I just think we've got to make sure we all understand. And then the other piece is a follow-up to one of the questions about expenses. Chantal, look, if I look at salary and wages, they're up $1.5 million sequentially just in a quarter. And then G&A is up $2.7 million just in the quarter. It sounds like you were talking about $2 million annually in expenses, but we've seen a huge increase unless I'm mistaken here. So just maybe set the table for salary and wages on a recurring basis in G&A because there's a lot more than that $2 million we're talking about.
So the $2 million wasn't specific just to that quarter. We were identifying costs on a go-forward basis. In terms of salary and wages, we expect this to be relatively consistent on a go-forward basis.
Okay. So what were the increases on salary and wages? Are you hiring a bunch of new people? Your executive team, obviously, you've got someone hiring -- you've hired someone in oil and well services. So maybe just take us through that substantial increase on a quarterly basis.
Sure. It was mostly in anticipation of the oil and gas and the EV charging opportunities that we've got in the pipeline now. Russ, did you want to speak more to that?
Yes. I only want to say that on the executive, it was a net change -- there's -- it's a net-net, right? There's no net positive at executives. So we don't -- we had in the quarter both -- the COO is no longer with us, but Vincent added. Now there's only Vincent, no COO. So it's going to be -- it should be down, right? So they were both there for a period of time. So at executive level, we're not net up. But everything else Chantal said is exactly correct. We're slightly ahead of the curve as well in Q4 in the Middle East, but we'll see more hiring going into 2022 in the Middle East, as I mentioned before.
Thank you. And at this time, I would like to turn the call back to Mr. McMeekin for closing remarks.
Thank you very much. Q1 is done already. So we'll be here on a call here soon. Thank you for your time here today. Thank you very much.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.