OK guys I have been through this as much as I can and my brain hurts so here is where I am up to.
Web2TV - FY16 Rev = $608000 @ 8040 rooms = $6.30 per user/month Purchase price = $1.925mill
This $6.30 seems very low.
Now say there is $200k profit in this for arguments sake.
We have actually only paid thus far $425k(after due diligence).
So if they only bring in $608K we have almost paid for the acquisition in 2 years.
The rest of the $1.5mil to be paid is under revenue targets. They earn we earn, sort of thing. Win Win.
The interesting thing is they are going to merge technologies to create a new platform for Web2TV clients in order to assist in achieving these revenue targets.
If we only get half way in2 years it would mean an extra $3mil or so in rev per year for just over $1mill outlay.
This could turn out to be a revenue monster if they convert all 8040 rooms to SW1 platform.
“-Opportunity to increase Swift Networks revenue on FY16 by 42%”
In my Estimate that would mean about $6mil.
In complete contrast to the first deal
Liv Ntwrk - FY16 Rev = $ 908000 @ 1736 Subscribers = $43.59 per user/month Purchase price = $0.8mill
Using the same method say $300k profit @ $0.8mill purchase price it would take less than 3years as payback from original investment.
IMO Sw1 picked up a lovely business at a good price.
Not only that it seems they have some very good backend systems that SW1 are looking to adopt. Nice add on. and cash flow positive from the get go.
Now for one of my concerns which was that we sign deals with a new business which have so many rooms serviced.
So say Web2TV deal would instantly bring 8040 rooms into the count towards the performance shares.
I have read all the documentation and IMO this is not the case.
As I understand it for the rooms to be included in the count towards the performance shares these rooms would have to be upgraded to the SW1 service platform.
So as yet they are not included in ‘The Spreadsheet’ until they are confirmed to be under an SW1 service agreement.
I also noted this sentence in page13 of the preso which was confusing and took a time and assistance from more intelligent people than me to understand.
“32
additional sites within organisations that Living Networks deliver services to that are currently not serviced by Living Networks”
So the deciphered content is that LN currently service a number of sites for certain clients.
These clients also have more sites that are currently not services yet by any platform.
So there is a big potential given the added benefits of the SW1 service that we could in fact build into these untapped areas under existing clients and increase revenue.
Now onto the new deal while we are at it.
528-room contract These will not be added to the spread sheet either. Don’t be upset this is good news.
We have added a new steam to our business which is installing the upfront infrastructure for
- Digital entertainment system
- Wi-Fi and data networking
- Internet user management
- Video information channels and alerting
- CCTV and access control for common areas
This deal will be a lovely add on and
hopefully lead to an ongoing service agreement as BAU and then we can add it to the room tally on the spread sheet.
“Swift notes the potential to expand the initial scope of this contract to incorporate ongoing maintenance, testing and user support.
If granted, such an expansion would represent an ongoing recurring revenue stream for the Company in relation to this contract.”
The revenue from this infrastructure build will be confidential so I will leave the revenue guess’s to everyone else but IMO we are not talking peanuts.
Why do I get the feeling we are not stopping for a drink.
It is only a matter of time before the market takes a more serious look our way and with each Ann the pressure will build.
All the best and all IMO.
(20min delay)
