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Davos007

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28/07/17

07:17

Post #: 26129433
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Originally posted by oggede ↑

The way they report revenue is confusing.

Last financial year $2.3m was "implementation revenue", which is one off revenue for setting up the white label platform for the 4 contracts. After that, they charge a fee for maintaining that service which is called "licence revenue", which is substantially less. So it's NOT $3m per year, it's $2.3m one off plus some small maintenance fees for providing the hosting and support of the platform.

The third is called "subscription revenue", which is the 20% margin they take when a client using their platform subscribes to cloud services. They don't disclosure this value separately, it's just included in the top line value. Most likely because it's so small at this stage it's not even worth mentioning. Because of this, it's impossible to work out a break even point YET, over time more information will come to light as to what clients are subscribing to and how much per month etc. At this stage it's so small they just don't know.

What they're doing now is subsidising the banks and partners in the hope that large amounts of end users join their platform. This is called a top down approach. If they can get millions of users onto the platform then the "subscription revenue" generated will be huge.

The USA bank is obviously waiting for the outcome and take up before joining. Yes, when they sign there will be revenue but it will mostly be "implementation revenue", which is really a way for 9spokes to recoup losses associated with setting up the platform for them.

At the end of the day it's all about "bums on seats". How many they need to break even is too hard to calculate now given the lack of details on "subscription revenue". To give you an answer, in my opinion it's atleast 500k if not closer to 1m. This shouldn't be too hard to achieve given that it's practically free software. What will happen long before that, is that cash burn will be too high and current shareholders will suffer. The product is at best mediocre and limited in appeal. Time will tell but plenty of time to get on board if things change.

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Not too sure about your figures, if believe that the company is lying in their investor presentations lodge a complaint with ASIC, that would be a much better way to downramp the stock.

9SP Price at posting: 14.0¢ Sentiment: Buy Disclosure: Held
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Breakeven no of users, page-5

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