The business idea is good but the business model is terrible. Their Algo platform is questionable. The gem is their QT Camera.
They have good traction on their product lines with KFC, Pizza Hut Canada, DMP, etc. Recently, they had a huge PO from DMP for $1.2m which is huge!
Management (Ido, Yehuda and team) owns a lot of shares in the company. Ido, the CEO owns > 22m shares. Yehuda owns > 32m which is good because they have skin in the game.
HOWEVER, there are two things which are red flags for me.
1. Management - Even with skin in the game, none of the management had a success (or any that I could find) in software and technology startups. Ido was CEO of several startups but I don't believe any of them got acquired or really took off. Their CTOs (Kate and Simon) doesn't look like they have the technical experience to lead this company to compete with current and future competitors. Just look at their website, the most basic thing and you already know the team doesn't have the technical capabilities to run a software company.
2. Business idea is superb. Business model is crap. They are burning through cash rapidly.
In 2017, they had ~3.2m in employee expenses. Operating cash flow was -4.35m.
That big Domino PO of $1.2m? They need 3 of those to cover their expenses. Let alone make a profit.
Business model is terrible. Their recurring revenues - $200/month for Algo and QT Camera for $50/month. Too SMALL!
Just to cover their $3.2m expenses, they would need 12,800 stores (with both Algo and QT) just to cover their basic expenses. This isn't making a profit or a SUSTAINABLE profit. I didn't factor in the one-time installation of Algo ($1,000) and QT Camera ($2,000) because counting on one-time installation isn't going to provide a reliable cash source for the business.
Players in the Pizza market
Pizza Hut - 12,000
KFC - 26,000
Dominos - 14,000
Burger King - 13,000
Total - 65,000
They would need to capture ~20% of the market share just to cover their expenses AND you better have an EXCELLENT management team to be able to capture 20% of the QSR market and grow that because there will be competitors coming in.
DTS have some big wins behind them such as their recent signing with DMP (2000 stores), Pizza Hut Canada (360 stores), Dominos India (>1,100 stores) but in the long-run, the sustainability of their sales is questionable. Just counting on these big hits, that is only < 3,500 stores.
GLTAH.
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