From Paul Koppelman's FY17 presentation: "Gross cash receipts...

From Paul Koppelman's FY17 presentation:

"Gross cash receipts from customers were $168 million, up 35% on the prior corresponding period’s number of $124.5 million, broadly in line with revenue growth. As a percentage of revenue, gross cash receipts were 104%. Cash collections have been higher than revenue and are forecast to remain that way."

Why is this noteworthy?

The very strong rumour, originating from the short brigade, that circulated through Collins and Macquarie Street in August '16, and perculated into the media, was that then CFO, Steve Recht, was quitting due to accounting irregularities at Aconex, and that the revenue figures were dodgy- and this could be clearly seen because revenue was running ahead of cash receipts. The rumour had it that Aconex was involved in rebating their customers to artificially inflate revenues from project wins.

Make no mistake, this was a very powerful rumour- circulated to the brokers, the media, and via HC as well. It helped trigger a slide in the sp, despite a fantastic result (50% revenue growth and 350% EBITDA growth).

Of course, the rumour was totally false. Steve Recht was 65 years old and was retiring to pursue his "extensive" bucket list and had flagged the move months earlier. There were no accounting issues.

Management was very clear, saying that the revenue/ cash receipt discrepancy was simply the wash through of a high percentage of full up front invoices from pre IPO days. This meant that revenue was reported over the life of the project (sometimes 4 years or longer), while the full payment for services, in those early days, had often been received in advance, to enhance cash flow, and at a clearly negotiated and recorded price.

No rebating- period (rebating meaning, of course, that the reported sale price was not the real price paid, a sort of "cash-back" approach).

Management also confirmed, with a stronger cash position, and with the focus post IPO firmly on annual or quarterly invoicing, in advance, cash receipts and revenue would gradually re-align, with cash receipts running slightly ahead of reported revenue.

This would happen, of course, due  to regular, periodic invoicing in advance, with revenue subsequently being reported as the service is delivered, over the life of the project. And also, appropriately, a small and decreasing percentage of full-up front payments would remain, with no discount offered, in the more volatile regions, globally.

And that realignment is exactly what happened in H1FY17, and has also what clearly occurred over the course of FY17

At 104% of revenue ($168m versus $161.2m), cash receipts are right on the money- so to speak, running slightly ahead of reported revenue. Additionally, this also bodes very well for operating cash flow.

And what of the shorters and media who helped spread that very pernicious rumour? No apology- of course. Would you expect it?

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This post is based on my own research and is not investment advice. When making investment decisions, always DYOR.