Hi guys,Just reviewing some stuff I found interesting regarding...

Hi guys,

Just reviewing some stuff I found interesting regarding the company's revenue and ARR performance / growth and their MC.

In the HY1FY19 Report on page 17 and 18 the company discusses the revenue impacts of Zunos and FatStax.

Revenue

Zunos added 950K to revenue and FatStax 100K approx., making 1.05 Mil, meaning without these bolt-ons revenue would have been $8.3 million for the half. Compared to $7.14 million for the previous half (H2FY18) this leap in revenue isn't great for existing operations, i.e. organic growth.

Annual Recurring Revenue

The HIFY19 Report also states that had Zunos and FatStax been a part of BTH the entire H1, then they would have added $1.2 million and 580K to revenue, respectively. On a FY basis this is $2.4 million and $1.16 million, combined it is $3.56 million. Is this ARR and is it included in BTH's ARR figures? Zunos is an SaaS business working a recurring revenue model, as disclosed in an announcement last year. It would make sense that their business would track ARR and that this figure would thereby be absorbed by BTH's figures post-acquisition. FatStax seems to have a business model extremely similar to BTH and so the same probably goes for them. Moreover, BTH's presentation released on 21/02/2019 clarifies that customer retention rates stated are not affected by the acquisitions, but makes no such clarification for ARR.

Hence, of the ARR reported in the H1FY19 Report, $3.56 million of this isn't due to existing operations, and the ARR due to BTH's own operations is $20.9 million minus $3.56 million which is $17.34 million. Pretty clearly shown here in the weird, random move up:



We can all agree this isn't a big increase for BTH's operations from the $15.4 million ARR 6 months prior, and is a slowdown in growth from the $12.78 million 6 months before that. Fortunately BTH has made some killer contracts recently ($7.2 mil and $2.7 mil) so it's still feasible that big growth and broader adoption is coming, and that FatStax and Zunos can increase the quality of the product offering.

FatStax and Zunos were quite clearly loss-making companies pre-consolidation. So I suppose the hope for LT holders is that synergies can be recognised.

Customer Retention

A concern of mine was how customer retention rates of BTH, FatStax and Zunos were integrated (i.e. If retention rates for these guys were very high they may dilute any customer losses from BTH's operations). The presentation released 21/02/2019 clearly stated that the 87% figure excluded the effect of acquisitions - this is a great sign for BTH holders.

Summary

My point of view is that BTH is mildly bullish. I think it's great that they've secured some of the contracts they have but the reality is they are operating in a competitive sphere (see Prospectus) with some companies that are larger than they are, and this will always be a weight on generating strong, exciting revenue growth - I think the way up could be a bit of a plod, as the graph above indicates. The contracts they've signed recently are huge and are the main medicine for a lot of the concerns I've raised though. They've already signed with quite a few global, massive organisations so they clearly have something valuable here. I also estimate that a lot of the growth in the LTV of contracts to H1FY19 (at $137 million) is due to their own operations (the revenues of FatStax and Zunos are very small).

That all being the case, if BTH can show more exciting revenue growth brought on by synergies / bigger contracts there could be a significant re-rate. I think a large explanation for the stock price's weird position is that the revenue growth for the last few halves has been very boring and steady, and this does'n't really fit the SaaS tale of an exciting, valuable piece of software that is rapidly increasing it's adoption, although it seems the story could be changing.

DYOR. NIA.