The slow rate of conversion from contract to cash has rightly justified the share price being hammered from its lofty heights. They signed $1.4m in contracts back in November and apparently they still won't be showing on the Q2 cash flow - 8 months later. It definitely makes the investment community question the nature of those contracts.
I work in IT and finance and know how long and drawn out processes can be, especially when dealing with large corporations. To me it looks like they signed the contracts in Q4 with the promise that the product will have additional functionality/meet certain specifications from the clients, which they then went away and built in Q1 and then deployed in Q2, with revenue only starting to be recognised in Q2. Hence the big delay from contract to cash. They did spell out 5-6 months for cash conversion in previous reports, so it appears they are a few months behind on that guidance.
A lot of people are sitting on the sidelines with this one. Any sign that progress is being made through increased cash flow and bookings will see this lift. A fortune 500 client signing a $500k contract is the equivalent of us going to the shops and buying $10 worth of groceries. These companies spend a fortune on recruiting and there aren't many players specialising in this method of recruiting. The fact that they have signed some big clients shows that companies are looking at new ways to recruit. They would only need 10-15 big clients and a handful of smaller clients to be profitable. From the value of their existing contracts, they are 1/3rd of the way there.
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