It's been less than 72 hours since we became aware about the Watson information. While everyone else is celebrating this news and trying to figure out long-term implications about what this can mean for OBJ's bottom line in the future, somehow you have managed to convince yourself that this is negative and "laughable".
There is basically no effort or work required now from OBJ's perspective for any of the launched products, we just sit back and enjoy the fruits of past labor. That is the beauty of the business model. The hard work is all done up front and the passive income rolls in later on with no additional (or very minimum) ongoing work required.
While we are talking smaller sums now (< 300k revenue likely), if this pattern and behavior continues, it won't be long until we cross the 500k and 1 mil marks without changing much at all. We just have to make sure the supply line continues into the future so additional products can be launched so that compound revenues can continue to grow past the 1 million mark.
What do you know? Coincidentally, we have another four confirmed Waves coming up (Wave III isn't even launched yet) and a (somewhat recently extended) agreement with P&G right up to 2021. This is the conveyor belt aka the supply line.
As long as the Waves / products don't dry up then the simple principle of compounding will ensure that revenues grow exponentially. So when you receive announcements that P&G have extended the agreement out until 2021 and additional work plans are in the works, this is alleviating my biggest fear and the key risk of the company and these simple words mean so much more than they look.
Simply put, while there is a supply line for the foreseeable future, revenues will continue to compound without the same amount of effort required. Right now the supply line is restricted to P&G - but consider when a second partner gets on board, a third brand from P&G gets on board and a second and third technology is taken up and so on... the compounding is then accelerated to previously un-imagined levels of growth
We are not there yet but P&G are not giving us 300k in royalties for the fun of it, this is just the start of the curve. If they could replicate the same results without using OBJ they simply would have done so already. The extension of the PDA the unexpected launch of Olay Magnemasks (this wasn't an official Wave product at all and there was no noise about this launch by the board) to the is proof in the pudding that the initial workplans were successful and the relationship has evolved to a level where additional products and ideas are being dreamt up by P&G and OBJ is coming to the party and providing a value-added service.
As all the hard work for the Wave II booster was already completed, do you think it was very hard to switch the design a little for the Olay Magnemasks booster? Not at all, now we have a second passive income stream (with the added bonus that it is going to be stocked in Watson stores) for work that was already completed for the SK-II bonus.
This is the simple, yet mostly underappreciated concept of exponential, compounded growth (additional revenue streams for work already completed). Don't be so negative about low revenues now, this will be made up for in the future when it grows each quarter. OBJ will not become a monster company such as Apple or Google, but it clearly has the ability to throw in another 300k revenue into the equation (tweaking the SK-II booster for Olay) with very minimal effort, expenses and most importantly risk.
This kind of business model is the envy of the business world.
OBJ Price at posting:
3.2¢ Sentiment: Buy Disclosure: Held
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