Lets change it up a bit folks and bring it back on topic to some healthy comparisons and forecasts which can be read in conjunction with y above post re: MYOB's earnings back in 2018. If you want you can add back in the potential from Industry Players like Reckon and QuickBooks per the refreshed diagram below. Investors need to NOT loose sight of what it is that Cirralto is actually playing for here.
And on that note here's a rather long read. But if anything it will keep your mind off reading all the unsubstantiated and unsupported words from the down rampers.
Just remember folks as in any simple ' Vulgar ' fraction . And no I a not speaking about FourQ here . So in any fraction , the Dividend or as it is more often referred to as the Numerator - as this Numerator grows and if the divisor or as it is more often referred , the Denominator remains constant , the decimal answer or Quotient in so far as it relates to Share Price and Market Cap is that in this example , the Market Cap ( Numerator ) divided by number of shares ( Denominator ) will continue to grow the resultant Quotient Share Price.
So in this Share Price example , there will be times when a Company's script price will have to grow into its corresponding ' Fully Diluted ' total number of shares. No Doubts about this.
But this simple mathematical relationship can be applied to just about anything you want. For instance as the Number of Total Revenue grows assuming Customers / Merchants remain constant , so to does grows the ARPU.
So what then happens when BOTH the Total Revenue ( Numerator ) , and the Customers / Merchants ( Denominator ) are both growing by in effect different Quotients or Fractions Well this is referred to as a Complex Fractions where you have one formula as the Numerator and a separate one as the Denominator.
So lets assume that the Numerator or the one associated with Total Revenue is expanding or growing by a factor of 200% month on month. At the same time we have the Customer acquisitions growing at 300% month on month . So lets use numbers here which we can relate back to the last quarters ARPU of $45. And I like this association because the Total Revenue number would have to be $225,000 ( or 1/1000th of the $225 million ' Gross Transactions per month forecast for Cirralto's potential share of the entire addressable markets of $100 billion ) .
O.K so $225,000 / 5000 = $45 per customer right . So lets then double the numerator to $550,000 and triple the denominator to 15,000. Well that doesn't sound right does it - because in that situation we actually drop in ARPU to $36.66. So we know then that in order to just remain constant in the relationship of ARPU to Customers is that Total Revenue must be at least double when Customers double. But this doesn't necessarily mean that by Tripling Customers and only Doubling Total Revenues is bad , because it may simply mean that the more rapidly expanding customers have not fully embraced the offering.
So what then happens when the Total Revenue and the Customers only double ? Well the ARPU then goes up by 50% to $67.50. What then happens when it increases by a factor of 4 Q's ( for quotient ..... ) and the customers triple. It then drops back to an ARPU of $60.
But last Quarter we actually know that Total Revenue grew by 83.6 % and the translated underlying ARPU grew by 35%. So the only way then by definition that you can get to an ARPU of 35% based on the Total Revenue growing of 83.6% is by either a 238.8 % increase in Customers or your previous 2.37 customers ( ie ZERO increase in Spet Qtr customer count ) produced 83.6% more revenue and thereby equaling again the average 35% increase per 2.37 customers. And we know we have more than 2.37 or 2.388 Customers right........
So we then know then that there is this obvious relationship of Customer Growth on an average basis with that of the Growth in Total Revenues. So based on this movement between December Qtr and the Sept Qtr there was approximately $4.90 increase in average revenue for every Customer added - ie $4.90 x 2.388 = $11.71 ( increase from $33 to $45 ). Remembering that by for the purpose of the Formulae we had 1 Customer in Sept Qtr which by definition of the calculation and relationship of ARPU to Total Revenue this increase 238.8% to a factor of 2.388 Customers in the December Qtr.
So what might we expect then in quickly arriving at that indicated $100 ARPU which Adrian spoke about in one of the Webinars. What is the likely path or scenario that we will achieve this figure ?
Well if Total Revenue goes up again by 83% and customers remain the same that would imply that the Total Revenue was up 336% as compared to the starting point in the September Qtr right. And if customers numbers remain static , average ARPU would then go up by as much as 424% to $140 or if Customers only doubled by 100% , ARPU would have increased 212% to $70.
So to get to a $100 ARPU from the September Quarters base figures , lets say by next report there is a Quintupling of Customers since Septembers reported 2.388 ( 2.388% increase ). That would put the Customer Denominator then on 11.9 with the Numerator of Total Revenues by definition on a figure nearing $2,150,000 or 1196% up on on the September Qtr's reported revenues of $179,746 .
So if we then move on from there to the FULL potential of the previously quoted 22,000 potential Customers coming in from the Appstablishment's connections , then by doubling the Customer number again to arrive at this figure of 22,000 would drop the ARPU back to $50 unless the Total Revenues were again growing in line with this number at a rate now equal to $4.3 million.
So there you have it folks.....with the conclusion being that we know the Customer Number is going to Grow , and we KNOW that the ARPU will move around as the Quotient results in the complex fractional equations.
But what we don't know is how much Total Revenue will be derived from each Customer with the $100 ARPU being the only hint and target having been mentioned.
Remember folks that Total Revenues are NOT the same as Total Gross Transactions.
And so what happens when we get to these sorts of numbers of 22,000 and $100 ARPU is that can then look at and extrapolate an annual Total Revenue figure of something like $17.2 million. And keep in mind that this would assume ONLY the 22,000 quoted customers without any further change or additional Growth being added to those Customers and ZERO further increases to average $100 ARPU figures. And we know that's these assumption once scaling becomes entrenched and self fulfilling with cross fertilization would simply not be the case. ie the potential .005% from XERO , the 1% potential on boarding from MYOB , the 1% from Reckon , or the .005% take up from QuickBooks 3.2 million Customers. So just in those 4 you could potentially have another 42,000 potential customers.
And for those people might think that these sorts of Numbers are not attainable....just look at some of the Others and how and where , and in what time frame did these companies establish their Customer Bases. The mind boggles when you start to run this exercise.
But make no mistake , this whole Business is about absolute Customers and Merchant / User numbers and their participation.
So coming back to the numbers then - by dividing the $17.2 million by .015 or even .021 ( 40% due to share of Interchange prescribed fees ) , we would get an annualized projected Gross Transactions of between Between $1.146 billion and $819,047,619 worth of transactions.
Of course if we compare the EBITDA margins to other peer companies operating in the same space of say 29 - 30% , we would arrive at a Gross Profit figure of something like $4.98 - $5.16 million ....noting that After Tax figures would be the same for Cirralto as before tax due the millions of dollars of carried f'wd tax losses.
(20min delay)