Ann: June Quarterly Report and App 4C, page-94

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TripleTop

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01/08/17

11:45

Post #: 26212002
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Originally posted by TripleTop ↑

Okay, I've had a crack.

- Average revenue multiplier is 6x

- Median growth for a SaaS company turning over less than $1m = 75%

- Given we are growing (annual growth) at c.4x this multiply the revenue multiplier by 75% to 10.5x

- How did I get the 4x - growth of 25%, 14%, 50% and 25% over the last 4 quarters gives an annual growth rate of ~265%.

- Other 4 factors listed I'd dare say might be revenue multiplier neutral (we don't have some of this information and the market size is well in excess of $1bn!)

- So in summary, 10.5x revenues (currently $625k) gives us a valuation of $6.8m. Add cash on hand of $3.2m. And that bring us to a tidy $10m, about right where we are!

It looks like VPC is currently being valued based upon the SaaS business only, and rightly so given that's where the value lies.

So to maintain this revenue multiplier the market needs to see a 30% growth QoQ.

If we move to averaging 50% QoQ then we are not only on the way to CFP in 3 or 4 quarters time but also a clear re-rate in SP as the fear for cap raises diminishes and the revenue multiplier (and revenues) both increase.

In fact, just maintaining a 30% growth QoQ should "in theory" result in a gradual increase in valuation as revenues increase. If we can maintain the growth levels while heading above $1m in SaaS revenues then the revenue multiplier should also jump providing another SP re-rate (as these larger turnover companies tend to see growth slow)

So, let's play with some numbers.

What if we get a 50% increase in the September quarter? That means SaaS revenue grows from $625k to $935k and average annual growth goes from 265% to 320%. Assuming no change in multiples for the higher growth rate (perhaps the whole market grows) then applying the 10.5 multiplier to our $935k gives a valuation of $9.8m + any cash on hand (assume $2m) so c.$12m or +20% from today's c.$10m MC.

As you can see the only number we REALLY need to know about is the SaaS revenue growth. And by the looks of the averages and medians in the SaaS world our growth rates are not looking too shabby!

As I said in an earlier post, I think it is still early days for Velpic and prices around these levels could provide an excellent entry point into a start up in the very early stages with significant market potential. It's very easy to get caught up in all the noise of the quarterly and metrics etc but at the end of the day we are growing at a decent rate. If that rate continues and we can avoid another cap raise then I expect a serious re-rate over the next 12 months.

All from me.

Cheers,
TT

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Moving this to another thread - I think it might be useful to revisit valuations over time and also it is a separate discussion to this quarterly results.

VPC Price at posting: 1.7¢ Sentiment: Buy Disclosure: Held
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