Ann: Appendix 4E - Preliminary Final Report, page-59

ARR is not instantaneous. For qtrly contracts, clients sign, then have installation period, pay their quarterly bill at the end of their first qtr and then have a grace period before they need to pay. Overall there is a lag of about 2 qtrs before you see the dollars come in on lvts receivables.

For yearly contracts, they pay up front for a discount (so we see the cash in the next qtr after being added as ARR) but these only account for about 20% of contracts.

There is nothing wrong with ARR to revenue conversions with lvt. If you use these facts above, you can estimate revenue for a qtr in advance knowing the ARR change previously. Vmk has shown this and I have used it in my own model. If you try it on past announcements it has the correct average and a maximum deviation of +-30%.

Cost is the obvious deterrent to most investors when looking at lvt. Remember, marketing dollars now bring contracts for many years into the future. Then next year's marketing does the same. You'll see that opex this qtr last year was about 13m, and last qtr it was 15.3m. Costs are not necessarily ballooning. Arr and receivables have increased significantly in that period and will continue to increase if we keep spending constant.

you don't need to be a genius to see that lvt are losing money in the present. But that's not why you should be considering investing in lvt. If you want to value a SAAS business you need to be open minded enough to consider the future value of contracts.

In a few years I think it is probable that ARR will be $100m+ and costs will still be at sub 70m per year. Remember, $9m of the loss this year was one off acquiring Wizdom which has hardly had a chance to pay itself off.