The shortcomings with this company (in particular dilution and KMP remuneration) have been covered pretty well by others, however there are a couple more to put on the table:
- Claims about a substantial "sales pipeline" repeated over the last year not turning into any substantial revenue uplift. The kindest conclusion we can draw is that the company was overly optimistic about prospective sales and doesn't (or didn't) understand the markets in which it operates.
- Customer churn rate and its effect on durability of claimed "Annual Recurring Revenue".
Not only has the reported churn has quadrupled over the last 3 years, it's also likely to be understated due to revenue growth over this period. Customers typically sign up on 3-5 year contracts, so much of the current churn will be loss of contracts from circa 4 years ago, when revenue was roughly a quarter of today. A higher "true" churn rate of 15%, for example, rather than the reported 4% would say a number of things about the business: - Customers don't value its services to the same degree - The company needs to keep signing new customers at a faster rate just to stand still - with all the attendant marketing and on-boarding costs - It has to do so in a market where the "low hanging fruit" has already been picked
SKF Price at posting:
3.5¢ Sentiment: None Disclosure: Not Held
