Its good to hear your first hand information @BlackFX. With 9SP, it can be hard to cut through the spin and get to the facts, so first hand info is always welcome. When you say "That is completely incorrect" I assume you mean my comment that the direct to consumer business has never been the main game? I assumed ticket clipping could not be the focus of much attention given the tiny percentage of revenue they glean from that source. Your observation that the execs saw it as a viable business model is both interesting and disturbing. What were they thinking?
I went back to the IPO prospectus to get a sense of what the revenue model was at the time of listing. It refers to the "ticket clipping" as "app margin". Here is a snippet...
Revenue Model
1. App margin = Commission on SaaS app subscriptions billed via 9SP.
2. Annual license fees = Licensing of the 9SP platform to enterprise customers.
3. Platform deployment fees = Implementing instances of the 9SP platform for enterprise customers.
But the prospectus makes it clear that the bulk of the revenue, a that point in time, came from enterprise customers...
"The company currently primarily generates revenue from developing and providing a customised version of the 9 Spokes platform for Channel Partners. The company may also obtain license fees from Channel Partners. 9SP also generates revenue from retaining a percentage of subscription fees collected from Customers in respect of apps offered by Billing OSPs, where those fees are charged through the 9SP platform. Currently such revenues are not material".
Explaining some of those terms for clarity...
- OSP = Online Software Partner, e.g. A SaaS product like Shopify or Stripe.
- Billing OSP = An OSP that gives 9SP a commission for subscriptions paid via the 9SP platform.
- Channel Partner = An enterprise customer with a customised platform (Bank of NZ, Bank of America, etc).
My misunderstanding was the phrase "Currently such revenues are not material". I assumed this meant "not material and never will be because channel partners are where the money is" but your insight suggests the founders were thinking "not material because we are only just getting started but ticket clipping will be a cash cow one day".
I am glad that they moved away from ticket clipping. The historical record shows it was a dog of an idea. Its hard to get definitive numbers as they last reported "subscription revenue" as a separate line item in 2017. Its not mentioned at all in 2018 and from 2019 onwards, it looks like it was bundled in "other" revenue. In the numbers below, I am including all unexplained revenue from 2019 onwards which is overly generous. All numbers are NZD.
Year Subscription Revenue Total Revenue Percentage attributable to ticket clipping 1 2015 $3K $97K 3.1% 2 2016 $5K $710K 0.7% 3 2017 $1K $1,163K 0.1% 4 2018 ? $6,678K ? 5 2019 $49K - From here on this is all unexplained "other" revenue. $8,276K 0.6% 6 2020 $47K $6,859K 0.7% 7 2021 $163K - Assume not all of this is ticket clipping. $6,598K 2.5%?
This analysis dug up some other nuggets...
2018 = 9SP made the decision to focus on the provision of white-label solutions for major banks.
2019 = Enterprise is now 60% of user base. Which means 40% of customers are direct and still making no significant revenue.
2020 = "The Company views Direct as critical to its future strategy and continues to develop the platform in line with other channels in preparation for a relaunch during the next financial year".
CAVEAT: I may have missed something, so if anyone has info about SaaS subscription commission being material to revenue or future strategy, I am keen to hear about it. Until then, I will assume the most likely way out of 9SP's current predicament is to sign up new enterprise customers and retain the existing ones.
