This company has de-rated to the point where its EV is now...

This company has de-rated to the point where its EV is now around $120m, which looks  
light-on if the company is going to keep progressing as it has been doing for the past several years.

I'm revisiting it because it seems to me like the market is failing to correctly discern the changing Revenue composition of the business, i.e., that the impressive growth from Subscription and Support & Maintenance activities (i.e., Recurring Revenues) has in recent periods been masked by the volatile and contracting Non-Recurring Revenues from Software Licencing and Project Services:



Now that the Non-Recurring Revenue stream has been compressed to a level where it is no longer the dominant determinant, the growth rate of the Whole will assume the growth rate of the fastest-growing Part, i.e. ~20%pa, corresponding to Subscription and Support & Maintenance.

That's the one significant aspect of this company that I don't think the market quite "gets".

The other is the mismatch between the P&L and the Cash Flow Statement (cumulative accounting losses of >$20m over the past 3 years, compared to positive cumulative Free Cash Flow of $7.5m), resulting in ~$10m of Current Deferred Revenue which will be brought to account in the current financial year.  

So, while there will be cash flow implication to service the deferred revenue amortisation, it is reasonable to expect the P&L to expand strongly in coming half-years (unless, of course, they land more contracts with front-loaded terms, which would obviously be a quality problem to have).

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