The highlight (because it was completely unexpected) in the...

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10/10/19

19:40

Post #: 40822560
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Originally posted by Rokewa: ↑

Hi Teddyward

You are correct in saying that it easy to be drawn into an investment based on the ‘heady’ school and student license numbers. I have rather centred on the ‘paying subscriber numbers’ and moreover the rate of uptake. Looking at the ANZ experience, the Company has achieved a strike rate of about 20% in terms of Parent adoption. That is through school promotion to school support to parent adoption.

They appear to have had a stronger response in the USA with growth definitely accelerating. Looks like they are signing about 500 customers /day which is impressive. Like the various push/pull forces at play where on-boarding a school can drive parental buy-in. Then you think of school districts / overseeing bodies who formulate standards at a district level. Then add the Telco involvement (facilitating compliance) and the ‘concerned parent’ push. IMO , numerous levers to directly and indirectly stimulate demand.

At at the end of FY19 their activities spanned 8 countries, with the USA accounting for just above 50% of sales. Their energy will be directed accordingly.

Looking at Operating Expenses, staff and corporate costs run out approx. $3 m / quarter (by far the biggest area of Spend). Yes, a hefty burden now but if they continue to scale the business, IMO quite reasonable. I gain some confidence from the convergence of cash income and cash costs.

Almost certain we will see another capital raise come Q1 CY2020, but that’s fine if the Revenue continues to grow. Only 200 m shares issued thus far, so all healthy in my book. I was interested to see that the MD recently exercised his options at 25c, a significant premium to the ruling SP at the time.

In summary, lot’s too like about the trajectories which are forming. Cashed up for six months and no debt. And finally, addressing a global problem with a well supported workable solution.

Rokewa

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The highlight (because it was completely unexpected) in the recent update for me was the 3.7k direct subscribers added in the quarter...the majority of which was through the company website. Doesn't sound like much but 3.7k subscribers equates to approx $200k per annum. Not sure if this will be replicated in future quarters, it was an unusual increase (even the company Im sure was surprised), but if it is its very significant as its virtually pure profit.

I'm personally though more interested in the student licenses short term, at least until the 'paying subscribers' gains critical mass. Their service (to schools) is best in breed, and in the same cost bracket (probably cheaper) than the alternatives, and with a very low 'setup' cost (so high margin). There is very little reason why school districts in the US wont continue to fall over themselves to signup to the FZO offering. And FZO themselves have said they are only targetting small to medium districts for now...what happens when they approach the larger ones with a 'proven in practice' product?

Here's a link to a list of largest school districts ranking in the US by student size, back in 2014. If you assume say $8 per student, just one of the smallest 'bigger' districts in that list would add $300+k revenue per year on student licenses alone. We have signed up 65 US school districts in a VERY short space of time. Guess how many school districts in the United States? As at 2015 it was estimated around 13,500 (source ). Talk about only scratching the surface!

FZO Price at posting: 19.0¢ Sentiment: Buy Disclosure: Held
12 Upvote

5 Great analysis

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