I vehemently disagree with those urging the company to rush to...

I vehemently disagree with those urging the company to rush to cash flow break even.

I believe the Australian retail investor base is a potential negative for the valuation. The message from the ARIB to the company is fixated around getting to cash flow break-even as soon as possible rather than maximizing shareholder value. This feedback (directly from investors and from Australian retail brokers) may start having some effect on management goals. It also might cause global investors to view Australian Tech as worthy of a lower valuation than US or European Tech (where creating shareholder value is still paramount).

The math is not complicated.

SAAS revenue is akin to an investor looking at an annuity. If an investor could buy an annuity for $100 (Cost of Acquisition) that generated a return of $35 per year (Annualized Recurring Revenue) for fifteen years (7% churn)......would you buy that annuity?

Bear in mind that it is CASH FLOW NEGATIVE in the year of acquisition. From the investors' pocket book, $100 goes out and $35 comes in resulting in net negative cash flow of $65. US and European investors would go "You betcha I would buy that annuity"

Then in the second year the opportunity comes along to buy that annuity again for another $100. Would you say " No , sorry, I'll take a pass. I want to be cash flow break even and just pocket the $35 per year without growth"? Or would you double your ARR to $70? and remain cash flow negative?

Add to tha,t the land grab!.......assume there is only $5,000 of this annuity available and whoever buys it first has it all. Perhaps instead of buying $100 in the second year, you would increase your spend and take the $35 revenue from the first tranche of the annuity and spend $135 on buying annuities in year 2 so that your revenue does not increase from 35 to 70, but instead iincreases from 35 to 82 and your cash burn increases to $100.

In year 1 negative cash flow is -$65, in year 2 it is -$100 and it year 3 (if the wife/market limits you to no more than $100 per year )there is an inflection point at $100.....cash burn stops increases and stabilizes or decreases but you still buy these annuities as fast as you can. If the wife insisted you were cash positive by year 3, you would be a lot poorer than if she let you burn cash for 7-10 years buying these annuities.

Subscription SAAS is a very simple model if you have (1) A good product (2) Commercial skills so that a sales effort results in recurring revenues with low churn (3) A reasonable Cost of Acquisition (4) Product pipeline and product refinement so that the product range remains competitive.

The co-founders of this company are passionately "Australian". It is a global company. They want it to be an Australian global company. I think that Australian "can do" and "cost conscious" attitude at the company adds value. There is no Silicon Valley glitter and trappings at this company. But there is no doubt that if this company was a US company it would have a higher valuation and investors would be prioritizing growth more than cash flow break even.

Dont get me wrong , US investors are very conscious of the cash flow inflection point but there is much less emphasis on sacrificing growth for cash flow break even. If a dollar buys 3 dollars then a tech company should spend the dollar.

That said, I respect the local culture and clearly my rant here will have no impact on management goals. They are reducing cash burn faster than I would have anticipated.

In the meantime, we were very struck by the increase in the R&D budget. At least that is one sign of a company not taking its foot off the gas