So it is clear that half of planned enterprise integrations have already progressed to revenue generation and there is a 90% retention rate. Those are good results.
This more or less ties into the 4C results in that they are what I and other long term fundamental investors would have expected - from details therein to public perception thereof. I expected dollar revenue would not amaze, nor will it for some quarters, it is the latter half of this year that larger integrations should begin to hit GSW's bottom line according to their own public statements. Expecting them to make many millions of dollars of revenue a quarter right now is a false presumption. It was also a gimme that non-holders/shorters/haters would zero in on a receipts and run with that as the angle of attack. Why not, it's an easy public forum win, the receipts are low compared to the MC, it's all gone to pot - right! Right?
Focusing on revenue when the company is clearly pre-enterprise revenue is too simplistic a view. When valuing a tech stock (something ASX investors do badly) it is all about user, subscription or transactional growth and future addressable market potential. The latter is huge obviously; people are getting lazy, ecommerce is increasing and GSW will tap it. So the pertinent question surrounds the former point, is GSW experiencing solid growth in its key metric at this stage of startup?
Yes. Growth looks good. The trend line flattens ever so slightly for the last quarter and for me the transactions are SLIGHTLY less than I expected from a mathematical POV but it is still within an acceptable range. This could be due to some delays in integration work due to Christmas, it could be due to the poor retail/hospitality outcome experienced nationwide in that time (
http://www.abc.net.au/news/2018-01-30/nab-business-survery-december-2017/9373210) as GSW will always be at the mercy of Oz retail/hospitality downturns whilst the bulk of its revenue comes from that sector still.
To put this growth in a greater context, using all available data from 4c's on aggregrate transactions, one can plot the greater trend of transactions and quickly and easily identify a log curve growth.
Based on the transaction data trend, I believe that more and more deals are indeed starting to come online as per this update. Which ones? Who knows! We do know however that during a testing period GSW levies no charges on an enterprise customer so revenue may remain flat BUT the number of deliveries has increased 120% overall from last quarter. THAT is the real kicker here. With a few more calculations and plotting of the revenue and cost relationship to transactions one can begin to draw up multiple cash flow models. I highly encourage people to do so
The other most notable thing from the 4c is the extra R&D costs which IMO I hope would be associated with two things : necessary integration work for current enterprise WIP (potentially large looking at those costs) and further development of machine learning into the GSW engine (something they have indicated as a big goal). I would personally want to see those costs come down over coming quarters OR transactions to begin to accelerate away from the current log curve - if neither occurs things begin to get a bit ugly in terms of cash flow going down the track IMO.
The visible and plottable potential is compelling. This is why GSW has had 75m placed into them at a premium.
OK, sure, the 4c and these updates do not placate all fundamental risks alone.
I have read a lot of posters saying things like X company could just build this themselves. That is a short sighted view. Companies are always better off focusing on their core business and letting other companies come in and deliver their core focus as a service. It would cost millions of dollars in effort to replicate GSW from scratch and even then you could not guarantee your mock system would do the job. Further, you would also be paying that cost just to get to where GSW is now, by which time GSW has moved on. A CEO/CTO would just look at GSW, see there is no upfront, it's low impact on cash flow, it is low risk (no lock in), has an immediate impact on profitability, it can be integrated and rebranded easily, it is leveraging snowballing network effects - it's a no brainer to just run with GSW in the same way you just buy JIRA rather than try to be another Atlassian.
I also notice many repeated questions over 'what is GSW's moat?' and 'where are their patents?'. What patents or moat does Snapchat, Netflix, Atlassian or Facebook have? Anyone could make a new variant of what they have created, right? Their moat is market acceptance, retention rate, data and key learnings that only come through taking the product to where it is. We live in a world of big data and this can't be overstated enough as a key asset alone. The Getswift ecosystem has been operational for some time and massive clients want to see a battle tested product that is not being run from a fly-by-night company. If a piece of software is going to be integrated with a tech stack then continuity of operation is vital. The 100 mill in the bank for GSW is a key derisker, it shows that GSW now has the backing to deliver as a business. Basically, a moat in tech is not always defined by features or patents etc, it is about being the solution that conquers first and becomes best-in-class through industry recognition. Again, Atlassian is a great example of this. There are many issue trackers and nothing truly unique about JIRA but it just does the job so well - it's product maturity becomes the moat. As GSW signs companies like CBA, NAW, YUM!, Amazon etc the organic business growth will do their marketing for them and give momentum to uptake. With a smart white label product strategy, GSW, IMHO, is fast going to become as necessary and generic for deliveries as GPS.
Simply put, there is no denying that both fleet and crowd sourced ecommerce delivery optimisation is a growth space and GSW seemed to be well poised to take a big chunk of the market share.
Is there risk of execution failure? Yes there is. It takes balls in the small cap tech space to sometimes trust your gut and not all the people telling you what to do with your money. Patience and thorough research gives me confidence to back GSW to come through and capitalise on their transactional growth in the long term. What the SP does a day, a month, two months, three months from now does not really concern me overall. Sure I will cheer the good news and jeer the bad news as a holder, but I never lose sight of the big picture. GSW has some massive partnerships it is obviously working hard to make 2018 GSW's year of transformation. The 4C and these updates are a step towards that but nothing more than a small confirmation.
Lastly, don't be swayed by me or anyone else on HC. It really pays to research a company and its future potential yourself.
GL to the GSW faithful, this has the potential to be the biggest ASX story in years from now - but the market is gonna make holders work for it. I'll buy if there is a bargain stampede, I'll buy if more juicy data comes along that improves forecastable trends, otherwise I'll continue to hold. Hopefully the rug isn't pulled from under us with a TO, we need more Aussie tech success stories.
