"the Aussie professional services market is near identical to...

"the Aussie professional services market is near identical to the US market bar the 10x size difference.
The Aussie market is a window into future in the US because it was here first. I would argue it's hugely important."

The relative structures of the two markets are markedly different:

On the enterprise side, in Australia more than 80% of service industry invoices are electronically, in the US that equivalent figure is something like one-third.


On the customer side, for all of the USA's technological advancements, tens of millions of Americans still pay for goods and services using billions of cheques each year; Americans love a cheque, but that is changing fast, which is the tailwind onto which QFE is trying to latch.

And I think that - if you eliminate the noise and focus on the financial metric which I believe matters most right now, namely growth in Gross Profit - the company has been doing a not-so-bad job of it, growing Gross Profit by 25%, 24%, and 39% in the half-years between IPO and the onset of Covid.

Based on today's outlook guidance - and using the midpoint of the FY2021 Gross Profit expectation - it implies just a 3% decline in JH2021 Gross Profit, compared with pcp. [*]

Which - given the doubly whammy of US businesses being still heavily impact by Covid over the past 6 months, combined with consumers in the US receiving large stimulus payments, thereby significantly dampening credit demand - is a most credible outcome, in this observer's view.




I think that if that chart was presented to an alien from outer space who had just landed for the first time from another galaxy, and who knew nothing about the happenings of earth over the past 12-months, they would not be able to discern from that graph that a massive, once-in-a-70-or 80-year economy-crunching event had just taken place.

Which goes a long way to demonstrating the premature nature of your question of: "why isn't the US market adding 10x as many new customers as the Aussie market in the same period? what has changed to the revenue growth profile across both markets?"

Namely, that there has been the the not-so-small matter of Covid.

Had it not been for the disruption of Covid - which I believe has cost QFE a year, but has certainly not dis-proven the business model - I think that the company would have been close to EBIT breakeven this year. That's now the following year proposition.


A lot of what drives share prices is the market's focus on the "here-and-now", but I try hard to think of what a business might look like in 2, 3 or 5 years' time, and how it is being priced for what I am able to envisage.

And in QFE's case, it is a highly-scale-able business and the revenue opportunity is large - very large - meaning that I can see Gross Profit of $7m today quite easily becoming $22m to $25m over the next 5 years.

Assuming a generous 50% increase in SG&A from today's $6.5m, so up to $10m pa, and assuming $2m pa of R&D expenditure is fully expensed, that would mean EBIT of around $10m to $13m

I don't know much, but I do know that if my prognostications prove to be correct, then the company will be a lot larger than a mere $50m company.

It will certainly be at least double that, and probably more like three times as big.

Sure, given it is still a loss-making business, QFE is no slam dunk investment, but in terms of the underlying progress of the business - towards EBIT breakeven and my target of double-digit EBIT - under the circumstances, I don't see anything that makes me thing that it isn't on track.


[*] Have to say, the FY2021 GP guidance of between $6m and $7m is so wide as to be almost meaningless. Given DH2020 Gross Profit was $3.2m, it implies that JH2021 Gross Profit will be either $2.8m or $3.8m, a 35% variance! Does no one proof read these kinds of announcements, with due consideration for what they actually imply for interpretations of underlying performance? Because interpretations could vary from: expected given the Covid-related circumstances (at the $6m lower limit - which would be 17% lower than pcp), to excellent under the circumstances (at the $7m upper limit - which would be 13% higher than pcp).

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