Here's my thoughts on this 4C....
Receipts
Revenue for Q2 was $8.5m, of that $3.7m was in December alone with receipts up to December being $5.6m. Dubber has mentioned in the past that cash received occurs 60-90 after billing and they’ve also mentioned they are on flexible arrangements due to Covid. Additionally, anyone who has dealt with Telcos know how painful their finance systems and processes can be, I would expect an initial 6-12 months of teething issues with billing, resulting in delayed payment, as partners are onboarded… this should smooth out as the partnership gets bedded in.
Dubber has said before for their foundation partners, like the Cisco deal, they get a monthly flat fee for the base service (Dubber Go) and any uplift to that is paid on a pay as you go model by the consumer to the Telco and then onto Dubber… this is also indicated in the BT deal.
ARR to Revenue Conversion: It’s looking like there is a 6-month delay between ARR to Revenue. IMHO this is due to the complexity of these Partner integrations. Injecting a service like Dubber into the core of a Telco is no small task, there would be all sorts of governance, security, compliance and testing gates to get through before a Dubber product would be live and available for end users to consume.
Based receipts of $5.6m, Revenue for Dec alone being $3.7 and the BT deal, I wouldn’t be surprised if we see Q3 receipts around $11-12m.
Taken from Q2FY22 4C
Taken from Q4FY21 4C
Taken from Q1FY21 4C
Staff Costs
The cash component of the Speik earnout to employees was included in 2.1.a Entities, not included in the Staff Costs.
There was a $1.05m PAYE payment for Covid Relief, bringing the $9.967m down to $8.917.
While that does appear to be very high, you have to remember that it’s likely 75% of the work force will be highly skilled specialists in AI, AWS, Azure, DevOps, Containerisation, Cyber Security, Unified Communications and of course Telecommunications in general, and that’s not to mention the Partner Engagement Managers and Customer Success Leads... All of which demand high salaries to attract and retain, especially given the skills shortages generally in the AI and Cyber areas. Dubber’s accessible talent pool is huge though given their global focus and with a presence in AU, UK and US.
Dubber’s employee head count is now at 240, compared to 152 the same time last year. Dubber are clearly on a recruitment drive, they currently have 30 jobs advertised on LinkedIn. https://www.linkedin.com/company/dubber/jobs/
If we break the staff costs down, there’s been a significant increase in the calibre of people, and therefore rem package. Depending on when new hires started in Q2 and Q3, we’ll likely see Staff Costs around the $10m mark next on the Q3 4C.
4C
Headcount
Staff Costs
Average annual cost per employee
1 Q2FY21
152
$3.617m
$95,184
2 Q2FY22
240
$8.917m
$148,616
MP1 could be considered a comparable company at $176,000 average annual cost per employee… Ok, yes I’m a Bevan Slatter fanboy, but MP1 does require the same type of employee skillsets.
Product manufacturing and operating costs
In the past, Dubber has mentioned that they were solely based on AWS and yet there is mention of Azure in some of the reporting now. While I’m pleased at this from a Service Continuity perspective, the administration overhead, operational costs and platform costs associated to running two cloud platforms dramatically increases. It also means an employee head count increase with Azure specialist Architects and Engineers now required to accompany existing AWS specialists.
The decision to go multi-cloud could have been driven by the Notiv & Speik acquisition, but also likely Partners could have demanded it to create a platform agnostic application. While Dubber should have reusable architecture patterns to integrate with Partners, I suspect each Partner integration will require further consumption of cloud services and application specific to their requirements… again driving up costs.
The beautiful thing about cloud platforms, is their pricing model is generally consumption based, pay as you go. Therefore, its expected Dubber’s cloud platform costs will grow as its subscribed users and number of calls recorded increases. Cloud platforms do have the ability for consumers to purchase capacity and services on a reserved basis over a term which is generally paid-up front, this is in exchange for a discounted rate over the lifetime of the term compared to the pay as you go model.
Throughout Dubber’s 4Cs, I see reference to them often referring to pre-payment of cloud services, and this is reflected in the dramatic change in Operating Costs between 4Cs. Check out this for more info -
https://www.cloudhealthtech.com/blog/aws-reserved-instances-vs-on-demand
If we look at the Operating Cost per Subscribed user, its on the increase rather then decreasing. However, given the expansion into Azure, Notiv & Speik acquisition, partnerships and general development of their products, I think the increase is warranted but something I’ll be watching carefully overtime.
Quarter
Subscribed Users
Operating Costs
Operating Cost per User per month
1 Q2FY22
510,000
$8.289m
$5.41
2 Q1FY22
450,000
$7.252m
$5.37
3 Q4FY21
420,000
$5.984m
$4.74
4 Q3FY21
380,000
$5.073m
$4.45
5 Q2FY21
300,000
$5.996m
$6.66
6 Q1FY21
230,606
$2.543m
$3.67
Taken from Q2FY22 4C
