Australia's largest stock trading and investment forum Australia's #1 stock forum

SPT

Click for more information

0.00%

7.5¢ splitit payments ltd

Ann: Quarterly Report (Appendix 4C), page-50

First 50 Last

Share
Profile

Follow
svrn

647 Posts.

71

28/04/20

17:44

Post #: 44307112
Share
Originally posted by slivering: ↑

Here is my take:
Revenue growth
It doubled yoy to close 2019 at USD1.65m (average of $0.41m per quarter). March 2020 quarter Revenue was $0.66m
Let’s assume $3m in revenues for 2020 (Some would argue this is a stretch, but let's go with it). That has SPT averaging $0.75m per quarter
Gross margin
About 72% reported last year. This is good, but if they don’t get revenue up, it’s not enough to cover their operating expenses
More on this later
Expenses
R&D almost tripled to $2.8m in 2019 – you would hope that this spend will increase their chances of accelerated revenue growth, if not, it’s money down the drain. Current quarter was $0.18m, however equivalent quarter previous year was $0.29m. It seems as though R&D is not front loaded, it hits later in the financial year.
If they want to grow and not be left behind, they need to spend.
So let's assume $1.5m for 2020 (they might exceed this).
Sales and Marketing expenditure. This increased 7 fold to $7m in 2019. This is significant. Again, if they increased sales and marketing and R&D expenditure so significantly, yet revenue growth is lagging they run out of runway to convince investors that the cashburn is worth it.
Sales and marketing expenditure March 2020 quarter was $0.66m. Assume by year end this is $3m.
General and admin expenses in 2019 - $13m!!!!!!! A significant portion of this was share based payments for staff. I don’t know how they can justify paying out $7m of share based payments to staff when they’ve just cracked $1m revenue for the first time (oh that's right, they're short of cash, so why not give them some shares).
Other general and admin expenses included salaries and related expenses (which tripled), professional fees (auditing and consulting) which increased 5 fold last year.
Staff costs+admin and corporate costs for March 2020 quarter was $2.83m. Current run rate is $11m spend by year end.
Assume they tighten admin costs given the environment, and they end the year having spent $8m on this category. Trimming the run rate by $1.1m per quarter remaining.
Again, I don't know how they sustain high growth under this scenario - merchants also under pressure, as is the consumer….
Assume bad debts of $0.6m (see below note on future repayments)
Lease $0.14m for the year
What does this all mean – let’s try and consider acouple of scenarios
Scenario 1 - stripping out OpEx costs by $10-11m year on year (unlikely, but let's see) and increasing revenues to $3m in 2020
They don’t have any loans, but I’d be surprised if a bank gave them a loan
They have $7.65m cash on hand + $2.69m future repayments from self-funded merchants. Assume some of these will be bad debts given current environment. Self-funded merchants are probably small and under increasing pressure. So there real cash on hand is $7.65m, the $2.69m hangs in the balance as a receivable. Let's assume 25% of the $2.69m is not recoverable, that leaves you with $2m bringing the total cash balance to $9.65m.
If they increase revenue to $3m in 2020, assume a 70% gross margin
Gross margin on $3m is $2.1m. Which means they have $2.1m left in the kitty to pay their expenses
Expenses last year were $23m, this year based on the above expense run rate and cost containment measures - assume $14m (unlikely, but let's see how we go)
$2.1m gross margin less $14m operating expenses
Loss of $11.9m
There goes all your cash…. And this is under a scenario where they increase revenue from $1.6m to $3m yoy and cost out quite signficantly
They will need to do capital raising and/or find a bank to give them a loan (which bank is going to give them a loan at this rate and in this environment??)
Scenario 2
Assume everything above remains constant, except for revenue
Assume they go nuts and achieve $5m revenues in 2020 at 70% gross margin (that means they will need to generate $1.45m in revenues on average over the remaining 3 quarters, in other terms 2.2x the March 2020 quarter for the next 3 quarters)
Gross margin = $3.5
Expenses are $14m, the same as Scenario 1 (a decrease from the $23m, which I think is ambitious, but they will have to otherwise they won’t survive).
$3.5m gross margin less $14m operating expenses
Loss of $10.5m
Again, there goes all your cash
Question then is howdoes the business model need to change to shift things, because you can'tassume current rate of growth into perpetuity. The growth is off a low baseanyway, and SPT risk running out of puff and capping out.
I'm sure managementare thinking about this, because the current model won't do it. They need tosupplement it or re-engineer it completely, or sell the IP and give everyone anexit.

So, to the forum - happy to be challenged/corrected on this. Also happy to get your thoughts on future prospects.

THis is not advice - just an opinion based on my own analysis of the facts.

Expand

My thoughts are that someone big will buy them out. You are right in that the negative cashflow is unsustainable in the long term. However they have a very advanced technology and continue to advance that no credit card company has their technology. They are already partnered with VISA which hopefully will continue to progress further and maybe they will buy them out.

There is a lot of unknowns about the future direction of the company but with the ceo and two directors buying up on the market recently highlights something big is happening or going to happen.

it’s an interesting stock and you can tell by the posts of holders that we are here for the long term believing this technology will become the norm of the future.

what is sustainable is there business model of not taking on risk. Compared to other BNPL players who are in a lot of uncertainty of how big their debt will be from those made unemployed who can’t pay their BNPL debt. So that’s another factor of in the future what kind of BNPL companies will be around.
SPT Price at posting: 52.0¢ Sentiment: Buy Disclosure: Held
1 Upvote

0 Great analysis

Reply

Top Stories

I88

Infini soars 50% as company reveals it could’ve just made uranium history – redefining what it means to be “high grade”

Week 28 Wrap: ASX hits all time high; CBA shares' two realities; US inflation hits 3% ahead of China plenum

Bitcoin investors need to know the risks

NIM

Nimy to raise $1.21M to explore 'newsy' WA targets

MDI

Nanocap Middle Island Resources kicks off Barkly copper-gold drill run – a potential IOCG-style NT project

There are more pages in this discussion • 103 more messages in this thread...

First 50 Last

Add SPT (ASX) to my watchlist