Thanks for the detailed response
@Just_a_guy , good background on Odotech and the current situation.
I was broadly aware of the Odotech model where the majority of the revenue related to the hardware, with a smaller ongoing cost for the software. Arguably that model hasn't changed that much with the acquisition, with the example of Kuwait where they are buying e-noses and will also generate ARR revenue through the EVS software. Not everyone will do this, some will be pure software plays, so there will be varying types of customers, I get that.
In terms of the customers conversion, I agree that some of those customers would be unhappy that Odotech went under and left them in a precarious position, but at the end of the day, the e-noses would essentially be little use to them if EVS couldn't provide a continuing solution with their software, in an area that is clearly important to their business. For me, I expect that makes conversion relatively easy for EVS (a good thing) given other companies software probably don't have off the shelf software that integrate with the e-noses (where else can they go?) and like most SaaS businesses, they are probably happy to just get them onboard and expand their spend over time.
Having said all that and one of my main points is that I think the company could be communicating this a lot clearer to the market as I raised last night. I would have thought it could easily be written up as a massive positive, but its not, it has been buried, which makes me nervous, especially if the Founder would like to move some of his share on.
As to your last point about the bear case, I also think it is a bit rich to pretend that EVS is selling its software on a gross margin of 85-90%, when the Annual Report last year had this at 42%. Now in the future, the GM is likely to increase, but this is part of my point, everyone seems to be putting 3 or 4 cherries on the EVS cake, while the facts suggest the cake isn't even in the oven yet! This is a really important one to get right either way in any analysis as to how the stock goes longer term and my biggest concern - if they are only converting existing Odotech customers now, how many more salesforce are needed to generate sales from NEW leads to hit their 2020 target. This could weigh on the costs within the business significantly!
Anyway, I will keep watching and see if management can be clearer on their actual progress, instead of dressing it up as a Ferrari, when it is probably only ever going to be a Fiat.
(20min delay)