Ann: Strategic Acquisition - Company Presentation, page-212

Hey Matt

Project revenue is described in one of the recent presentations. It includes professional services associated with custom engineering and new product development requested by customers. They refer to it as part of the ‘Revenue Mix’ so looks to be an important part of the model. I think this view is born out in the CEO interview where they discuss the fintech space and their need for someone (CCA in this instance) to ‘build’ their products. Does that make sense?

As it is part of the Revenue Mix I don’t think it is correct to strip it out when modelling future profits/cash flows. The bigger issue for me in this respect is the degree to which the pre-acquisition CCA is still in scaling mode and therefore investing in the business. The fact that the acquisition brings card platforms and capabilities that CCA would otherwise have to develop should save them a lot of development costs. It will be interesting to see how this shapes up in the next few quarters.

That comment about the previous lack of marketing and business development caught my attention as well. I have a suspicion that under Wirecard ownership the business may have been hamstrung a little in terms of expansion - perhaps harvesting cash to head office. Hopefully we’ll see growth accelerate in a more nimble CCA. The acquisition presentation references an addressable market growing at 60% pa through 2025 so there is plenty of business up for grabs. As a B2B model I don’t expect the marketing spend to involve burning huge amounts of cash like you see in the BNPL space as example.

The video presentation references their fintech accelerator program so I’m expecting this to be an important part of new business development along with selling additional programs to existing customers (3 upgrades already identified and another 9 or so possibles according to the presentation).

Of course, it is all subject to management delivering. Hopefully these guys will take a leaf out of EML’s book in this respect.