Giving this a repost apparently I was blasphemous before so I will be sure not to invoke David Williams name in vain again
While not price sensitive this is a very important announcement, the key line from the announcement is: "We expect to be able to extrapolate the Australian experience in the US"
That is massive and they helpfully provided some extrapolation.
If we look at the table the number im interested in is the active agents under a paid subscription i.e. agents paying us money.
In short 12,000 agents in Australia are on paid subs
Looking at the segment reporting from the FY21 report we can see that from these 12,000 agents alone a direct gross margin of $8.3 million is made thats $692 per agent per annum in Australia and growing
Now look at the extrapolated figures in the US, they are saying they can replicate their Australian performance in the US and get to 278,000 agents, assuming the same contribution margin then we get gross profit of $192mill in the US alone!
Combining US and Australia we are looking at contribution margins of $300mill before we consider expansion into Canada, South Africa and UK
Granted this is the gross margin and doesnt consider unallocated operating costs currently sitting at $17.7mill but these costs wont scale at anywhere near the same pace as the gross profit growth thats the whole point of being a capital light subscription business so alot of that gross profit growth will hit the bottom line.
Given that it has taken them approx 5 years to roll out to this point in Australia its not a foregone conclusion that given the lessons from Australia my expectation that a slightly accelerated growth path will be achieved in the US and I would expect this to occur within the next 3 years.
So overall this is a business that should be generating EBITDA (and given no debt and capital light model therefore no depreciation) profit before tax of at least $200 million p.a. if Australian performance is achieved in the US
Take 30% off for tax and you can comfortably call it $140mill in mostly subsciription based NPAT on a consolidated level
At that point i dont care what multiple you apply because that profit figure is more than our current market cap
As always DYOR, disclaimer, disclaimer etc etc
RMY Price at posting:
23.0¢ Sentiment: Buy Disclosure: Held
