Amortising data-capture over two years is definitely realistic. It was a timely move to shift from 5-years to 2-years, However that means that this is a move from an aggressive accounting policy to a policy that is more in-line with reality. There is always a short-term (<2 year) pain when this happens, half of which is experienced when the company announces changes like this, and the other half of which is experienced when the company actually reports this and it hits investors again when they see a slowdown (or sometimes a negative turn of events) with NPAT and EPS.
In fact, I would also go so far as to agree with you that treating data capture as an expense would be better. That would be an ultra-conservative accounting policy, but I think moving from ultra-aggressive to ultra-conservative would have smashed the share price from $4 down to 90 cents. Investors would have been livid. I think they did the right thing by easing the pain for investors and easing the market in. 2-year amortization is acceptable in my view.
I disagree with aerial mapping being no longer a high-growth start-up play and the focus on profit. I would argue that growth is still very important for this company at this stage of it's life. This company is pretty much a toddler within the industry.
They need to push hard into North America and Europe and Asia. HOWEVER, it should not be Growth At Any Price. Customer acquisition cost needs to be controlled.
They need to be disciplined when it comes to deploying capital and actually calculate and weigh up what they are willing to pay for that dollar of growth.
For a certain locality, if after performing some groundwork and legwork, if they think they can realistically secure $1.5m of contracts this year, another $2.5m next year and another $2.5m the year after, then they should have a dollar figure on what they are willing to pay for those $6m ACV's.
Assuming LTV for those contracts is $30m (6m x 5 years), then they should have an internal metric that tells their Sales, Marketing and Finance teams that they can only spend up to $Xm, within those 3 years, to acquire those contracts. So spend WISELY.
Perhaps that number is $2.5m. Perhaps that number is $5m. Perhaps that number is $6m. But I, as an investor, need to know that they are strictly controlling and measuring and managing these expenses, and they have a capital management framework to ensure they don't throw cash everywhere with no results, and think that's acceptable "because that's what all Silicon Valley companies do here".
On another note, well done on CCP. I haven't taken a look at the company yet, but several smart cookies have told me to look at CCP for 2 years now, I simply haven't had the time or resources to do so (unfortunately!).
NEA Price at posting:
$1.91 Sentiment: Buy Disclosure: Held
