M7T Analysis

Hey guys,

I recently started buying stock in this company. I'm a big fan of @madamswer and found out about this great company through him (thank you Adam!). Hopefully I can contribute to this forum in a meaningful way going forward.

I have put together the below in an excel spreadsheet of mine. Plenty of scanning over the annual reports from FY17 to FY19, to create the complete picture. New line items were added in FY19 to give more detail to segment revenues, I have tried my best to decipher what these figures were post FY18. Turns out I was spot on for FY17, but $560 off for FY16.

Note the 2016 figures are the pro-forma, unaudited results, which includes the Mach7 Group for the full financial year, and not just from the date of acquisition (8 April 2016) by 3D Medical Limited. I left the 2016 geographical segment revenues as is, thus include only one quarter of Mach7 revenues (formatted in red font).

One thing that became increasingly apparent to me is the volatility of earnings, centred around large contract wins. It appears that recurring revenues adds some much-needed stability. In saying this, I just wanted to clarify, this is the support and maintenance contract locked in for a period of time (usually five years), after a software license fee is sold? So the duration of the recurring revenues after a contract win is usually not longer than say 9 years at most, or is it likely that customers on the Mach7 platform will continue receiving support indefinitely?

I was also curious to know, what exactly is 'Third party viewer software license fees' (highlighted in the red rectangle)? Also if possible, why has it shot up from 2 percent to around 16 percent of revenue? I believe this didn't exist pre-FY18.

Overall, I spent most of my time researching this company's product rather than its financials. I think Adam summarised it well: "Capital-light, globally scale-able, adequately funded, and with a product/service offering that appears to add real value to users in a fast-growing and large addressable market." The huge growth in unstructured data will create a fortune for anyone that gets it right, or even appears to get it right. Given the quality of clients choosing Mach7, I have little doubt they are in the former category. Hopefully this slide isn't too far from the truth...