As having had some accounting experience I understand how this deferred revenue is accounted for and it's not all rainbows and sunshine like some here think. There are expenses associated with these deferred revenues and they will hit the P&L over the next 12 months along with the deferred revenue.
The real issue with this company is not that though, it's actually the margins. The margins are far too low, especially in half 2. This is why the market doesn't value BIG as an SaaS company (at least not yet). This is not down ramping this is honestly what my conclusion is after many and many hours of research into this company. If you want a 5X sales multiple than you need WAY higher margins. Once the market sees the higher margins we will be awarded a higher sales multiple - simple as that.
For the 1st half (1/7/16 to 31/12/16) the gross margin was 35.3% ($2,117,362/$5,990,067)
For the 2nd half (1/1/17 to 30/6/17) the gross margin was 21.5% ($1,717,389/$7,983,272)
Overall for the year (1/7/16 to 30/6/17) the gross margin was 27.4% ($3,834,751/$13,973,339).
The first half was evidently more profitable than the second half.
Until then we will trade at 3X FY18 revenue at best and even that's optimistic. The business model BIG runs is difficult/impossible to scale while not expensing an absolute cra* load on staff and marketing people. It's not a true cloud based model that other software as a service companies run and hence the lower margin means lower valuation multiple. If the margins actually started improving I would come back in if I thought there was upside.
At this point, a market cap of ~200m (fully diuluted) is fully valued if you assume around 70m revenue for BIG in FY18 and the same shocking margins. It's not even just the gross margins I'm talking about. It's both gross and OPEX margins. Both will not come down meaningfully as this company scales imo.
This is a great company and I love their videos and revenue is likely to grow strongly over the next year. The margins mean that little of this will mater for the bottom line and the valuation multiple will be restricted at 3-4X sales optimistically until an imporvemnt is made to the current business model or approach to generating revenue.
