RISKS - Updater

A few things are really concerning me about Updater - and please excuse my rough numbers. Feel free to discuss.


·So Updater is expecting 8 to 10 times CY2017 revenue so if on the lower end eight times so ($2.37m X eight) equals $19million by calendar end 2018 – result due late January 2019.

·We already know Updater can make $2.37m in revenue (as seen in the 2017 calendar year) and circa $7m of revenue is expected from Updater’s non-organic acquisition of (IGC and ACI) so that leaves Updater needing another $10m in revenue growth required to obtain Updaters goal.

·Considering last quarters receipts for Updater were circa $1.7m Updater will need to grow 55% quarter on quarter in profitability during CY 2018 to reach that end result goal of $10m.

·That means next quarter receipts from organic growth in the Updater business needs to reach $2.72million and should not include any revenue from their IGC and ACI acquisition.

·To ensure Updater is not sneaking in revenue from their acquisition if Updater are not breaking down where revenue is coming from next quarter – one should deduct $1.75m ($7m divide by 4) each quarter from Updater’s receipts which would include revenue from their recent IGC and ACI acquisition to see if they are keeping on track.

·It is true that Updater’s acquisitions could also be growing in profitability which will assist Updater but I am hesitant to consider/ include this because I predominately want to see Updater grow organically as a business (as its current market cap commands) rather than Updater only growing through acquisitions which can result in further dilution etc.


Quarter/ year outflows

·So these appear to be growing at the rate of $1m quarter on quarter with Jan quarter being $7.5m as compared to the quarter previous $6.2m. Second quarter outflows could be circa $8.5m so let’s say $34m for 2018 with about $19m in receipts (supposedly) coming in – a net decrease in cash and cash equivalents of circa -$13m or $37m left in the bank. There could be potentially more in Updaters bank if they increase revenues and ensure their costs do not blow out.


If Updater keeps outflows at around $8.5m per quarter whilst growing massively (55% per quarter) and if Updater’s gross profit ratios work at circa 33% they will need at least $25m in receipts per quarter to break even or $100m in receipts per year. To get to break even Updater will need to grow Q on Q at 55% for another five quarters or until the end of Q1 2019.

Let’s be frank – when I hear a company already (supposedly) having 35% of the market and is only making $1.7m in receipts and has already chased an acquisition this can be a bit concerning.



The main things to look out for:

1.That Updater obtains there quarter on quarter growth goal of circa 55%.

2.That Updater does not start to go on an acquisition spree in order to obtain it’s growth (revenue) targets.

3.That Updater’s costs (outflows) do not start to blow out.

4.That Updater’s ability to scale does not slow down as it needs a lot of scale in revenues to justify its current market cap / future return.

5.That Updaters cash in the bank does not start to dwindle fast



If any of the preceding things begin to change - get the hell out of Updater! The overall problem with Updater is that it is already commanding such a large market cap and it is not really making anything in revenue. That means ‘hopes and dreams’ have been largely priced in. Typically, as soon as unrealistic ‘hope and dreams’ begin to unravel under the sheer weight of such expectations (MC) the share price of that company can drop rather quickly.

And let’s be frank – there is a lot already priced into Updater and not much room for failure. If a target is not hit Updater could be severely reality checked.