Ok, here’s my take on the US “sponsorship” arrangement.
I see 2 possible scenarios based on the information at hand.
December 17 quarter (refer asx aware response letter):
468 customers on 2x pilot sponsorship programs.
Total US revenue = $2,354,164
From September 17 quarter:
US revenue = $640,000
Scenario #1:
All of the US revenue was from sponsorship agreements very similar to that provided by FC Capital, with the difference being they are paid in full (one year subscription) once they go unconditional.
Referring to the asx release https://www.asx.com.au/asxpdf/ 20171127/pdf/43pm0qk6jjzry8.pdf, at 27/11/17 BIG had "on-boarded" 800 customers in the US, and 50% had gone "unconditional" for an arpu of $5,900. They expected another 600 customers by quarter end.
In that release, they almost perfectly describe the FC Capital method of "on-boarding" (but of course are talking US sales). So, if they reached 1400 customers on-boarded & 468 accepted, that's an acceptance ratio of 33%. The flaw in that calc of course is the time taken in between being on-boarded & accepting a video. We don't know what the time slippage is.
Alternatively, the last month of the quarter may have suffered from slow sales (we never did hear what number of customers had been on-boarded - subsequent to the 27/11/17 announcement). So, 468 x 2 (50% acceptance) = 936 total "on-boarded". The flaw in that logic is that 400 unconditional customers (as per 27/11/17) x $5,900 arpu = $2,360,000 (very close to the end quarter number), hence I am leaning towards scenario #2 as more likely.
Scenario #2
Another way to look at it is that they do in fact get paid upfront for all customers “on-boarded”, but they get paid on a monthly basis (as opposed to upfront). The company has also stated in numerous announcements that the US is paid monthly.
Anyway, without knowing the monthly breakdown, it’s hard to calculate, so I’ve just used quarterly numbers to work out customer numbers. Let's say arpu of $5,900 is correct & we assume another $640,000 would be received from customers "on-boarded" in the previous quarter. Taking the December quarterly figure of $2,354,164 - $640,000 = $1,714,164 (income from new customers) & multiplying by 4 to get an annual amount = $6,856,656. Divide that by arpu of $5900 = 1162 customers on-boarded for the quarter. Since 800 customers had been on-boarded as of 27/11/17, and with December being interrupted by xmas, I think those sorts of numbers look quite realistic.
Conclusion
Obviously, scenario #1 would be the preferred scenario due to money only being paid on acceptance of a video (equals less commission), but based on company announcements to date I would conclude that scenario #2 to be the most likely. And while it does seem eerily similar to what has happened with FC Capital, the customer conversion rate appears to be a lot better. Not only that, but commission is likely to be a lot lower due to monthly payments as opposed to 100% up front. And, the risk of having to pay back a huge amount of money at some point in the future is a lot less. In other words, the whole thing is a lot more manageable. Not to mention the fact that Zeta can provide targeted marketing, which would likely improve the conversion rate by providing higher quality customers.
Anyway, this is just me putting 2 & 2 together from company announcements to date. I could be completely wrong.
BIG Price at posting:
$2.22 Sentiment: Hold Disclosure: Held
