CAVEAT: I didn't do great in grad school because I was terrible at taking notes, LOL, but here you go for what it is worth. One note I have is that the question portion is very unsatisfying for anyone like myself who listens to quarterly small cap calls in the US where analysts get to ask questions live and follow up when the answer is "less than satisfying". Here, the moderator, restates the question and seems to soften them. It just feels static. I asked a very pointed question about why there is no promotion on podcast or social media and it was mostly ignored and restated as, Will you continue to update the market?
Also, in bold at the beginning is my q that was answered at the end (in bold), which I think was good to hear.
ID LOVE TO HEAR OTHERS TAKE ON THE CALL. 3/8/23 (US LOS ANGELES)
Prophecy Int'l
H1 fy23 Financial Results Investor Webinar
At what level or revenue would Prophecy need to reach thegoal of becoming a, ”relevant Australian software company?” (as I believe was the stated goal in previouscommunication) – First benchmark 25m (which was the goal but probably won't be achieved this year) , 50m with reasonable multiple SaaS shouldbe 8X ARR let alone rev, imminently achievable
Headcount over 110 now
Staffing and hiring and retaining very tough in last 12 months; currently people asking for work because tech lay-offs
R&D all in Australia; growing team in UK; Denver biggest in Sales
4,200 customers, 4k Snare, 200 emite
Global market: Sales process extended in last 6-12 moths, more people involved; more rigor, more scrutiny. Large customers there is very much a focus on saving money and decreasing costs. Typically get a security q that includes hundreds of q’s, very onerous. Not just Yes or No.
1/3 institutional, 1/3 investors, 1/3 insiders; good buy right now,
Record Rev 1st half, doesn’t give guidance but thinks 20m for full year, new record.
Focused on large and gov’t. Helps with financial uncertainty in economies
Emite Rev to be 10-11m by end of year
Snare subscription effects revenue: e.g. sold 100k on perpetual you recognize on day of invoice, but with subscription the 100k translates into a 40k per annum going forward. Long term it’s good.
(He covered a lot that was covered in h123 presser)
Cash flow positive by end of the year
US Defense deals. Some have gone away. 1 of them awarded to someone else and 1 withdrawn. These opportunities not included in pipeline. There are still 7 pending.
3 things drove expenses: hosting cost onto emite platform, 20% up, IT systems moved to Oracle cloud; unrealized foreign exchange loss of 640k and before had gain of 400-something. This made P&L 1m down. But Aussie dollar softening, so that’s good because how much in USD and pounds.
In 2 months, now 15m invoicing where as of end of half 9m.
Philippines in-house: happier workforce, .5m savings,
Moved office in Adelaide, saved $100k
Humana 1.45m per annum;
We have opportunities larger than Humana in the pipeline!
Vast majority of customers come through Genesys or Amazon. Emite. There are many other companies that do this Zoom, Goog, MS Salesforce, 59?, Twillio. Emite has opp to expand into these space. Announcements coming relatively soon. Emite is seen as a dashboard but it is a data product. Same with Snare. CX market space opp vast, and it is expanding. Call center is just one of 10 or so systems that a company has an emite can connect them all.
(discussing Snare, nothing new)
UK: Royal Nave 700k Snare, Royal Air Force 550k (partner Fujitsu)
Will be in Japan next week at DSEI with Team Defence Aust, trying to expand a small “beach head” here
Questions:
More color on cash burn. What to expect in future: Increase in business, increase in costs. Cash flow positive for the year. Had to make some investments. Recruitment costs, salary increases. Smoother going through rest of year.
Income statement basis profitability? Have we got more rev than expenditure? Looking for that every year. Last 3 years very difficult because of global conditions. Better position than many peers.
R&D fully expensed.
Customer acquisitions: emite only going after 500 seats and up. These all come from somewhere, a partner, a legacy, sometimes a competitor.
New sales staff: It’s been a slow process and difficult to get people that are qualified, very challenging. Lost one is Aus. Got poached, couldn’t match pay. It takes 6-12 months for sales staff to get going. Very tough. Some new folks in and ramping up. The pipeline hasn’t changed because we can only handle so much.
Hiring technical staff very difficult. Bigger customers require more staff. Over 30 people in US. Difficult because dollar is .66 to Aussie dollar.
Philippines—there was an “out clause” they only had one person when they set it up 6 years ago. Great retention rate.
Snare Central: Would Snare customers benefit from Snare Central? Yes, except maybe some customers that only use a few Snare Agents and they can’t afford to do more, usually very small customers. Everyone else should upgrade. (Royal Airforce 18 separate Snare Centrals).
US Fed deals? Currently have a foothold in every branch of defense through a big defense contractor. We do a contract with the vendor and then it ends, etc. We also have specialist partners, e.g. Vambrace. Now set up to really go after these deals. Tough because of US budgeting and politics.
Snare Rev opp from moving from perpetual to recurring. Currently Aussie 3m. Getting customer to switch is challenging. So they incentive by offering new product capability and giving them a credit. They basically don’t do non-subscription, except if large gov’t country.
Emite: Margins to improve? Currently 85 points, only cost hosting. Yes. More customers should drive higher margin.
70% of emite pipe through genesis.
Optus: in the process of finalizing deal through them. Will be done this year.
R&D incentive in Australia: We claim it. Got 400k ish cash back. Came in after h123.
At what level or revenue wouldProphecy need to reach the goal of becoming a, ”relevant Australian softwarecompany?” (as I believe was the stated goalin previous communication) – First benchmark 25m , 50m with reasonable multipleSaaS should be 8X ARR let alone rev, imminently achievable
I don’t think the Prophecy story is being taken to the retail investor market very well. There is very little activity on podcasts and social media, which is a great and inexpensive way for investors to hear about rare quality microcaps like Prophecy. Do you have any plans to change this? DID NOT ANSWER THIS ONE. MIGHT HAVE SOMETHING TO DO WITH MODERATOR LOL.
(20min delay)