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Active Member Straws
#Thesis
Last edited 2 months ago

Dragtontail systems (DTS) offers an incredibly unique and exciting product.

They offer SaaS with their Algo and Algo light products. These products organise fast food/quick service restaurants (QSR) kitchens and delivery systems. Ever ordered Domino's and been able to pull up on your phone where and how far away your delivery driver is? This is DTS. It ensures any prepped food is put to the side and until the delivery driver arrives at the store as the food comes out of the oven, ensuring it arrives hot to the customer. This is all done through their patented AI driven software.
Ever heard of the Dom pizza checker? This is DTS as well.

Domino's pizza has shown a threefold reduction in late deliveries (down from 1.6% to 0.5%) and complaints (2.6% to 0.9%).
Rack time has been cut in half (I'll be honest I don't know what rack time is but assume it's how long food stays off to the side).

So Algo optimizes and manages the entire process starting from food preparation all the way to its delivery to the customer, completely streamlining the food preparation and delivery processes. The food preparation, delivery, marketing operations and Customer Relationship Management (“CRM”) are integrated into a single GPS-based algorithm and management software, which optimizes, manages and controls the entire operations chain in the restaurant.

As mentioned above DTS has a QT Quality Control Camera. This can be used to ensure orders are packed correctly, check toppings as pizzas come out of the oven, check ingredients quality, ingredient distribution and order matching.

The company’s states it's objective is to grow this license revenue, which represents a long-term recurring revenue stream with very high margins post installation.

In 2019, the installed base increased approximately 10-fold compared to December 2018, reaching more than 2,000 stores globally.
Cash receipts were up 41% over 2018.

DTS plans on/is working with food delivery aggregators (think Doordash etc) to further leverage their platform and gain additional revenue.

DTS does not have a sales and marketing team and as such all their acquisitions to date have been from company's such as Domino's approaching them, not DTS actively looking to sell their product.

They will be debt-free in the next month via the offering of up to 148,076,926 preference shares in 2 stages, raising $19.25M to be used to pay off debt with the remaining funds used to accelerate its entry into the US and other global territories, to explore significant business opportunities, and to build a dedicated Sales and Marketing department.

With patents protecting their IP DTS has a massive moat/competitive advantage and a huge addressable market.

Analysis:
Red Flag 1: up to 148,076,926 new shares to be issued in 2 stages massively diluting the existing 248,900,000 shares outstanding
Red Flag 2: management has missed milestones and isn't forecasting to be cash flow break-even until Feb 2021
Red Flag 3: This is a SaaS product that is claimed to and should have high margins but just doesn't
Red Flag 4: They've installed in over 3300 stores (Domino's, Pizza Huts etc) globally and still aren't cash flow breakeven. For reference there are 700 Domino's in Australia.

I don't like to get subjective but I feel Domino's has DTS by the balls. To be installed in that many stores with a SaaS product that should have high margins suggests they aren't charging enough for their services.

Disclaimer: I do not hold any shares in DTS and I plan on off-loading my Strawman position in this company.

 

 

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