Consensus community valuation
$0.130
Average Intrinsic Value
91.2%
Undervalued by
Active Member Straws
#ASX Announcements
Added 5 months ago

31/01/20 Appendix 4C - quarterly

A mixed quarter from KNO. As expected with no contract announcements there was little user growth, but the company was able to grow it's ARR strongly due to passing on a price increase to existing users during the quarter. It's positive that management feel they have the stickiness with their product to pass on a roughly 15% price increase.

Nonetheless, the thesis still remains one of signing customers. Again on this front commentary was positive, but especially given a ramp up in costs during the quarter the market will want to see results soon.

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#Q2 Results for FY20
Added 5 months ago

Annual recurring revenue of just under $3m at 31 December, 2019. Up 21% from this time last year, and roughly 16% in the past 6 months. 

However, the number of user licenses was essentially unchanghed from the end of FY19, and up only 5% for the last year. As such, ARR was driven entirely by an increase in the average revenue per user.

Net operating cash reduced from $500k in prior quarter to -$886k in the second quarter -- a huge turnaround, which Knoysis says was due to the timing of cash flows, and the typical seasonality due to annual license renewals usually occuring in the 4th and 1st quarters.

Cash balance at $2.8m, essentially flat from the end of FY19. It expects gross cash outflows of $1.25m next quarter, which will be offset by $0.4m in contracted inflows, plus any new wins. A further $1m in inflows is expected in the June quarter, which includes an R&D tax refund.

With annual operating costs of ~$5m, and an ACV of ~$3m, it seems likely that Knoysis will need to raise more capital in the not too distant future. 

With a market cap of 4.4x ARR, the lack of customer growth is concerning, as is the low level of remaining cash. A lot of effort and expense has been put into achieving growth, but this latest quarter fails to adequately demonstrate that.  

Total sales opportunities supposedly increased "significantly" in the last quarter, with the company hopeful of converting many of these prospects in the current half. We will see.. There's likely further downside if they fail to bring in significantly more users in the months ahead.

4C report can be seen here

 

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#Contract win
Added 4 weeks ago

Knosys has signed a deal with ANZ New Zealand to migrate its data to a standalone Knowledge IQ system -- a decision driven by a regulatory requirement not to have technology systems dependant on any foreign parent entity.

The deal is expected to generate $840k in service fees over 9 months. For context, KNO generated $396k in customer cash receipts in the March quarter -- so this is a significant deal.

I quite like the business, but am wary of the customer concentration. I do not hold at present.

ASX announcement is here

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#Financials
Added 2 months ago

From march quarter update

Should i be worried? -

  • Net cash used in operating activities for the March 2020 quarter was an outflow of $817k
  • Estimated cash available for future operating activities: $1.98m
  • Estimated quarters of funding available; 2.4

or not?- 

  • During the latter part of the quarter Knosys commenced managing down certain expenditure, reducing development costs, personnel expenses and marketing and travel activities to levels below recent quarterly run rates.
  • Total receipts are estimated to significantly increase in the June 2020 quarter, with government R&D grant funds of over $550k and potential new contracts adding to the regular monthly customer receipts. In addition to this, contracted large annual licence renewals of over $1.2m are due to be invoiced in May / June 2020, with payment due to be received in June / July 2020

Finally why are staff costs so high:

  • March Quarter Receipts from customers $396K
  • March Qarter staff costs $639K

 

 

 

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