Conscious that there has been progress with this company since my last straw circa 9 months ago.

However, knowing that the Straw community consists of hard charging c-suite market makers i'll keep this brief so you can all board your private jets to Davos.

In summary;

1. A new CMO has been bought on board (Chad Kinlay) to help drive product / company awareness.
2. The company raised $3m via convertible notes issued to strategic, professional and sophisticated investors.
3. The companies primary product, Traffic Guard, has now launched on Google Market Place.
4. Much talk of 'interest' from perspective customers.
5. Fist sale through Google Market Place ($120k USD) announced in May.
6. Claimed 'Breakthrough quarter' with Annualised revenue to $2.4m. Up 34% over the June quarter.

My thoughts;

1. The share price has, in my opinion, rightly taken a hit as a pre-revenue endeavor that far from breakeven.
2. The company is continuing to spend circa $2m a quarter to keep the lights on.
3. With the product now launched it's the real test as to whether it's as business critical as it's been claimed to be.
4. Good luck to the company this year. I still have a small holding with this company IRL. Keen to see what the rest of the year brings. If the contracts and revenue continues to increase this year then I'll continue to hold. If it starts to putter out I'll cut my losses and move on.

Enjoy your flight Straw people.

Company Update (October) & Building a Case for Future Sales

The company provided an update to the market at the start of the month (October).

Similar to previous mid quarter reports, this one has bundled together several minor updates with the following headlines:

New Clients: JD.ID, Palmerbet & Singtel - All 12 month contracts. All paying contracts (i.e not Freemium)

Annualised Revenue Growth: Circa $1.6m, up 55% since June 2021, and up 150% since 31 March 2021.

General Update: Growing companies in trial, Growing number of paying clients trying more services from Traffic Guard (land and expand).

There has been commentary on some of the socials that this is a puff piece announcement to boost the SP ahead of the expiry date of a certain senior exec’s options. 

Personally I can’t speak to the validity of that as;

1. I believe you’ll only turn yourself inside out trying to figure out any truth in claims like that; and
2. If true, does it invalidate your thesis as to the future of the company? If not, then why care.

From my perspective the update is in line with previous ones provided where the company gathers together several minor / early stage elements to announce to the market. To me it shows progress and I’m happy to have it. 

Lastly, and to an extent almost the point I’m most interested in beyond these initial contracts (which are positive in and of themselves) is the following:

“JD.ID has agreed to be named in a case study to support the marketing of TrafficGuard around the world”

I’ve previously noted, in the commentary on the FY21 results, that the big piece that I believe is missing from the Traffic Guard sales pitch to other organisations is a healthy data set showing how effective the TrafficGuard product is for a large organisation.

I’m unsure if JD is the only client who has agreed to this, it appears to be the only one to date, however it’ll be a great one to be able to show perspective, large scale clients. 

Assuming the product is as good and effective as claimed, this can be a key piece of the AV1 future.

#FY21 Results and the Path Ahead

Highlight numbers;

• Revenue up 111% at 30 June 2021, since 31 Dec 2020.
• Freemium sub’s up 400% at 30 June 2021, v 30 June.

Adveritas shows progress in the last year but is it the commencement of a nice run up of converted sales or continued struggle to meet the expectations set by their own hype?

Welcome to my TedTalk.

Originally I approached this in a positive / negative list form but each point raised generally had  both a positive and a negative to it so instead I’ve just gathered my thoughts below for some consideration. 

Freemium

There’s a lot of talk on the conversion of Freemium customers to paying ones. Ultimately business is business and if they are making money out of this then all the better. I’d like to understand what the long term future for this section of the business would be. 

Is there real expectation that they can continue to get people signed up to the free offering and then convert a decent portion of them to paying customers? 

I would assume if the business starts to exceed at the larger ends then this section of the business would fade as they won’t need to offer a free sample to prove the need for their product.

Google Market Place & The Multi-Nationals:

Initial agreement signed with promises of revenue to come. Good to get the foot in the door but the take up / sales of the product will be interesting to watch. 

As much as an explosion of sales would be welcome I’d imagine that the product needs to prove itself over time so the excitement of the big sales may take a while to get there. 

Also the growth between companies owned by the same overarching company may be a slower burn than expected. Just because the left hand has learned a trick doesn’t always mean the right hand picks it up.

Employment Costs: 

They spend a lot. $6m this year. Somewhat similar last year (taking into account ‘voluntary pay reductions’ during the covid period to help the company out). 

They are also still banking Covid stimulus and Grant money. When that stops, the gap to breakeven becomes that much greater.

The company calls out that they pay market costs to get the best talent to drive the best outcomes for the company. When the sales follow the approach is supported. When they don’t, not so much. 

Thoughts on the future:

1. AV1 are well positioned to start generating sales and proof of product across a good mix of perspective clients.
2. The nature of their product, I would assume, can bring great value to any company that hands over cash based on data provided to it. However I would further assume that larger organisations who want to purchase this product would want to see a nice, long, deep data set that shows how this product can reduce their risk. This takes time. Yes they’ve started but it would need exposure to larger customers, to influence other larger customers to engage them. A bit Catch-22 but accurate regardless.
3. The employment costs and generally outgoings are going to catch up with them, I believe, before their sales cover the gap. They’re committed on the path of paying the premium to drive their sales. Not a wrong path but one that will likely need a cash injection before those sales start to outstrip the costs.

I believe the company have great opportunities to prove to the market that their product is as good as they claim. 

I think it’s going to need more financial support from the market to get there.

They still have all the other risks to conquer to reach success but have my support in the short term.

Based on the above I don’t believe there will be substantial movement in the SP until the sales pick right up and I don’t think that’s going to happen before they need to go to the market for more support. 2 years is my guess until this starts to move. 

RAPIDLY GROWING FREEMIUM AND PAYING SUBSCRIBERS

Key highlights:

•  Freemium subscribers, a lead indicator of future growth in paying customers, up 49% (since 31 December 2020) and most recently grew 23% MoM in March
•  Freemium subscribers now sit at around ~ 2,100 companies
•  New sign ups occurring daily from all around the world
•  Conversion from Freemium subscriber to paying customer remains above management expectations, averaging 15% in the March quarter vs a global average of 2-5% 1
•  Adveritas is now providing its TrafficGuard anti-fraud protection to approximately 170 paying customers, up from 120 (as at 31 December 2020)

Disc: I hold

CONTRACT SIGNED WITH FIRST EUROPEAN CUSTOMER – ONLINE MUSIC STREAMING SERVICE DEEZER

Key highlights

~ Adveritas has signed a “land and expand” contract with its first European customer, deezer, a French online music streaming service

~ Under the agreement, deezer will pay Adveritas €4,000 per month (circa A$6,500 per month) to utilise TrafficGuard’s mobile app install anti-fraud solution

~ TrafficGuard is currently running trials across other divisions of deezer’s advertising spend

~ Combining revenue from the deezer agreement with that from other recently signed clients, additional annualised revenue of approximately $100,000 has been signed since the start of 2021

~ Additional mobile app install customers are expected to be signed over the coming months

Disc: I hold

Key highlights

• Rapidly growing base of paying customers and trials being undertaken ­ 37% increase in TrafficGuard Freemium subscribers (vs September 2020 quarter) ­ 83% increase in customer numbers, with over 100 revenue-generating clients (vs September 2020 quarter)

• New enterprise level clients added to a growing pipeline, and expect to convert a number of these trials into paying customers during the March 2021 quarter

• Strategic partnerships opening new sales channels

• Appointed Matthew Sutton into the newly created role of Chief Revenue Officer to rapidly expand TrafficGuard’s reach in global markets

• Listed as one of Australia's Most Innovative Companies by The Australian Financial Review and awarded Most Effective Anti-Fraud Solution at the 2020 Effective Mobile Marketing Awards

• Strong cash position underpins growth initiatives

DISC~I hold