Latest 4C from DTC:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02624460-3A611492?access_token=83ff96335c2d45a094df02a206a39ff4

First up, you have to congratulate them for the clarity of their reporting style and refreshing honesty. The metrics they had flagged in the last 4c have been diligently reported on again, no cherry picking. Though they have chosen to exclude the Newmont fail from their revenue, so maybe not that brilliant!

The good news is that they have definitely had a lot of success in reducing the cash burn: both from pcp and previous quarter to 570k. The EBTIDA margin has improved significantly to 19%. They have $8.1m in cash and predict FCF +ve in 2H FY23 if revenue targets are met.

They have increased prices to multiple customers without an increase in churn, and are looking at expanding this to the majority of their client base.

But.... they are still free cash flow -ve. There are no guarantees that revenue targets will be met and then they are looking at having to do another raise which will be highly destructive to existing shareholders.

Additionally, NRR is not brilliant at 103%. For a SaaS company to be really profitable they need to be upselling modules to existing customers consistently and have a NRR at least 10% points higher.

They have a shot at doing what they say they are going to do as the new Barrick contract looks like it could become a good earner, and old contracts roll onto a new pricing model, but it is not without significant risk.

Not Held, lost a lot on them already!

Some happy news, finally, for long term Damstra holders

Q4 FY22 Quarterly Report and Appendix 4C

Damstra Holdings Limited (ASX:DTC) (Damstra or the Company), a leading Australia-based global provider of integrated workplace management solutions, provides an update on the Company’s operations for the fourth quarter of FY22 ended 30 June 2022 (Quarter or Q4).

Key Operating Highlights

• Highest quarterly revenue for FY22 of $8.0m1 (unaudited)

• H2 revenue growth of 25.2%2 from H1

• Multiple client wins in North America including two large clients in Barrick Gold (Barrick) and Capstone

Copper3

• Significantly improved cash flow trends reported across the business:

o Q4 operating cash flow of $1.3m, the first quarter of positive free operating cash flow for FY22;

o Operating and investing cash outflow of $1.2m, significantly ahead of Q3 (-$4.7m) and the best quarter

in FY22;

o Cost optimisation project target savings upgraded to $8m from $5m, ~50% already achieved at current

run rate;

o International business continues strong momentum, moving towards positive operating cash flow;

o Projecting to be free cash flow positive in 2HFY23, moving to reporting on a free cash flow basis from

Q1 FY234.

Commenting on the results, Christian Damstra, Chief Executive Officer, said:

“Q4 has been a breakthrough quarter for Damstra in many ways. With two large client wins in North America and Barrick rolling out our products over three initial international sites, our international business is now showing the benefits of our significant investment and we believe Damstra has the critical mass to grow at scale. We continue to see a growing sales pipe of opportunities in ANZ but also internationally. Our much improved cash flow outcomes are pleasing in the current environment, with a material and structural reduction in cash outflows in Q4. By the second half of FY23, we expect to be free cash flow positive and are optimistic about the outlook for the business globally.”

1 Unaudited and includes proportional share of SkillPASS joint venture

2 Excludes Newmont, growth of 19.6% including Newmont

3 See announcements released to the market dated 2 May 2022 and 24 June 2022.

4 Free cashflow, includes operating, investing, and financing activities but excludes acquisitions and drawdown / repayment of debt. Damstra’s expectation to be free cash flow positive in FY23 is predicated on the assumption that market conditions do not materially deteriorate, including a re- emergence of COVID-19 restrictions and resulting disruption to client and market activity.

Further SaaS details from CFO:

Our net retention ($) was 114% last year. 

ARPU is a little trickier; really module dependent. At its base, we can go 623k licenses  over $12.1m in revenue is $19 for the half or $38 for the year. But that is low, because the Vault licenses came in for part of the half and are cheaper per license than the Damstra traditional products. If I do that same sum for FY20, it is $19.6m over 404k licenses, so $49.

In essence, though, that number will have reduced because of the Vault acquisition, but will start increasing again as we a) cross sell and b) correct the Vault contracts.

I contacted DTC regarding my favourite topic of SaaS metrics. I got this reply which I have posted for general info.

Some questions were answered, some were not, and there was a bit of extra info thrown in for free!

Dear Mr xxxxx

Thanks a lot for your enquiry and nice to meet a fellow shareholder!

In terms of LTV and CAC, we have actually previously struggled to understand how to communicate that. Our issue, and particularly in the workforce management product, is that we tend not to lose clients. Glencore, for example, was our first client in 2002 and is still with us today. So it is really hard to get a sensible number, as that will blow the percentages right out. To give you an idea:

• Sales team costs circa 28% of revenue currently (and this has been increasing, It was very low pre-listing);
• Our average contract with our Top clients is 3-5 years
• Client $ churn is less than 1%
• The top ones have all been clients for multiple renewals.

So, you can see how CAC would be really hard to get a sensible idea from.

FCF: we define as operating cash less capitalised software spend. That went slightly backwards this year at ($1.8m), which was a bit of an anomaly due to delayed receipts and higher spend in development. Last year, for example, it was $3m positive. I do aim to keep operating cash at 80% of EBITDA, and I do expect development costs to reduce as a percentage of revenue going forward, not that integration activities are winding down.

Hope this helps

Kind regards
??Chris Scholtz

Chief Financial Officer

Damstra's SP has come under significant rpessure over the last 12 months. 

ARR dipped in the Q1, cash receipts were flat between Q2 and Q3, there was doubt that organic growth had plateaued and that new users were being inflated by the Vault acquisition.

The SP had dropped from $2.40 to $0.75 in little over six months.

This latest 4C should pep things up a bit.

They have demonstrated good progress for several quarters now: ARR steadily trending upwards, margins improving, churn remains negligable, new customers signing on, existing customers increasing number of users and products, receipts increasing and a pipeline of potential customers in the near future.

These are all incremental steps rather than anything electrifying but hopefully indicate a well run company improving all the metrics possible to maximise profitability.

Will be looking forward to annual report for greater details

I hold