Seems like a decent win for MSL:

Compared with guidance for over $32m in revenue for FY22 it's not huge in and of itself (especially with the $3.6m spread over 5 years). But this is a big client and it seems there'd be scope to roll out the solution to another 7 stadiums. Also, it's always good to have more high profile reference sites (they won Eden Park in NZ in the last 12 months), and it's a good foot in the door for increasing the offering (and no doubt prices once the system is installed).

Full announcement here

Shares in MSL are presently on (roughly) 10x EBITDA or 1.7x sales. The company has over $8.5m in cash.

Not held.

MSL has told the market to expect a pretty strong first half result, with revenue, EBITDA and cash flow all moving in the right direction.

Excluding OrderMate, which was acquired in September, revenue grew by over 25% from the previous first half. Including one quarter's worth of contribution from OrderMate, Revenue is expected to come in 40% stronger.

Operating profit (EBITDA) is likely to come in above $2m, which is 3x what it was last year, even excluding any Government subsidies, while operating cash flows should be around 16% stronger at $1.4m.

The business remains debt free with $7.5m of cash on hand.

Annualising this latest half -- which is undercooking things given there will be a full 6m contribution from OrderMate and (hopefully) some added growth -- the business is trading on a forward Price-to-Sales of 3.4, and an EV/EBITDA of 18.

Doesn't seem too unreasonable given the company's growth ambitions (check out our meeting with CEO Pat Howard from October last year for more insight there).

ASX announcement is here

MSL had a disappointing year, with sales falling short of expectations due to orders drifting into the following period. Overall, revenue from operations was almost 15% lower at $27.8m.

A big ramp up in R&D and Marketing -- which has long been flagged -- also acted to push them back into an EBITDA loss, which came in at -$1m compared with $3.4m last year.

Cash on hand has dropped to $2.1m, down from $6.6m at the end of the previous year.

Annual Recurring Revenue, which is a key metric to follow as the business transitions to more of a subscription focus was also underwhelming. ARR grew just 6.5% to $17.9m.

The business is in the process of a strategic review, which is always a frank admission that the business is performing as desired. MSL will update the market "shortly".

Overall, it's a disappointing result. Mid single-digit growth in ARR hardly justifies any market premium, especially when the business is supporting higher costs and has returned to a loss making situation with only a couple million left in cash.

I'm glad I closed off my Strawman recommendation when i did!

Of course, it is tempting to make a value argument. At 13c, shares are on 1.2x sales or 1.8x ARR, which seems super cheap next to a lot of other SaaS-styled businesses. Then again, many of those have high double-digit sales growth and boast market leading positions...

I'll see what the strategic review comes up with, but happy to remain on the sidelines for now...

Full ASX announcement can be viewed here

Business update here

Appendix 4C, Cash Flow Statement, here

• Cash balance improved to $3.4m -- a $2m improvement form the last quarter and, BUT this was due entirely to the ongoing sell-down of the Zuuse business. Net operating cash was negative ~$1m for the quarter
• Recurring SaaS revenue up 31% on previous corresponding period (pcp)
• Annual recurring revenue (ARR) now at $18m
• Total revenue down by ~10% from pcp -- as business continues transition to SaaS model
• Company is no longer expensing all R&D and will capitalise 30% of this spend in FY19. Disappointing..
• R&D and marketing expense significantlyu higher compared with pcp -- as previously flagged and already seen in prior quarter

So, all in all, welcome news that cash balance has improved (albeit due to asset sale) and that recurring revenue continues to grow strongly.

However, still very concerning that operating cash burn is still strong and added R&D and marketing spend is accelerating this. Nor is it a good look that R&D expense policy is changing -- bit of a red flag for me.

Shares are presently at 15c (at time of writing) which is only ~2x ARR. That's extremely cheap for a SaaS business in the current environment, especially one whose core metrics are growing so strongly. BUT, the cash burn and very low cash balance is a real concern.

Will continue to watch, but am closing my position as of today

Results for the 6 months to Dec 31, 2018 reveal a 3.5% drop in revenues from the previous first half, and a 23% drop from the preceeding half.

First half EBITDA loss widened from -$0.2m to -$3m

HOWEVER -- The business is transitioning to a SaaS model (less upfront compared to a capital sales, but greater lifetime value). When you look at just the recurring revenue component, there was a 15.5% gain from the pcp, and a 4% improvement from the preceeding half (H2 2018).

There was also a timing issue with some capital sales slipping to the second half.

At the same time, the business has ramped up its R&D spend by 35% and Sales & Marketing costs were increased by 42%.

So, the Bulls will argue that this is (as management say) a transformative year of investment and shift in the sales model that will yield greater long term benefit to shareholders. Indeed, if growth does resume, shares could be considered very cheap -- about 2x sales and 1.5x ARR (very low relative to other growing SaaS businesses).

The Bears will say that the ramp up in costs shows poor discipline, will not yield a good return and, given a fast declining cash balance (just $1.4m, with $2.6m in operating cash burn during the half), the business will almost certainly need to raise cash. Likely at a depressed price which will bring furthert dilution.

I sit between the two. I think the business has good potential and ramping up to chase the very large market opportunity makes sense (execution risk notwithstanding). The descline in sales is well explained, and for the greater good longer term.

But hard not to think they will need to raise. 

My Valuation remains unchanged, for now.

Full results presentation is here

MSL has a big and growing market opportunity, and currently have around 5% of the estimated total addressable market. 

The top line has grown strongly; at a compound annual growth rate of 57% over the past 3 years (as of the end of FY18), with organic revenue growth of 15-20% over the period

MSL has a significant R&D budget, with 17% of revenues in FY18 dedicated to product enhancement -- all of which is fully expensed. In the current year, this has been further (significantly) increased, and similarly Sales & marketing costs have grown by around 25%. There have also been some new senior executive appointments. 

All this extra cost has reduced operating cash flows, which is also further impacted by a ~6% reduction in cash receipts for the first half. With a fast declining cash balance, this has the market worried (understandably).

MSL attributes the decline in cash receipts to the timing of receipts for upfront sales and the ongoing transition to more subscription based sales.

The key question, as is so often the case for companies looking to scale, is whether this added spend will deliver a good return on investment. There's little value in growing sales if gains are more than offset by a fatter cost base. The counter-argument, of course, is that the money spent now will underpin stronger growth in the future. And the company is certainly targeting some strong top-line growth in the coming years.

MSL says it's confident of achieving positive operating cash flow in the second half of 2019, they have a record sales pipeline and are ostensibly very cheap when evaluated against typical SaaS business multiples.

With shares around 8.2c, the company is trading on ~1.2x ARR

So the bull case is simply that the current year is a period of investment in future growth, and that ARR will continue to grow at a double digit rate over the coming years. The business will pivot to positive operating cash in the current year, avoid a capital raise and manage to effectively scale the business. While there are risks, shares are (now) very generously priced.

The business has substantialy ramped up costs and has seen a decline operating cash receipts. The cash balance (~$1.4m) is fast declining with operating cash outflows of $2.6m in the first half of 2019.

Sure, they are saying they will be cash flow positive in the second half, but this would require a significant improvement from the first 6 months of the year. The market is sceptical and shares have dropped around 60% over the past 12 months.

So the worry is that all this added spend on sales and R&D wont yield the promised gains, and therefore the company will fail to scale well. It seems very possible they may need to raise cash in the near future, which would be highly dilutive given the current share price. 

MSL Solutions provides software to the sports, leisure & hospitality sectors. In particular, golf clubs, stadiums and club venues. Software solutions centre around member/guest engagement and management, the value proposition being that customers can create better experiences for their own clientele and, in turn, drive growth.

The core MPower software platform connects a customers food & bevearge point of sales, membership, marketing, financials and workforce management.

It has over 2,400 clients and operates in 24 countries and claims market leadership in Australia and the UK.

It listed in May 2017, and has relied a lot on acquisitions to fuel growth.

It displays a number of attractive characteristics espoused by typical SaaS businesses; such as high recurring revenues (50% of sales) and scalability. 

Half of income comes from offshore, and this is expected to grow as the business continues to pursue new geographies and expands in existing international jurisdictions.

As of the 2018 Annual report,  management have a stated goal to double customer numbers by 2022 to around 5000, and to achieve NPATA margins of ~30%. They are targeting 15% annual organic revenue growth, and 15% more through strategic acquisitions. MSL expect 75% of revenues to be recurring in nature and 75% coming from offshore. 

Q1 FY19 Update -- Oct 31, 2018

ASX announcement here

• Annual Recurring Revenue (ARR) up 4.8% from preceeding quarter (June 2018)
• Sales pipeline up 35% from this time last year (you'd expect a big increase given investments made here -- let's see if and when these all convert, but a positive sign)
• The first quarter is hostorically the softest one -- MSL saying to expect Q1 to account for 15-20% of annual revenues
• Cash receipts in the quarter were down ~9%, but this is due to a shift to SaaS contracts (subscription vs capital sales), and the timing of receipts on upfront sales
• Cash balance of $2.5m

All up, not a bad quarterly, and in line with strategic goals outlined in August.