Jaxta has been on my watch list for some time. After seeing the CEO present at a ASX smal & mid cap investors day. Slide deck
video of presentation on YouTube here
Three things I liked about the business
- Founder Led and insider ownership is quite high
- Simple to understand problem - solved by Jaxta and at the time a reasonable level of competitive advantage and control (credits for all thing music have been lost or disjointed, think record labels with credits written on the back compared to an mp3 with no credits listed at all! Jaxta pull this data into one place - more on this below)
- Simple way to onboard new customers and make a significant difference for them - every person in the industry that Jaxta had credits for has a profile on Jaxta - all they need to do is log in and claim their profile (or even have their manager do this for them) - it couldn't be more simple.
The stats from the latest release is in the attached pic (I couldn't copy paste for some reason).
Where is the value add? (What is wrong with just having a resume...) The data is Supplied by the recording studios - Jaxta has lincensing agreements with the recording houses to ensure they get and keep the data pure and accurate. In the slide deck above they note agreements in place with the top four incumbents (~80% of the credits generating studios and ~90% of all credits) with discussions underway with the remaining studios.
In terms of revenue -
Jaxta have just launched (today 12/08/2021) the paid version for members which is a conservatively priced option (IMO) - my valuation has the details on this. I estimate an initial Rev from paid to range from $1.5m (30% of current platform users) up to $4m (80% of current platform users). IMO based on price point the higher number will be more likely - if it isn't I think the value proposition to users has been overestimated and the business model / platform will need serious review.
Jaxta currently have ~23k profile claims (of potential profile claims TAM 3.8mil profiles but Jaxta suggest a more conservative Serviceable Available Market (SAM) figure of 1.9mil profiles) even at 10% of the SAM Paying for the Pro experience will give Rev of ~$9mil)
Jaxta have API deals with major business partners (currently 5 signed deals all to begin contributing Rev in the next half results) this should drive significant revenue over time and the release today eluded to more deals in the pipeline. Some of these deals will organically grow with the business partner in the deal (Songtrader is one example where I expect the business deal will grow in time).
- 60 deals in imediate pipeline (potential for 30 to be complete and contributing Rev by December 31 2021) on the back of past performance I would suggest this is more likely 10 rather then 30 (management have a tendency to mid targets like this - I think it speaks to there experience with this kind of deal making and should improve as the business evolves)
- 100 deals in entire pipeline at present
Advertising revenue doesn't seem to be on the radar just yet - but it is planned - I would imagine a site of this size and scalability it is only a mater of time - the potential for significant uplift of Rev here seems a no brainer.
With current subscribers at ~104k and orgnainc growth of 286% on previous year the story is starting to unfold... engagement is increasing as well which is up 42% from previous year. As more profiles are claimed and more FANs figure out what's going on, the network effect should take off.
In terms of competitive advantage - Jaxta noted in July 2019 they had 29 licensing agreements with which represents the TOP four recording studios (~80% of market player) these are the largest of incumbents and this represents “90 percent of the global recorded music industry”. (As per slide deck above).
DISC- I hold in RL and on Strawman. I like the business.
please poke holes in my thesis!
