Member log in

SLI Systems says FY sales miss forecast on ARR basis, to report smaller loss

SLI Systems [NZX: SLI], the search engine software developer, said full-year revenue missed its prospectus forecast, using its preferred measure, although it will report a smaller loss because of delays in building a sales team.

Annualised recurring revenue rose about 29 percent to $25 million in the 12 months ended June 30, compared to a forecast in last year's offer documents of $25.9 million. Operating revenue was $22 million, about matching its forecast for $22.2 million, the company said in a statement.

The shares rose 8.5 percent to $1.41, recovering from a record-low close of $1.30 on Friday and valuing the company at $85.3 million, after selling for $1.50 apiece in last year's initial public offering. The stock has retreated from as high as $2.90 in late January. The company, which is scheduled to report its audited results on Aug. 26, said its loss was smaller than forecast after it deferred spending to hire sales and marketing staff.

SLI Systems had forecast a comprehensive loss of about $7.2 million for the latest year,or a loss of $6.87 million on an earnings before interest, tax, depreciation and amortisation basis.

"We continue to prudently manage the capital we raised last year," chief executive Shaun Ryan said in the statement. "Our cash position and operating loss are favourable to our forecast, due to a deferral of planned expenditure on marketing and sales headcount hires."

The company raised $27 million in last year's IPO, of which $15 million was new capital to be invested in the business. SLI Systems had 510 customers at June 30, compared to the 580 it had forecast in its prospectus.

"Revenue has benefited from the good progress we have made recruiting large e-commerce sites, which take longer to engage but generate higher average monthly revenue and provide an outstanding opportunity to showcase SLI's capabilities to a greater number of this type of customer," Ryan said.


Comments and questions

At least they reacted well to the slower revenue increase by deferring hirings but the question has to be asked ... when do profits start kicking in?

Selling more each year to lose more each year ... it seems to be a common theme from A(mazon) to X(ero) ... but eventually there does need to be some sort of positive return to shareholders ... doesn't there?

Ultimately - if it doesn't become profitable soon it will become another walking dead type company - forced to bootstrap, forgo growth, and raise more capital at dilutive prices.

Lets hope that doesn't happen.

They have $22m of recurring revenue, and are adding $5m a year. They should still have about $20m in the bank, which even if they maintain their loss of around $8m gives them 2 years to get profitable. Worst case in 2 years with no cash left, but say $35m of recurring revenue, they get rid of a bunch of cost and voila, profit.

I'd say they are in a better position than the likes of geo-op or dare I say it, Xero.

Or a bit mischievous?

The NZX release talked about revenue growth and had that in the headline.

In the body of the release it only made reference to expenses and losses being less than forecast.

Very clever as when you look at today's articles they all initially only picked up and reported the revenue and gave lip service to bottom line performance. Had SLI actually provided the losses it is likely the newspapers would have included that figure in their article, which would read the other way. THe NBR appeared to be the only one who after their first article went to the prospectus to outline the potential quantum of SLI's losses.

Easier to focus on the fun stuff rather than large losses. A bad sign when management try to avoid focus on important stuff like that.

Deutsche target $2.01 and recommend hold.