D4t4 Solutions Share Discussion Threads

[halfpenny] 16/7/2020 14:47

Look ate this year low and use Fibonacci. Also no news flow is a negative driver.

[texas_caddy] 16/7/2020 13:29

What analysis brought you to that conclusion half penny?

[halfpenny] 16/7/2020 12:28

D4T4 looks like it will test support 200 this week. Just watching as no news flow is bad....

[norbert colon] 08/7/2020 20:21

https://www.fintechmagazine.com/technology-and-ai-2/d4t4-solutions-and-dnb-digital-transformation-through-data

[amt] 02/7/2020 11:52

It's impossible to buy any shares but can sell large numbers if you want to. Could there be a takeover on the cards or does the market see this as undervalued

[halfpenny] 02/7/2020 10:02

How disappointing, but there is strong support at 190p which may be soon unless news flow. Fortunately i got out as 235 as RSI was too high so i may come back in below 190, lets see. AFC just raised funding and is in a growth market going forward...

[sphere25] 30/6/2020 13:41

This stock is a good example of how elevated some of the valuations have got. The stock has actually breached its pre-crisis high and yet the earnings for 2021 (6.6p) are set to more than halve compared to 2019 (13.9p).

With all the uncertainty and talk of protracted recoveries, these earnings aren't agiven. The earnings for 2022 are expected to come in at 8p so even looking further out, the valuations in the near term still look stretched.

I'm not suggesting this is a bad company, far from it. This is actually a better example of the valuations out there (e.g. some sectors where you have losses forecast for this year and then some miraculous bounce in earnings the next leaving the stocks on multiples of 25-30 (!!!) if you look out to 2022).

The psyche of the market that is rather baffling at times and it isn't hard to see why the stock is selling off today. I just wonder if these sell on the news type moves are going to be the norm now, as the true picture of the fundamental damage emerges.

[adamb1978] 30/6/2020 13:10

Its a bit disappointing that D4t4 don't provide a few more KPIs in order to help with the understanding of the business transition. For example, providing the number of customers and/or the average contract value and/or duration of contract etc would make it easier for them to truly demonstrate the transitioning of the business. Without that, its difficult to see it, aside from taking their word for it. The problem with the latter is that they have massive customer concentration with 2 customers accounting for 2/3 of their revenues, meaning that those two customers can mask the transitioning of the business - a couple more data points would alleviate that.

Having mulled over the figures over the last couple hours, I've decided to take my money off the table. The main reason is that whilst I think they're progressing reasonably and long-term their valuation (2 years +) might not be overly stretched, I think there's more downside risk in the next 12 months than upside (i.e. more likely to see 170p than 270p). Additionally if we get another market melt-down, then rightly or wrongly their PE could see them get hit more than others. Finely balanced decision, but in the current market I'm happier banking profits.

All the best for holders - I might well be back in by year-end!

Adam

[vprt] 30/6/2020 12:18

Shanklin, the NPV depends on exactly how they decide to price it in the new model vs. the old (which I am not privy to), but typically I believe the answer is yes, it is often higher NPV for the software company if you keep lapses moderate/low. So less up front but more per year, and potential upsells can also add to the annual fee.

Plenty of companies have gone this route. A UK peer on the same path is Sopheon (SPE).

You're exactly right that when partners and customers move to recurring, you must follow or risk losing out. It sounds like D4T4 are not (always) forcing absolutely everybody to the new model, but rather "leading with" a term recurring model. (BTW there are nuances around monthly SAAS vs. annual which the Finncap note touches on).

D4T4 are adding new customers and talking positively about the pipeline, so I think there is every reason to be optimistic that the customer base will be growing nicely.

I am impressed that they are serving some very sophisticated end customers, and I like the "real time" and "tagless" parts of the proposition - as I see it, they enable customers to optimise digital services including ecommerce in real time, which should be valuable. (The data D4T4 help gather is fed and used immediately for analytics and potentially fancy AI / automated decisions and actions.)

[shanklin] 30/6/2020 11:50

How does the NPV of the two different approaches work.

Obviously with one method you get a payment upfront and much smaller ones thereafter...

...and with the other (SAAS), the revenue stream is less uneven and presumably has a longer minimum contract period.

Whether its easier to sell SAAS vs paying up front is one question. But does the NPV of the two contract methods vary greatly?

[vprt] 30/6/2020 11:28

Look a few years into the future and IMHO this is very attractively valued today. If short term P/E is the only tool in your valuation toolkit, you will always miss out on / sell out of a software company transitioning to a fully recurring model, which is what is generally happening in the world of software. Shareholders must understand the medium and longer term revenue and profit implications of (eventually) the entire installed base having to pay D4T4 quite substantial amounts every single year (unless they lapse i.e. stop using the product). The beauty becomes clear when you see layer upon layer (upon layer etc - hopefully you get it...) of predictable i.e. high quality, high gross margin revenues accumulating over time (as long as new wins and upgrades exceed lapses, which is a very low hurdle) to make this an even higher quality, nicely growing, very profitable and valuable cash machine. I hold.

[mfhmfh] 30/6/2020 11:14

I agree, this statement is significant IMHO:

'If the majority of new contracts had closed on a perpetual licence basis then there would have been significant top line revenue growth in the year.'

[shanklin] 30/6/2020 10:23

Think this is pretty significant from today's results...

"In the short term there is a well-known consequence of transitioning from perpetual to recurring licence models in that revenues recognised in the year are lower, hence the reported revenues fell from £25.2m to £21.7m in the period. If the majority of new contracts had closed on a perpetual licence basis then there would have been significant top line revenue growth in the year.

Several large contracts that probably would have closed on the existing perpetual licence basis were deferred into 2020/21 as a result of multiple stakeholders in client and partner organisations needing to review and approve new recurring revenue based contractual terms."

Given the backdrop, I am sure we would all have been happy with significant top line growth... ...and this is despite perpetual deals sometimes being more difficult to get over the line.

[deanowls] 30/6/2020 10:18

Increase in inventories is for hardware for a client delivery in Q1.

[ali47fish] 30/6/2020 10:07

finncap note 30 june more straightforward
A transitional period sets up secure growth in FY 2022
The FY 2020 results are in line with our expectations and reflect the impact of the previously announced switch from large perpetual licences to recurring annual term licences during the year. Despite the COVID strictures, with its large global partnerships, D4t4 continues to close numerous lucrative data gathering and data management contracts with major blue-chips around the world. It is successfully converting a high proportion of its new sales to recurring revenue contracts, but this will sacrifice growth and earnings in FY 2020 and FY 2021. Nevertheless, with growing recurring revenue base, an exciting pipeline and a very strong balance sheet, D4t4 is very well positioned for continued long-term growth and security.

[valhamos] 30/6/2020 10:06

Yes - a real disconnect between the analyst assumptions and what the company are saying.

This link in the company's presentation is interesting - shows a 34% CAGR over the next 5 years in the CDP market.

[mauricemonkey] 30/6/2020 09:54

Maybe he meant 16.6p :) Let's hope so

Edit - just seen Adam's post. Not sure what to think now. Will hold on for the interims and see how it's going.

[adamb1978] 30/6/2020 09:50

So I've downloaded the FInnCap note. I need to read in more detail but their drop in FY21 EPS seems to result from:

- They assume gross margins dropping 4%, this despite the company's own product representing a greater proportion of products (now 80%, up from 71% last year)

- they assume opex to increase from £7.9m in yr to Mar-20 to £8.9m in yr to Mar-21. No idea whether this is valid though I'd hope a board would resist opex increasing >10% if gross profit wasn't also growing

Will read more shortly but forecasts look exceptionally prudent - flat revenue, declining gross margins, increasing opex....that doesnt chime with management commentary

[eagle eye] 30/6/2020 09:43

The business model has been in transition from annual license to SaaS for some time now.
I agree the RNS verbiage suggests positive omens, but the revenue forecast of £21.7m for the current year is in reality flat.
For the following year, the forecast revenue growth is 10.6% to £24m, which appears low for a company exposed to such strong growth drivers.

[adamb1978] 30/6/2020 09:36

Thanks for posting those Rivaldo. If those figures are right, and their analyst has got a link wrong in their excel model, then agree that it looks rich. I struggle to understand how the analyst gets to those figures those given the comments on trading and with almost 50% of revenue in the bag already given the recurring nature. I think someone needs to email the analyst!

[rp19] 30/6/2020 09:29

I agree and that's why I questioned the 6.6p. I think the people above are just quoting what they have seen in the note. I am a happy holder and see plenty of positives. Perhaps there will be more commentary/clarification over the coming days.

[valhamos] 30/6/2020 09:19

6.6p ?? That does not accord with the words in the RNS. I think there is a mistake or some games are being played here but then I tend to hold analysts in low esteem and prefer to do my own forecasts.

"largely unaffected by Covid"

"The year has started promisingly in line with our expectations" D4T4 would be irresponsible not to be more explicit if their expectations were really only 50% of last year.

[rp19] 30/6/2020 09:01

I don't have access to the note - so EPS is forecast to drop from 11.19p this year to 6.6p next year? Even taking into account the SaaS transition, this sounds like it should be exceeded.