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My view on newsflow over the next few months and revenue growth and profitability based on the meeting.
I think it is not well recognised how quickly VRE can move into profit given the effectively 100% margin that is received for the event and enterprise licences (they also get an undisclosed margin on services). They so far have not disclosed much about deal sizes except for a couple of deals worth about £200k each. However we can get a sense of the growth rate by looking through the figures they have published.
H1 2019 revenues of 497k with 18% or £89.5k of Engage Revenue (£407k other revenue)
H1 2020 revenues of 681k with 33% or £225k of Enagage Revenue so 150% growth YOY (£456k other revenue)
Post period Engage was 68% of revenues. If this continues, and if you assume other revenues continue to climb at 12% (reasonable given that the full run rate of shuttle commander revenue won't be visible until this year, and there are going to be a lot of the new VR headsets in xmas stockings this year) then you would reach H2 revenue of:
£511k other revenue.
£1.09m Engage revenue (nearly 5x H1 revenues)
£1.6m total revenue
Given that VRE's total costs in H1 were about £1.8 million this shows that breakeven could be coming a lot sooner than is recognised.
There is room for an much larger upside surprise in H1 2021 given the following.
1. There is nothing in the above that takes into account annoucements of deals coming out of the HTC launch in China.
2. As mentioned before, revenues coming from Engage currently are the thin end of the wedge - the events and the pilot deals are small in size relative to the rollouts that will occur afterwards, and given that VRE is selling to very large organisations, the deal sizes on these are going to be large (putting my former tech sales hat on I would guess in the order of hundreds of thousands, rising over time as the platform is rolled out across a company). The timing on these of course is uncertain but given the "huge spike in enquiries and enterprise customers" taking place over the last few months, I would expect many of these deals to be announced in Q1 2021, and there is still time to close a deal or two before year end 2020.
3. Pricing will continue to rise. As was said on the call they are not getting any pushback on their pricing which means they know they are too low and they will raise prices with each new successful event.
So to summarise my expecation on newsflow would be the following:
Next 3 months:
-Trading update showing a very significant increase in revenues and customers ahead of market expectations (last year they gave a trading update on Jan 16th)
- Positively revised forecasts issued of both revenues and breakeven date.
- More news on major organisations booking events.
- Possible significant news on new reseller partnerships (they have mentioned they are working on these)
If the above scenario plays out then we would get a fairly dramatic spike up i