Lindsay said in his note he believed the market was “inappropriately pricing a high degree of certainty around the long-term outlook” for Serko’s key partnership with Booking.com for Business (B4B) which is responsible for about 60% of its revenue.
Serko, which is due to report full-year financials next Tuesday, announced a renewal of the B4B partnership at the end of April, although with a revised revenue sharing arrangement giving it lower commission at higher quantities of ‘completed room nights’ (CRN).
The note said the structure of the new contract would mean sustaining elevated levels of revenue growth would be increasingly challenging at higher levels of CRNs, and it would be more difficult to generate operational leverage due to a deteriorating gross margin profile.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Lindsay said in his note he believed the market was “inappropriately pricing a high degree of certainty around the long-term outlook” for Serko’s key partnership with Booking.com for Business (B4B) which is responsible for about 60% of its revenue.
Serko, which is due to report full-year financials next Tuesday, announced a renewal of the B4B partnership at the end of April, although with a revised revenue sharing arrangement giving it lower commission at higher quantities of ‘completed room nights’ (CRN).
The note said the structure of the new contract would mean sustaining elevated levels of revenue growth would be increasingly challenging at higher levels of CRNs, and it would be more difficult to generate operational leverage due to a deteriorating gross margin profile.
“Difficult to generate operational leverage” I think is a bit disingenuous of Forbar.
Due to the nature of the business, every extra dollar of revenue (regardless of its exact level of gross margin) is generating operational leverage.
It is fair to say that the amount of revenue share on each booking at the higher levels will generate less revenue per booking than the current commission gives, but that revenue has essentially near zero marginal cost to Serko, which is why I take issue with the Forbar commentary.
Software businesses are basically all operational leverage after all.
• Total income confirmed at $71.2m (+48%)
• Total spend of $83.9 million (+1%), below the FY24 guidance range of $86m – $90m
• FY25 guidance for total income of $85m – $92m
• On track for positive cashflow for FY25
does this Lindsay know how software business works? software business is one of the highest leverage businesses in the world
Once the development is done, every dollar of revenue provides incredible benefits and leverage as it doesn't cost you anything extra to get that extra dollar of revenue.
once Serko system is in place and sit there, if you make 100K sales or 1 millions dollar sales it cost the same thing.
during development and expansion phase you don't see much leverage but once they are done you can easily see it.
compared to someone who making burgers or other form of business, every extra sale required extra input cost to make the product
so to make 100 burgers it cost you X, to make a million burgers it cost you extra xxx
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Originally Posted by winner69
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