Special Bonus: Why SiteMinder Could Be the Most Misunderstood Stock on the ASX

21:51Because one of the questions is, what do you need to spend so much money with sales? Because for B2B businesses, it's more sales than marketing. And the answer is, yeah, we have salespeople, but we get tons more back. It's just back-ended over the life of the customer. And that narrative sounds unconvincing. but when you put a metric next to it, like where you say, this is how much the overall value of the customer is worth relative to how much it costs us to acquire the customer, which is what that LTV to CAC metric is, then you can say, cool, we can compare that to what other businesses say their LTV to CAC is and then you get an arms race on that ratio but it's just an easy way to explain an important narrative.

22:38That's why that goes in there. Yep, okay. What else do you like that they put in? The other one was showing the different, like separating out revenue. It sounds pretty simple, but a lot of companies will blend their subscription and transaction together. So you do like them as separate business units. 100%. Here we go. I agree. By the way, I think these are pretty honest reporting companies. That's what I mean. I get excited when I see that. That's good. They break it out. They report constant currency as well as reported numbers. So I got very excited and then I did find myself a bit upset when I came to the way they talk about annual recurring revenue and then under that they have transaction revenue, which is just not – it's not – and then when you go look at the definitions and you go look at their own definitions and it says – I'm just picking it up because it's important because it's being thrown in with annual recurring revenue.

23:37A lot of software companies do that. I actually did have a huge issue with that. No, it's a big issue. So there's a couple of examples. What the hell are you talking about? So I actually don't understand what you're talking about. So the transactional revenue is sitting under ARR? Yeah, when they're in their nice opening bit with lots of great metrics, the one bit that I got a little kind of red mark next to it was the transactional – it said annual recurring revenue is whatever their revenue was. I can't remember, like 281. And transactional revenue is a subset of that. It's a subset of that, which is not – Yes, I agree with you.

24:06It's not a subset. And even in the own definition bit, it's like, no, this only occurs when a transaction takes place. And I forget the name of the company, but there was an ASX company two, three years ago that treated it like this. And then, of course, when COVID happened, everyone stopped sending SMSs and their transaction revenue fell off a cliff. I think ARR is an unnecessary metric for this business. They have subscription revenue. You can call it ARR if you want. And they have usage-based revenue. And this is a dream business. It's a subscription business. that jacks up its revenue also with usage-based.

24:40Oh, it's fantastic. That's great. I don't think they need ARR as a metric. Yeah, I think it's a disservice. I agree with the ARR point. I just looked at revenue. Too many numbers. Well, that's one of my issues with the presentation, too many different numbers. There's only one dodgy number in their entire non-gap metrics, which is impressive because usually there are tons of dodgy numbers. EBITDA? What do they call it? Adjusted, underlying, whatever their adjective is before EBITDA. Just the big one. Yeah, so I ignore that. So they love that number. That's a number at the front of their presentation.

25:15I just ignore that number. So you should say why I ignore that number. Why are you telling me why I ignore that number? Because what they've decided is that a big chunk of their cost of people shouldn't actually be an expense. Share-based payment. No, I think that... Oh, yes. Yeah, yeah. No, it's the R &D. Yeah, they're adjusted EBITDA. They've pulled out 20 million in R &D. Share-based payment. No, no, no. They're capitalising it. Oh, capitalized. Sorry, I was going to get to that. That's not... They're hardly a load in this. So they don't need to pull it out. They don't need to pull it out. So just to explain.

25:46So earnings before interest... I'm shocked that you're so aggrieved by this. We talk about SEEK and Xero and you don't seem aggrieved at all. SEEK puts like 150 million bucks of that dodgy EBITDA. We disagree on how share-based payment should be treated. No, no. SEEK does the R &D thing and Xero does the R &D thing. All right, but I just want to explain. In Australia, you've got to put a share base in your P &L. I know, but I don't want to explain my issue with their adjusted EBITDA and why their cash – they've got this other thing called cash EBITDA. You've got to stop looking at my notes and just saying that.

26:17You can say it if you want. Well, I would just say this. EBITDA, earnings before interest, that means money you pay for loans. Tax, that means money you pay the government to get no services. Depreciation, that means the reducing value of assets on tangible assets on your balance sheet. And amortisation, which means the reducing value of intangible assets on your balance sheet. Those things are outside EBITDA because that's what EBITDA means. And one of the things that's an intangible asset on your balance sheet is you employ all these tech developers and they build software, but you can't just expense that software because that software is going to last a while.

26:55So it goes on your balance sheet as an intangible asset. and then the way it hits your income statement, profit and loss, is that you just reduce the balance of it on your balance sheet and it hits your income statement as an expense. Okay, fine. But the thing is that's amortisation and the cost of those employees, they don't hit your profit and loss statement. And so EBITDA doesn't include amortisation. So if you're going to trumpet EBITDA, fine, but if you're really going to factor in the full cost of what it took to run the business, you've got to put in all the money you paid those staff this year So depreciation equals that.

27:28Yeah, but that's... Amortisation is just depreciation of an intangible... The only thing I'd say is like zero and massive business do exactly the same thing and WiseTech doesn't. Maybe I was just... It's not like these guys are any different. No, but... Yes, but just because other people are doing it isn't a good argument. I point out other people and I do defend them half the time. I didn't realise I was... $200 million of R &D gets down. I didn't realise I was defending that. I was asleep. I think if you're going to trumpet like your profitability, then including this in there has to be in there.

28:01You're going to make a big deal of it. I think it's pretty obvious. Look at a net profit. No, this one is, again, so many good things about this business, but this one is very hidden. I had to do a bunch of like hokey-pokery financial stuff. I'll give you two seconds to find that because maybe I'm used to looking at it because I always look for it really quickly. You acknowledged that it was pretty obvious to spot that it wasn't included. There's net profit there. So you can tell from net profit. The deal between net profit and EBITDA is pretty much just capitalisation. To get to the amount was a bit of work, but I think if you're talking about your profitability and that's something important, then you've really got to include a$20 million a year expense and include that in your profit.

28:40For paying people? For paying people that goes out the door. The challenge these guys have, I'm not saying you're wrong, but I think the challenge these guys have is when you're making$100 million and you've got the$20 million in those extra costs, it kind of doesn't really matter. People kind of just look at it. No, but it does. Because it's such a big proportion of that net profit. And so that is why it's so much in your face. If you're not going to trumpet profitability, sure. I don't care. But if you're going to make your profitability... Why is there trump? Is there seat trump? It's zero trump.

29:06They're all trumping it. They all do exactly the same thing. And they're all getting docked. Like, they should all be getting docked. And that's why they've all been docked. So everyone's reporting it, but then you're getting in and... I think making a fuss of these guys is unfair. No, no, no. Okay. That's fair enough. I want you to know the bag he's made to... He's building it, mate. No, I do. Wait, wait. They're not my mates. And secondly,

29:29I didn't even, look, I don't even recall that conversation, but I just want to be clear on these two points, which will answer Scott's criticism, which I agree with. So I think your argument that you just made, I'm shocked about this. The argument you just made is when it's big, then it just blends in. But when it's small, like I'm more sympathetic because it makes too much of a difference and it shows that you're not really making money. And so... No, because they're getting scales so this will become less and less... That's a rubbish argument. My point is... Listen to this noise. That's your argument.

30:01That's your argument going into the bin. Your argument's in the bin. Number two. Shh. Don't talk yet. This is making my argument out of the bin. Don't talk yet because I'm going to tell you something else which will put an end to this whole thing.

30:20Remember I keep saying to you, they've got too many metrics. So this is a non-GAAP metric, which means the objective of this metric should be to help people understand your business better. And this, this is a misleading metric, but they have a very honest version of this metric. And the honest version is called cash EBITDA. You see that metric? That has this capitalised R &D in it. It's like net profit, essentially. But just the cash one then as well is problematic because of the R &D incentive being included in it. I don't really care about that. They do get that money back. Sure, but I think this mixing up of profitability, free cash.

31:00But R &D is always baked in now, so I'm not sure you can penalise it. And then bringing it down to the rule of 40. For rule of 40, they use cash EBITDA, right? Well, they use two things as it happens, free cash flow and cash EBITDA. That's right. I just think... But I think you're too harsh on that with the cash EBITDA. I thought you were going to complain about share-based payments, but that's actually not fair. I'm comfortable with cashier bidder for this business. I take your point on CapEx prima facie. Don't get me wrong. Well, you take my point on if you pay people, it would be good if you included that as an expense.

31:31That's my point. That's effectively my whole point. But what else should we not include? Adam would have been in fierce agreement with this one. Well, I am. By the way, you're boring podcasts. The point is, as this business scales, it's not adding people. The people cost is actually pretty steady. Well, that's false. False. Not completely. We don't know that yet. I hope that's the case. It's not false. They're not adding people like they're adding revenues. No, no, no, no. The LinkedIn chart for employees added is going like, they can't, it's just going up and to the right. Well, LinkedIn is interesting, but what's more interesting is financial statements and their costs went up, their employer costs went up 25 plus percent.

32:08Oh, that's wrong. Sorry, their employer costs went up 20%. 5 %? They didn't. Their R &D costs did. Their R &D costs. Their employer costs, which would include R &D costs, I should correct myself. You can actually go and see what their R &D cost is because you go and fish through the cash flow statement and you look at how much cost on the cash flow statement was investing in software and intangibles and what you can see is that is rising. And so I think it's still, and they even in their investor deck, they talk about the increasing cost of R &D and they say, oh, this is good. It shows that we're making a better product.

32:44Even they talk, I think it might have risen 31 % or some number like that. It was a pretty big rise in R &D costs. So I think that they should not have adjusted whatever they call this thing EBITDA. They should just use cash EBITDA to show what this business looks like and I'd be very comfortable with that. And that is mostly what they use for their rule of 40 number. I'm very comfortable with that metric. So the reason I kind of take issue with the EBITDA one and it's not, Adam's right, it's common, and everyone does this, happens all the time, but it comes down to R &D and the way R &D is treated.

33:18I would like to think that people running businesses and the society we're in are capitalists, but R &D being included above the line as income, getting money from the government is actually, like you're getting a handout from the government. This would be a tax offset for these guys. There wouldn't be revenue for them. No, but it's the way that it's accounted for. No, that's strange. No, it's accounted for correctly because what it technically is is a grant. And so it's allowed to come in as income. Only when you're below$20 million. About$20 million is a tax offset. Either way, the way that the legislation has been set is that it's a grant.

33:56But these guys aren't paying taxes. What's the dollar value of this, Scott? Everyone's the same. What's the dollar value? The dollar value. It's in the – I think it's like$10 million to$20 million. I think it's$7 million. They've got about$7 million. And then they've got a whole bunch of prior credit. But I think like – I'll tell you what I think. Basically, you're right. That's the truth. You're right. That shouldn't – he's right. It shouldn't be below the line. It's like a tax. He's right. It shouldn't be in revenue. But it is. It should be a reduction in expenses. That's my view on it. Yeah, that's what we're up.

34:24Yeah, reduction in expenses. It doesn't matter. On the bottom line, it's the same. And I take your point, it shouldn't be revenue growth. If anything, it slows down their revenue growth because it will be growing slower than their revenue. I know everyone's really upset about CGT, but I feel like the R &D, the treatment of R &D on where it sits on the P &L should be another big item up there. Yeah, well, I'm not disagreeing with you, but I think in this business, like, ultimately it comes out of, it's going to look the same at the bottom line of cash EBITDA. Look, yeah, it's more my philosophical position on where it should sit than anything.

34:59I think you're right about that. But, you know, your philosophical position should be more passionate about the changes to how leases are structured than anything else. And I think, Adam, I think you're right. Like, it is a tax offset at 20 mil rising to 50 mil after this budget. and so they're not paying tax because they've got forever losses and I don't know, I think they're not going to see the cash of this R &D offset, are they? Oh, not for a long time. Yeah, yeah. So in terms of that, so revenue was up from$104 million to$131 million for the half. Yeah, that's good. That's a pretty decent revenue growth.

35:29That's great. Employee costs, well, I think they were steady. You disagree? No, I agree. I just was more granular than you were. What was up was credit card processing costs was up$8 million because obviously that's the transactional business. Yeah, yeah, that's great. And that transactional business, if you call that cost of goods, cost of sales, it is reducing their gross profit half on half. Not a lot, but by like their gross profit, just by 1 % every half. I thought about this a lot. But the thing that it's really increasing is their mode. Like that stickiness of processing the transaction and just having that extra thing that's even working harder around revenue.

36:04And so I think it's a great thing. Definitely adds the competitive advantage, is no question. Well, it is. It makes some money as well. Well, it is also increasing three other things. their revenue, their profitability, and the value of the company. That's what it's increasing. And on that, I think they're at 4 ,000 or so properties have taken it up. Is that all? Yeah, so they've still got – I can't be right. There was one number. Maybe it's one of the products. Yeah, and then basically there's a long way to run. No, no, on the transaction one. No, on the new platform they're releasing. I'm talking about the general, the normal side.

36:39Right, right. Don't they have like 53 ,000 customers? I think my point is that this new platform they've launched and they're getting customers onto it, you can see the growth there. They've still got another huge portion of their customer base to sell this into. That's without going for new logos. Those customers keep going. Yeah, yes, which is great. It is competitive space. There's other people who do exactly the same thing. They're not the only ones. If you love SiteMiner, you've got your data in there, there must be like a good case to switching. So we get so much in the granularity of this.

37:07And my view was so different about this. which is, number one, look at the product. Where do they sit relative competitors? When I did some research, you know, better, there's cloud beds in the US that's raised, you know who they got money from, cloud beds? Vision 2. Oh, really? It's a soft bank company. So they've raised 300 mil, but it looks like people are mostly, start off with cloud beds, and as they grow a bit, they go to site. I've never even heard of cloud beds. I think their revenue maybe is 100 mil or something. They're not small. And so I think, but they don't really. There's RMS in Australia is another one.

37:37There's plenty of these. But none of them are better than Sightminder. When I looked at, you know, I cheated and got AI to do some product, review of product reviews of this world, right? And so you look at that, I think their product's good. I think they've done an amazing job of expanding into transactional revenue. They're growing really nicely. They're about to go through break even. Their cash EBITDA is an honest metric. And like you look at this and you say, what do I think about this overall business? Well, I think it seems to be run well, although I don't like that Mike Ford is not even on the board anymore, the founder.

38:13He's gone off into the distance. Yeah, he's quite. So I don't love that. But unless he's off the board now as well. And the new CEO, I think the new CEO. Shanker. Shanker. Yeah, yeah. He's got a good degree. He's like a second founder. Like he's really taken a big sort of – I think people think of him as a re-founder of the business. I think he's got like seven plus million shares. So he's very exposed to the business. And so you look at this thing and you say, how could you justify a$750 million valuation? Is it easy or is it hard? Can I just finish my financials before you? Yeah, finish your financials.

38:44So the business famously claimed the EBITDA of$11 million for the half, of course, took that big grain of salt because there was almost$15 million in software costs. So that's sort of a negative$3 million when you pack that in. A better reflection of the bottom line, which was actually very positive, was SiteMinder reducing its loss from$13.3 million to$4 million. This is a net loss for the half. throughout its life, so it might as well have a couple of losses of$662 million. It hasn't really. I just want to say that, so those retained losses have a massive$400 million reserve if you look at the balance sheet, which I suspect, I don't know, it's hard to get to the bottom of it, it's a bit boring and complicated, but I'll say it in two lines.

39:24They basically had, I think, convertible notes or something, and as the value of the company rose, the value of those convertible notes that they're giving away rises. It's like employee equity. Exactly. And when they actually go and trigger the convertible notes, they're going to wear the cost of that as a company and that's going to hit reserves. I think they're more likely to have lost 200 or 250 mil. But my point was more, it's lost all that money. Now it's basically a break even. So it's sort of been on this journey where it's now at the end of the road. And if growth kind of continues the way it's going, they'll be posting a profit, potentially even this half.

39:58Exactly. I'm sure they will be, based on what they were saying. As long as costs haven't gone up, This is a business that just tends to grow naturally. It's sort of at worst case you're growing 10%. Worst case. But really you're probably growing more. So if it grows 20 % again, how much money do they make? I wanted to ask you just about that. If it's just tracking the way it's been tracking historically, they could do$20 million in Scott operating profit. So real money, real profit. Like this half. So like this full financial year, FY26. FY26? That's just pushing things forward. It's all in the growth of revenue.

40:35What's the Scott operating number for the first half? I've just got the full year here of$280 million revenue total. What about the Scott operating number? Profit. You're pitching your Scott operating number. What's the first half? So profit impact was minus four. What's your number for the first half? This is quick math, but just the revenue that I had them finishing on is$280 million. the I'm just I think which I think is too high but anyway it could be all I've done is roll forward the historical what are you multiplying that by to get to your 20 million dollar number I've got the full cost with the research and development included as an actual cost on the operating profit I take your point of like the half because of the half to date it's going to have to catch up a bit I think a lot of it's coming from the revenue growth though like really all this profitability is coming out it's not coming out of cost It's really coming out of revenue growth, which is there and real.

41:33I don't think that's slowing down. I think there's some slight jaw-widening as well. It's not massive jaw-widening. There's a little bit of jaw-widening going on here. Yeah. Well, they talk about it a lot in their overwhelming presentation. I don't think the presentation is that bad, by the way. I think you're overly quick talking about it. Really? I don't mind it. What, that 40 pages where... I think it was too bad. The financial part of it was good. There was lots and lots and lots of caution on every slide and too many non-gap metrics that they don't need. Yeah. I just went straight to the books and used their website.

42:02I generally looked at the books as well. I know, but then it's good to see what they're talking about. Yeah, yeah, 100%. And what they think is important. Look, the way I feel about this business is pretty simple. Like, could you see this? Forget about 26. Let's talk about FY27. Could you see them generating a$20 to$25 million NPAT in FY27? Probably. Absolutely. They could get there. And suddenly now you're on. Even at 60 or something. Something has to go very wrong to be at 20 in 27. Yeah, and so then suddenly if you had the same valuation as today, because their balance sheet, just forget about that, it wipes itself out, right?

42:35So that means that if you had the same valuation, when you get to the end of FY26, a few months' time, you're looking at probably 30 times forward NPAT, so 30 forward PE. That's not crazy for a business like this at all. I had maybe even as good as 13 times FY27. Well, you're very ambitious. All I'm doing is rolling forward the growth rate. So I think it's unlikely they'll get there. But even if, let's say, they get 20 to 30, all of a sudden this business starts looking very cheap. And so this comes down to like... When you say cheap, because I go straight to margin of safety to start with and then I want to layer on top.

43:24And when you say cheap, it's still a forward, like paying that price today is still a forward. I agree with you. You're paying a forward multiple. You don't think the current valuation is cheap? No, no, no. I'm just talking just in general terms, paying a forward multiple, like it's essentially double. So if you're paying today's price for, call it, $30 million in profit next year, you're almost like you're paying a lot more for next year's result. Maybe you would say margin of safety. Which may or may not happen. I think you're talking about margin of safety. Yeah, I'm assuming margin of safety.

43:54So maybe what you'd say is it's now the end of May. They're going to report some numbers in July, presumably, and full numbers in August. And so in July, if you see that this year's second half played out in the way you were hoping, the margin of safety increases dramatically for FY27. And I think once those July numbers come in, this might actually look like a very good buy because... But the way to be a great investor is to get in before that. Because when those numbers come in, everybody knows and it's back to the share price within a second. So the question is, do you think that will happen?

44:29And then we go to first principles and powers and switching costs and stickiness of revenue and sharing all that kind of stuff. I think you can make the call now. Well, the interesting thing I got to with this was a lot of it's tied into that transactional revenue base, which Adam is probably one of the best people in the country to know where the winds are going on transactional revenue around hotel bookings. The US looks bad to me. Yeah, so this is the bit that's really curious. No one wants to go to a much bigger in Asia and Australia. Because if you're talking about margin of safety, there is a world where, because most of that profitability is being delivered through revenue growth, not through cost out.

45:07And so you've got to really believe in the transactional growth story. And so I think it really comes down to how real is, is that going to keep growing or are we going to get hit with people stopping travelling, stopping making bookings? So your first principle question is, will tourism continue to expand or not? That's essentially the question. Over the next 12 months. Look at ageing population. I'm taking my own book because we operate in the same sector, so what's good for them is good for us. But it's hard not to think of travel continuing to grow as older people continue to get richer and they're the biggest spenders on travel.

45:40As Gen X becomes that boomer age and starts working less and travelling more, Like, it's hard not to see travel continuing to go well for businesses like Sightminder. Like, anything's possible. If you look at since, and Graham Turner from Flighthands has got this great sort of discussion about it. If you look at since 1998, 1999, yeah, there's been SARS and there's been GFC and there's been, obviously, COVID. There's been blips. But travel is like, if you can see my hand, it's a line up to the right. And it'd be hard to think this reverses. I think these guys have a lot of tailwinds. I think so Australia APEC used to be their biggest market now I think EMEA is bigger than APEC but the US is the one that's actually got decelerating growth and like I think that is mostly the Trump effect of people not going to the US yeah I think that they are feeling the pain of that but Scott's comment is right like as they leverage more to the transactional based revenue the cyclicality, economic cyclicality as it pertains to travel is going to have more of an impact on their profitability than as a subscription piece.

46:45Yeah, subscriptions that people pay rain, hail, or shine, as you both voted. I think you're right. It's hard to imagine this. It's your protection, actually. The subscriptions, you kind of margin of safety, and the transactions. You always do a sum of parts here. What's the subscription worth and what's the transaction part worth? Because, yes, they're industry-related linked, but they also are two separate businesses in many ways. So you can very easily value the subscription business because it doesn't share that much, and the revenue is not growing that much either, so you can easily model that.

47:11transactions are harder to model for sure because who knows what churns 100 so who knows what as in terms of transactions but it's definitely modelable this is not the hardest business to model money stretch and what would it make it get cheaper from here there is nothing you know that the the fall in share prices when everyone's share price fell it was cesspocalypse falls and so that's what that's what took the wind out of the sails basically and so what could make this halve from here is maybe one way I think about it. So let's go, ask questions why this was caught up in the Saspocalypse, given you've got a...

47:44Because it's software. It's, you know, the Sass part of Saspocalypse. That means software as a service. Let me rephrase it. Should it have been? And if you look at the two parts of the business, one is called the actual Sass part, which has almost no churn. You're not going to vibe code something that will cost you 200 bucks a month, and you can't vibe code it because it's actually too complex. So if you look at your eight... That's great. This is a safe... So the other part is transactional revenue, which is not even definitely SaaS that much anyway. It's like a credit card processor. And Visa and MasterCard haven't been hit.

48:12So I don't know what. These guys are essentially like another Visa, MasterCard, or an Amex, all done really well. So SaaSpocalypse should not have impacted this business. If you believe this business is worth$15, and I don't think it was, but if you think it was worth whatever it was, 2.x million a few months ago, six months ago, then this is a crazy cheap bargain. The question is, how over the top was it when it was worth a couple of years. What could make it halve? Yeah, I don't know if it's crazy cheap. I think it'd have to go down a little bit more. Yeah, COVID. What else? What could make it halve?

48:41Oh, the Middle East conflict. Well, I don't think it will. Well, I think that's the Middle East conflict. Yeah, yeah, yeah. But I just think if that gets worse, that could start impacting travel. So a world war. That's right. Okay, no, no, that's a world war, but unlikely, right? It's anything that's going to stop travel is like, yeah. Well, anything, not just stop travel. So the way I think about it is, their price today is not dependent. it's not priced to perfection it doesn't need to maintain some amazing growth rate and so if their growth dropped two percent on what people were expecting i don't think it's hard for me to think about something that could halve the stock price from here and so i know like that's especially given the covid resilience of the subscriptions yeah and so i think if you're trying to say you know this being a contrarian which i am saying i would say if there's nothing that looks like a a high probability or even a somewhat probability of halving the share price like there's some risk of waiting for it to go down there's some risk of buying before the facts are known i think that's a line ball call because i think if the results are good in july august and they don't have to be very good i think the market probably will re-rate this stock would be my guess well it feels like it's just unfairly tarnished with this sass apocalypse thing when this has nothing to do with sass well i'll tell you something that i i really don't want this to be talking the catapult book at all but like catapult released our results and a lot of results very well a lot of them thank you a lot of them were very clearly communicated to the market and i think a lot of what happened is it was just a reminder to people that said hang on a second these guys are not susceptible to ai and actually they just keep delivering on their commitments and We were a hardware business.

50:27It's ridiculous. But I think what happened is they looked at it and said they keep delivering on their growth commitments and the money flows through to, we call it management EBITDA. You could call it cash EBITDA. And I think there was nothing that was especially amazing. They were good results, but they were telegraphed, right? And so I think that what the market is looking for from software companies is a reminder that the world is not ending for them and they will continue to grow and generate profitability. That's happy. if you look at it last year, which is probably the most susceptible to disruption, or not the most, but it is susceptible to disruption, and that had a great result last, well, ostensibly a great result, but people didn't really believe it because disruption hasn't come yet.

51:08So I'm not sure one result can use these guys' ills. Have you vibe-coded Jerrian? We're working on it. But I agree with you. But I think that when they produce results, if they produce results at the end of this fiscal year that are just consistent with consensus, the market will remember hang on a second what the hell were we selling this off as part of the cesspocalypse for that's all you need is just a reminder that delivering on your commitment with consistent growth and money flowing through to profitability is what you want to buy this business could be making 20 million cash every day calendar year this year or even more this year calendar year calendar year and then you can extrapolate that's 40 next financial year whatever it is it's definitely in that ballpark this feels like where a real, bizarrely, this is a perfect inflection point now.

51:57You can see it in the last, loss going from 13 to 4, basically break even. Forget that. I agree with you. Forget that with the capitalised stuff. Their NPAT is, a lot of software companies, like Catapult, you can't use the NPAT because of a whole of acquisition stuff. Yeah, yeah, yeah. Basically, like unfortunately, it's how we pay for acquisitions and it flows through the profit and loss. But like they don't have those problems. You can believe their NPAT. And their depreciation, so how much that was equal to their R &D cash spend. So they don't get, If the timing's off, you get that free hit.

52:26They don't get that free hit. So the empath's a very genuine number. Well, I just want to pull you off on that. Their R &D amortisation was not. It was. I checked it. Their overall amortisation was. Oh, okay. But the R &Ds, they are spending more. But that's normal, right? Look, I'm telling you, they're spending more on R &D. Take my word for it. But I'm okay with that, you know? Because their R &D spend as a percentage of revenue was falling. Now it's kind of flat rising a little bit. I'm fine with that. But regardless, it's going to have to drop eventually. But regardless of that, this is a business that will be profitable.

52:53We all think it's going to be profitable. When the stock's living 20, 30, 40 million dollar profits, this is going to re-rate really quickly. And the growth, yeah, and the growth as well. Yeah, plus the growth. Plus it's in a great sector that's benefiting from lots of tailwinds. I think to your comparison to Atlassian, I think the fair pricing, reasonable pricing kind of matters as well. Like pricing matching the performance really matters in... Well, Atlassian was never making money as well, so it's really hard to... It's starting to now, but that's the problem. You couldn't give an EBITDA multiple because there was no EBITDA.

53:24Well, that's the thing. This is what breaks my heart with, I'll just say this for two lines, but we didn't catapult buy stuff. Let's say we pay 80 mil for something and we announce that. It says, oh, cool, I paid 80 mil for it as an example. But we won't pay the 80 mil unless the founders keep working. Maybe we'll pay 40 and the other 40 is contingent on them, staying in the business. That means that other 40 flows through the income statement as an expense. That is the dumbness of accounting. and so people look at that and they're like the impact's going backwards it's like well if you make our impact go backwards you've got to say that we bought the business for less because it's just the purchase price flowing through versus hitting the balance sheet if we would have been dumb enough to pay it all up front yeah and so that sucks right and it means it's hard to value catapult on a pe because that negatively affects our impact because of accounting but these guys don't have this problem and what they've done is we're transitioning from giving them a revenue multiple to an NPAT multiple and a PE.

54:19That's the best transition you can have. That's how you should value a business. Yeah, well, it's best for investors for sure. That's what's happening here, right? Yeah. So I think definitely we all agree no one is shorting this thing. I don't think a 40 valuation, an NPAT 40 is unfair for the business's growth, this kind of level of growth. It's growing at 25%, 30%, super sticky revenue, very low in the context of things, very low risk. So all we're arguing about between the three of us really is, is it a good buy today? Do you want to wait for more information before? No one's saying short it.

54:50Like, I think we finally found something that we're not saying short this thing. Well, I was bullish on line bikes. You were the bear on that. After your network effects. No, I didn't. You know what? The thing is this. You've got to give yourself some credit. You actually, remember you persuaded me to be much more positive about the business. I'm not sure about the valuation, but like you may be much more positive about the business from our discussion. Yeah. I think you look at this business, this business, this site-minded business, it's bizarre that the market's written it down when it's actually looking the best it's ever looked.

55:18It's just so strange. Like, the market is so irrational, we talk about it all the time, but this is like the height of rationality. It gave it this huge valuation at$2 billion when it wasn't doing that well, and now it's doing really well, about to start making lots of money, and this could be making$100 million in a few years' time, and then you give it a 20, 30, 40 multiple, it's$2,$3,$4 billion business. We're not miles off that. Just to give you one thought that's been going on in my mind around the SaaSpocalypse is like there's an element of now it is sensible. If you think back to two years ago on the podcast, everything you guys looked at was just like that is crazy pricing and now more and more there's things where it's sensible.

55:59We said zero was a great business. We said why is it great? The valuations were completely batshit crazy. And now they've dropped 70%. They go, you know, not too bad. Like I'm not rushing out and buying zero now because I don't like the management, but like valuation-wise, it feels pretty good. You can buy Sightminder today at the price that was paid in 2019. Yeah. And it's an incredibly better business today. We barely had a transactional business back. It had a little transactional business, but it was small. And it has much more revenue. About half the revenue or less. And it's heading to break even.

56:29It's going to pass through. Yeah, I think, there you go. You finally, who picked this one? You? Scott? Yeah, yeah. Oh, you finally picked a good business for us to talk about. I'm actually a buyer of this business at this price. Oh yeah, there you go. I think you're waiting for FY26 results or not? I think it's a great business. What's your answer? You've got to commit to something. Oh yeah, I'm a buyer. You're a buyer at this price? You're a buyer. Don't do it with three ringing the bells. Yeah, I would buy at this price. Not investment advice. Of course not. That was a great episode. Thank you, Scott, for not only coming in because it's such a great Australian business that's done so well.

56:59We love looking into it. Thank you, I dear. Of course, we'll be back for our big episode on Tuesday. Love having Scott in. Saturday, I think the audience prefers you to us, so we just... They definitely prefer him to you. That's true. That's the feedback I'm getting. My mum certainly does. Oh, don't... You're meant to fight back while you don't fight back. Now, pummeling someone who just lies down is not fun. You've got to punch back. I do during the episode. So no one would even notice if you didn't turn up a deer. I'd notice. My mum certainly would. N equals one. Thank you, guys. We'll see everybody on Tuesday.

57:28Thank you.