Clarocity Corp CLRYF

RE:RE:RE:35% Revenue growth

[Trelawny]

Hi LSCFA,
I wouldn't use net margins for a growth company like this. The reason is that essentially all funds will be used to fuel growth.

I would model off of Gross Margin or Revenue.

I am using a blended Gross Margin of approximately 36% and would expect that to grow.

My assumptions are that the newer business using the BPO Merge products and the newer Axis products will have margins in the 50% to 70% range.

Older Axis products/serivces would have lower G.M in the 30% range. 

At this point I am weighting the G.M. very much towards the Older Axis products.

Given that the bulk of growth will be stemming from the newer products I would assume that the growth of the new marginal revenue would have higher G.M.s.

The quality of the revenue is also what I would characterize as re-occuring (vs. recurring) and is broadly diversified. This gives the new revenue a higher multiple than the traditional revenue from Axis.

I am using a blended revenue multiple of 2.3x top line revenue and using an year end exit run-rate revenue of $75mm.

This is assuming 2/3 of the revenue is coming from traditional products and services and 1/3 from the newer products and services.

Highly re-occuring revenue which is broadly diversified can have multiples in the 4x to 7x depending on the revenue growth.

I am overweighting of the traditional revenue and the lower multiples on revenue in order to create a more conservative pricing model. Which means that many different sections of the model can be wrong and the price still be close even with the errors.

I am using a share count of approximately 320mm shares (fully diluted).

So using that model you can do your own math on the price:
$75mm/ 320mm shares = $0.23revenue/share X 2.3 revenue mutliple =  54 cent share price


Using the current pro-forma revenue:
$50mm/320mm shares = $0.16 revenue /share X 2.3 revenue multiple = 37 cent share price

If you believe, as I do, that the mix will be more skewed to the newer, higher margin, revenue then you can increase the revenue multiple.

I would counsel against going too crazy with the revenue multiple until we see the proper results come out.

But I think that this very simple model will give you some understanding of where the market will begin to price this stock.


I hope this helps somewhat.

Best regards,




Trelawny