TrakM8 (TRAK) – Chairman/FD interview – 25 Jan 2016



Paul Scott interviews John Watkins (Exec. Chairman) and James Hedges (FD) of TrakM8 (TRAK)

Company website is here

Most recent published accounts – interims to 30 Sep 2015

As usual, questions were submitted by investors, see question list below

Disclosures: at the time of publication, Paul does hold a long position in this share. No fee was charged. This audiocast is for general information only, it is not a recommendation, nor financial advice. Please do your own research.

Q. no. Category Question Submitted by?
Intro Paul Scott to do intros & disclaimers, share price & ticker.
Intro Please could you give us an overview of TrakM8 Paul Scott
1 Accounts Net cash issue – it seems clear to me that the bullet points in the accounts announcements were incorrect, in that gross cash was wrongly stated as net cash. Can you explain what went wrong? Paul Scott
2 Accounts There was a discrepancy of about £115k in the profits reported at Companies House of your subsidiary “Box”, and the figures mentioned in the reverse takeover announcement. Why was this? Tom
3 Accounts Do you feel the bearish attacks on TrakM8 are a witchhunt that will culminate in nothing? James
4 Board Why do you call yourself Executive Chairman, instead of CEO? Bearish Bull
5 Board Do you think it would be better to have an independent Non-Exec Chairman? Curly
6 Dividends How long will it be, realistically until you start paying dividends? Simon, David J
7 Products Vehicles are becoming increasingly technology led, straight from the factory, therefore what barriers to entry exist that would prevent automotive manufacturing companies from creating their own software equivalents of your product? How will you preserve and grow market share if this poses a risk ? Brian & Richard S
8 Products What is the key competitive advantages of TRAK in a crowded sector? Brian & Flintstone
9 Products There seem a lot of smaller telematics companies about. What are the main competitive threats to TrakM8? Paul Bailey
10 Products Why the absence of major customers, such as DHL, UPS, etc? Ramridge
11 Products How big do you see the potential telematics market growing to and are there any plans for international expansion Fedor
12 Products How much od your technology is protected by Patents?
13 Products Are you in direct competition with Quartix Holdings? If so, does TrakM8 have a competitive edge? (he notes that Quartix has a much higher operating margin than TrakM8, at 37% Why is this?) Peter
14 Products Surely bad drivers will refuse to have this technology in their cars, as it could incriminate them if they have a crash? Even good drivers will resist this Big Brother snooping over their driving. Richard
15 Products Jokingly – wouldn’t this App be used as spyware by suspicious wives, to track their husband’s movements?! Richard
16 Products TrakM8 claims to have over 200k units installed worldwide. How sticky is the revenue – i.e. what is the churn rate? How many of that 200k are paying ongoing monthly fees to you? Mark M
17 Products What is the gross margin for monthly subscriptions? What Cost of Sales is there, or is it just mobile telephony charges? Mark M
18 Products hi could I ask the geograffical spread of trakm8 and your plans for the geograffical spread thanks. Paul Fish
19 Growth Which overseas regions offer the most potential for growth? James
20 Growth How does your sales pipeline compare with say 6 and 12 months ago? FREng
21 Growth Is it true that most of your growth has come from acquisitions? How much organic growth potential is there? Paul
22 Growth So youve bought a electronics manufacturing company, a camera company and a scheduling company. What other technologies do you want to buy next? Dan
23 Growth What skills do you need to hire to continue your growth James
24 Growth What are your plans for long term growth for TRAK? blondeamon
25 Growth I invest in Companies of quality with a long term view on any such holding. What can the CEO say that would encourage my investment in his Company Roy Edwards
26 Growth Why has free cashflow been limited to date? Is this a function of up-front installation costs, and costs of customer acquisition? When will FCF increase? Gus
27 Growth Paul, the fact that TrakM8 have made initial inroads to the US market was referenced at the AGM in September – not however the specifics of the strategy for penetration. Would be interesting to hear further details as, whilst it’s large, it’s a notorious hard and fragmented market for any player to crack. Thanks Lear
28 Growth (trakm8) In what particular areas of the market place is future growth going to come from? What are the ideas/concepts/market developments that business intends to exploit? Andrew
29 Growth Can you explain the potential of the new AA deal? R
30 Growth Could you give some colour on the long term potential of deals with Direct Line, AA, Saint Gobain? Presumably lower margin hardware comes first, then cash is generated fropm service revenues? R
31 Growth How will the company finance future acquisitions, given that positive cashflows are not going to happen in the near future? I am worried about shareholder dilution. Peter
32 Growth Is the sliding price of oil having an impact on your business? Or is safety more important to customers than cost savings? LightningTiger
33 Route Monkey Can you explain why you acquired Route Monkey? Paul Bailey
34 Route Monkey What Due Diligence did you perform on RM? Are you still happy with the acquisition?
35 Route Monkey Its published accounts show abnormally high debtors, of £2.4m vs annual turnover of £1.7m – surely revenue recognition (and hence profits) cannot be right? Will these figures be restated, with a more prudent revenue recognition policy? Bob
36 Route Monkey How did you arrive at the price for RM? Did you overpay for RM? David, Gus
37 Route Monkey Given concerns over previous RM revenue recognition, how do you intend to ensure the earn out is not abused or ends up in dispute or paid when it should not be? Dave
38 Route Monkey You state you bought RM for its IP not profit, but why was RM unable to generate real profit/cash from this IP and how will you manage it if they couldn’t? Dave
39 Route Monkey He & his wife have had bad experiences with deliveries from Yodel, and it has received bad press for unreliable service. Is there a risk to TrakM8 being associated with Yodel? Gus
40 Route Monkey Who participated in the 330p Placing, as no TR-1 disclosures have been published? KTM
41 Route Monkey In a 2014 interview in the telegraph available online, the guy from route monkey claims they made a “£1.1m net profit last year” but the stat accounts show a different picture which is somewhat less than this. Are you happy with the due diligence on historical numbers and trading and management assertions? Dave
42 Share Price Given that there was an oversubscribed Placing recently at 330p, why is the share price now below that (i.e. why are Instis not buying in the market now?) FREng
43 Share Price Why haven’t Directors bought shares after recent fall? FREng
44 Share Price Have any Institutions expressed concern over recent SP fall? FREng
45 Share price Concerning recent share price volatility, is the company concerned about high volumes of shares changing hands before & after (what he calls) ill-informed blog posts? (meaning Tom Winnifrith) Have you, or do you intend alerting the authorities to this? michaelmouse
46 Share price Did you think the shares reaching 395p over-valued the company? Simon
47 Conclusion Any closing remarks you would like to make, or anything we have missed?