Can 9Spokes kick ass in 2HFY?

9Spokes [ASX:9SP] co-founder and CEO, Adrian Grant held an investor conference call yesterday.


Below are my key takeaways from what he had to say.


9Spokes [ASX:9SP] offers a free, single-dashboard service, designed to allow small and medium sized businesses to bring all their software apps together on the one screen. Their website claims " You can be up and running in minutes. Just connect your favourite apps to our super smart software and watch your business data come to life." They offer it under their name or as a white label.


The company also operates a software marketplace, from which it gains revenue via a percentage of sales.


WHAT TO WATCH FOR, IN THE NEAR TERM, ACCORDING TO CEO.
  1. Version 2 of the 9Spokes platform being sent out to clients over the next few weeks and should go live early next year.

  2. Version 2 separates the 9Spokes, App Market place, to become a stand alone entity.

  3. Expect more significant partnership announcements in the next couple of weeks, in particular with banks.

GENERAL OBSERVATIONS

According to Grant, the company share price has remained low, despite significant progress over the past year. He puts this primarily down to a failure to deliver in the past.


But he is confident that things have changed for the better and predicted the second half of the financial year should show the results the market is looking for. Here is why he believes this to be true.


9Spokes has completed a major rebuild of their core platform through the development of version two, and are now focused on scaling and engagement. To achieve results, 9Spokes has made a number of changes to its technology stack.


APP MARKETPLACES ARE WHERE IT'S APP :)

Grant firmly believes in predictions that online app marketplaces will drive 75% of all B2B software purchases in the future, and consequently, the 9Spokes marketplace has become its own entity.


If he is right, the marketplace could be a rich vein for 9Spokes. if their free, white labelled dashboard software continues to burrow further into some bank offerings. Big banks offer a strong connection to small and medium size business and Bank of America, which 9Spokes signed earlier in the year, claims between nine and ten million SMB customers.


Of course, having a marketplace you control and therefore clip the ticket on each sale is one thing, but having something to sell is another.


That is why Grant says they've also worked hard to keep the core technology stack of the dashboard as open as possible, so the external developer community will be encouraged to create apps for sale in their marketplace.


Scaling of the 9Spokes business could be significantly affected by how this pans out.


IT MAY BE FREE, BUT IT NEEDS TO BE REALLY GOOD TOO.

From a dashboard customer viewpoint, Grant explained that the 9Spokes development team have adopted a "leading edge" approach to streamlining how quickly a bank partner can get embed the platform, and do so with minimum effort.


In version 2, 9Spokes has embraced Progressive Web Apps, which allow a developer to build one app that will play on virtually any device. In the past, you had to create different versions for different platforms like PC, mobile phone, android or iPad etc.


As a result of this, and some other developments, Grant claims it is 10 times faster to create in the new version - going from a couple of months in version one, to a couple of weeks in version two.


This also means lower marginal cost to serve new clients.


HOW COME THE SHARE PRICE IS SO LOW?

Sometimes it's patently obvious why a share price takes a turn, be it for better or worse.


But in 9Spokes case, having announced Bank of America [The second largest bank in the USA] was adopting their platform under a white label deal, which suggests the bank has a high level of confidence in the app, the share price has gone down by nearly 50%.


Go figure.


It is also something that Grant admits is confusing.


But it may be, that until there is some substantial"sales revenue growth" behind 9Spokes version two, the market may continue to punish for past sins.


Adam Grant seems very confident that that growth will start to happen in the second half of the financial year, as the positive improvements made by his team start to rise to the surface.


The InsideMarket Private Fund does owns shares in 9Spokes at the time of publishing this post. We have not received any payment from the company for this coverage. Disruptive technology stocks should be considered very speculative, high-risk, and extremely volatile. There are significant risks inherent in developing new technologies that are not discussed here. You should always seek professional advice before considering any share purchase or sale. Please read our full disclaimer.

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