Shares in Dubber Corp plunged 27 per cent after the company restated its revenues by $10 million while its chief financial officer resigned.
The voice recording software firm that only last year raised $110 million from investors resumed trading on Monday after it was suspended from earlier in the month for failing to lodge its financial accounts on time.
But late last Friday it revealed that the full-year revenue figure had been restated from $35.67 million to $25.34 million after consultation with its auditors, BDO.
Dubber chief executive Steve McGovern was grilled about the company’s remuneration practises on Monday’s webinar.
That change, the company said, followed a “review of customer payment history and timing of recognition of invoices,” emanating from the application of different accounting standards.
In a webinar arranged by the company prior to market trading, chief executive Steve McGovern sought to assure investors that shareholders would “not be materially affected” by the restatement.
“We are 100 per cent convinced that the company is fully funded to achieve its business plan,” he said in response to questions on the webinar about the strength of the company’s balance sheet.
“I will stress the business is in the position that you think it’s in – in terms of nothing has changed apart from we’ve recognised our revenue in a different manner in consultation with our auditors.”
In July 2021, Dubber, which boasted rich lister Alex Waislitz as an investor, raised $110 million from investors via brokers Barrenjoey and Shaw & Partners and in September 2021 was added to the S&P/ASX 300 index.
The expansion capital was raised at $2.95 per share but after Monday’s harrowing fall, the share price is languishing at 41¢. In September Dubber dropped out of the top 300 index amid investor angst toward non-profitable tech stocks.
The main cause of concern among investors was the accounting updates. While the revenue was restated by about $10 million, a further $8.16 million of receivables had been reclassified as a doubtful debt, suggesting a large slow paying customer.
“If we have provided for a doubtful debt – not a bad debt – you can’t say with supreme confidence you are going to be able to collect it,” Mr McGovern said, adding that he was hopeful the cash inflow from the customer would be forthcoming.
“The company made a date-based decision to provide for it in order to be conservative,” he said in response to questions.
Dubber was one of 14 listed companies that were suspended from trading since October 3rd for failing to lodge its accounts on time.
Ahead of Monday’s release, the company said the current chief financial officer, which it did not name in the statement, would step down with immediate effect while a review into the finance function would be undertaken.
Mr McGovern will forgo $250,500 of entitlements, the company said.
Monday’s release and resumption of trading was greeted with instant selling as Dubber plunged as much as 33 per cent, before recovering to trade 26.1 per cent down at 41¢.
The shock revenue write-back increase in doubtful debts did not come as a total surprise to some investors as an analysis of its accounts revealed the company was slow in collecting money from its customers.
In a note to clients sent last month, Ownership Matters pointed out that cumulative cash receipts had lagged its reported service revenue since the 2019 financial year, which it said was likely a result of a “build up of trade receivables.”
At the end of the 2021 financial year, one single customer accounted for $10.86 million, or two-thirds of total receivables, although Dubber expressed confidence that it would collect the funds.
That figure was also about 30 per cent total service revenues since 2019, Ownership Matters said.
The report also estimated, based on reported changes in receivables balances, that 47 per cent of service revenue was uncollected at the first half of the 2022 financial year. The gross receivables balance was about 82 per cent of trailing 12 month service revenue, the report said.
Ownership Matters pointed out in that note that the composition of Dubber’s board, meant it could not form an audit committee to meet the ASX listing rules. That is required to be eligible for inclusion in the S&P/ASX 300 index.
The proxy firm recommended that shareholders vote against the remuneration policy at the 2021 AGM because of the option grants to non-executive directors.
It further criticised Dubber’s remuneration practices, including the issuance of options with strike prices well below the prevailing share price and long-term incentive structures for executives that were 50 per cent weighted to annualised recurring revenues (ARR) measures.
These ARR measures, the report said, “were non-audited, forward-looking guidance numbers provided by management, rather than statutory revenue achievements which are audited”.
Mr McGovern was grilled about the company’s remuneration practises on Monday’s webinar. He said there was no plan to cancel shares issued to executives related to hitting revenue targets.
“One would hope that we hit the revenue targets and I think if that’s the case, all shareholders will be happy. But at the moment that’s not a decision that’s been considered by the board.”
Mr McGovern defended the company’s use of zero price options to pay staff, which he said was a way to lure talent away from other fast-growing Australian tech firms that provided “exemplary” working conditions.
“Anyone who invests in technology would realise that it is a highly competitive market to get great technologists, particularly in Australia.”
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