ISX Milestone Millstone?
As the ASX and ASIC investigations into ISX ramp up, some delicious disclosures are now being made, which make it possible to tease out some interesting detail as to just how the massive performance right grant milestones were met by the tiniest of margins.
Now the period of interest for these performance rights is the half ending Jun 2018, and by putting together various details we can see where this $5m of revenue was derived from:
ISX also disclose that 25.9% of their revenue in the first half of 2019 came from the two CFD chop shops that ASIC shut down in March 2018. This translates to just shy of $1.3m, which suggests that substantially ALL of ISX’s Australian revenue was derived from what ASIC alleges are fraudulent businesses - quite some achievement for a company for whom KYC and AML are specialties!!
Most of the remaining revenue came from the Netherlands and substantially all of it in June quarter. It is also clear that this Netherlands rev was through the payment gateway.
Drilling down into the monthly numbers, a large part of this revenue was generated in June from the “financial services” merchant sector, a timeline that corresponds with the timing of the SMRs raised at KAB, as reported in the Financial Review. This revenue then suffers a precipitous drop in July, as does the Netherlands revenue as a whole.
Now $1.86m of revenue in a month is ~$90k per working day. This then drops to $34k for the entire month of July - this business has fallen off a cliff, straight after the revenue target was met at the last possible moment.
Comparing this to what the company said at the time:
ISX claim that the KAB matter (ie the Danes shutting them down due to money laundering) was impacting them only “intermittently” in July and August - yet Dutch revenue had already vanished in July and was actually higher in September! It would appear from this that the KAB matter was NOT the cause of the revenue drop.
So we are left with a business that was deriving 85% of its revenue from alledgedly fraudulent business, which then performed a stunning pivot to Dutch CFD/FX business, which then added a one month Financial Services client, met the milestone by a gnat’s todger then immediately lost all of these revenue sources.
So if the Dutch revenue drop was not caused by the KAB matter, and the Australian business was used almost exclusively by dodgy CFD chop shops, perhaps the better question is what caused the one month Financial Services revenue spike just before the Performance share milestone was due to expire? Could the milestone be the millstone hung around ISX’s neck?