investment faqs

Q. How does Cytiva’s “on-demand” business model benefit investors?

A. Cytiva hosts its products on its own secure servers and leases them to corporations who access them over the Internet. Cytiva clients typically sign three year contracts for service and Cytiva collects payment at the beginning of each contract year. This “up front cash” is deferred and then recognized as revenue evenly over each twelve month period of the contract. For investors, this model provides a stable and predictable revenue stream. Because cash is deferred and recognized over time, investors can also gain insight into what revenues for future periods could be.

Q. What does Cytiva consider to be key indicators of future performance for on-demand software companies?

A. Because cash is collected up front and then deferred over future months, revenue is a “lagging” indicator of financial performance. Profit can also be a lagging indicator of performance, as well. Cytiva considers the key indicators for an on-demand software businesses to be as follows:

• Deferred Revenue. When viewed in conjunction with recognized revenue, deferred revenue becomes a good indicator of future growth. If revenues are growing, and a company’s deferred revenue is growing at a similar or greater rate, the company is likely to be on a strong growth path. Deferred revenue represents new sales contracts that have been invoiced and will show up on the books over the next twelve months. When properly evaluated, the combination of recognized revenue and deferred revenue allows investors to get an idea of what revenues are likely to be up to twelve months in advance.
• Cashflow From Operations. While profit should never be discounted when evaluating investments, Cytiva believes that profit is a lagging indicator of the health and potential value of an on-demand software company. Remember, cash is collected up front and deferred over each twelve month period during the life of each contract. However all the costs of supporting that contract, including personnel costs, costs of sales and other expenses, are recognized at the beginning of the contract. Therefore, when looking at a growing on-demand software company, cash flow from operations is the financial measure that most closely represents the company’s health, because it represents sales vs. expenses BEFORE revenues are deferred. Positive cashflow from operations can indicate an on-demand software company that is wisely managing expenses against sales to maximize growth-even if they are showing negative profits. Watching cashflow from operations can give investors insight into potential future profits (when cashflow is positive), and can warn of potential future negative profits (if cashflow is negative). Of course, profit should always be evaluated in conjunction with cahflow from operations when evaluating the financial performance of any company.

Q. In what currency is Cytiva’s financials reported?

A. Canadian Dollars.

Q. On which exchange does Cytiva trade ?

A. Cytiva trades on the Venture Board of the Toronto Stock Exchange, part of the largest stock exchange in Canada. Cytiva’s symbol is CRX.

Q. Is Cytiva traded on any U.S. exchanges?

A. No. Cytiva is only traded on the Venture Board of the Toronto Stock Exchange and any foreign investment would need to be made according to advice and instructions from your broker.

Q. What trends are driving Cytiva’s impressive sustained growth?

A. As the baby boomers retire and skilled positions become harder to fill, organizations recognize their success or failure rests on their ability to find, hire, deploy and retain effective employees. Investors are increasingly requiring CEO’s to provide clear strategies for attracting and maintaining a high performance workforce. Talent Management, which includes software for recruiting, performance management, compensation, succession planning and other strategic employee management functions, has become a fast growing category which is predicted to grow from 2.3 billion in 2006 to more than $4 billion in 2009 (Yankee Group). For information about Cytiva’s markets,
click here.

Q. What revenue multiples are comparable companies trading at:

A. Cytiva tracks P/S ratios of comparable on-demand talent management software companies (TLEO, KNXA, SLRY). The average cap value of companies tracked ranges from 4X revenue to more than 8X revenue. The average cap value of similar public companies is between six and seven times revenue.