Normally, the announcement of a software player inking an agency agreement with a distributor would not attract our attention. But when we looked more closely at the news that AIM-listed, social media SaaS pure-play, SocialGO, has signed such with Eindhoven-based digital media industry technical services group, Catalis SE, we found that this may not be quite as straight forward a transaction as it first appeared. Couple this with a revenue (and I think profit) warning, one felt obliged to dig a little deeper.
First the latter. SocialGO has warned that half-time revenues will be ‘materially’ lower than the year ago period, though cost cut-backs seem to have reduced losses. SocialGO lost £1.2m in 2011 on £734k of revenues (see SocialGo offers a peek under the SaaS covers) and seemed at risk of running out of cash.
In respect of this very point, the terms of the distribution agreement ‘will see Catalis acting as an agent for SocialGO, providing marketing, promotion and sales support, as well as financial and creative services’. Catalis will pay SocialGO £50k a month for the pleasure ‘which will be sufficient to cover the current cost base of SocialGO’. This looks like a close call as SocialGO had operating cash costs of over £800k last year, but I can only assume that the recent round of cuts has brought this down to below £600k. In return, SocialGO will pay Catalis the first £50k p.m. of revenues and 60% of any excess.
Now, throw into the mix that SocialGO founder (then known as Bright Things – see SocialGo yet to see the ‘value’ in social media) and executive chairman, Dominic Wheatley, is to go non-exec because he recently took over as CEO of Catalis, and it starts to get really interesting. And by the way, SocialGO CEO, Neil Goodall, was formerly CEO at Testronic Labs, the largest of Catalis’ operating companies. Catalis is not in the rudest of health itself having recorded a €7.4m net loss last year on €26.m of revenues.
Maybe this is all fine and dandy, but investors have marked SocialGO’s shares down 14% to just 0.6p as I write.