DSEGROSS MARGINThe gross margin percentage declined year-on-year...

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    The gross margin percentage declined year-on-year to 68%. This decline is attributed to two main factors:
    1. The shift to the higher ARPU yet lower gross margin percent Email Backup and Archiving sold through distributors and
    Managed Services (MSPs) sold to larger Small and Medium Businesses and Enterprises.
    2. The proliferation of the backup data across nine data centres around the world (to date) to cater to the growing
    emphasis on data sovereignty by our partners and users.
    As the Company grows it is user base, the downward pressure on gross margin from data proliferation will abate. Furthermore,
    the engineering team will continue improving the product architecture for better scaling and cost (COGS) reduction.
    Operating Expenditure (excluding Amortisation and COGS)
    Operating expenditure (OPEX) increased 18% year-on-year. The increase is mostly attributed to growth in employee headcount
    and costs as the Company expands its product capabilities and support, and grows its global footprint with an emphasis on North
    America, Europe and Australia and Japan. Very selective increases to headcount are expected.
    The other factor in OPEX growth has been the increase in withholding tax (categorised as "Other operating expenses”) applied by
    the local tax authority to non-resident companies in Latin American. A material portion of this expense is expected to be
    recovered in the form of US income tax credits to be taken up in future periods for our US subsidiary.
    Total cash and cash equivalents is at $2.2M, down 45% year-on-year. The Company will continue to be vigilant with respect to
    operating expenditures and expects to see a reduction in costs in the second half of 2019.
    • ARR by December 2019 is forecast to be in the range of $4.8M-$5M – a pleasing increase from the $3.86m of ARR
    reported at the end of June 2019.
    • The signing of new partners and the expansion of existing partnerships will continue for the remainder of the calendar
    year and into 2020.
    • An ongoing focus on Email Backup and Archiving in terms of both feature-set and user experience enhancements as
    well as architecture and scaling improvements.
    • Low customer churn from July onwards in single percentage digits.
    • Cash burn and OPEX will be lower in the second half of 2019 with very selective hiring and targeted marketing.
    Overall, Dropsuite is in an excellent position to capitalise on the growth initiatives put in place in the past 12 months. ARR is now
    steadily tracking up with the near term forecast favourable; the revenue base continues to be de-risked and diversify each
    month; the quality and base of partners is growing; product demand from end-users in increasing at a steady clip; the underlying
    technology continues to be enhanced, and entry into new first-world markets and building critical mass in existing markets is
    ongoing. The Board is very confident about the Company’s prospects moving forward.
    Last edited by Goblin: 10/10/19
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