As the table above shows, whilst there are plenty of companies willing to promote their recurring revenue, very few are willing to contextualise this number by disclosing churn. There are only two reasons for this – they don’t know or they don’t want to tell you. Which of these is worse depends on circumstance. But in any case churn, or some derivative or it, should be viewed as material information.
Software vs Resources
If the ASX and ASIC are going to make a big song and dance about certain companies, maybe they should get serious and introduce a standardised reporting template for SaaS companies in the same way that they do for resource companies. Revenue could be classified along a spectrum from one off to MRR much as mineral deposits are classified as reserves/resources. A similar standard for Churn might be developed. Customer acquisition costs could be standardised the same way C1 cost reporting has been tightened for resource companies.
This obviously would create some administrative burden, but is possibly a fair trade off for those companies that want to trumpet recurring revenue. And who knows, maybe forcing management to focus on some of these metrics might actually have the unintended benefit of improving longer term performance?