Disproportional response: a small company's current business is visibly outgrowing its own size
The model's full reasoning — Q2 2023 call → NOWe need to determine if management conveys that the business currently being done is visibly outgrowing the company's own size. Look for statements about current activity, demand, commitments that are large relative to the company's smallness. From the transcript: - "record new business ACVs drove ACV growth to a record 29% year-over-year" - that's growth, but not necessarily disproportion. - "48% year-over-year growth and customers paying us $50,000 or more in ARR and 130% year-over-year growth and customers paying us $250,000 or more in ARR" - these are high growth rates, but the base might be small. However, the question is about current activity being large relative to company size. - "RPO growth of 62% underscores the momentum we were seeing up-market. And Q2 RPO represented more than 63% of our total ARR up more than 2,000 basis points over the past 2 years." - RPO is a commitment, and it's growing fast. But is it large relative to company size? The company's ARR is $326M, RPO is $206M, which is 63% of ARR. That's significant but not necessarily "disproportionately large" relative to the company's size. However, the growth rate is high. - "Enterprise grew nearly 50% year-over-year and represents a record 43% of total ARR." - again growth. - "we are beginning to see if structurally positive impact on net dollar retention of our core customers and our enterprise business further accelerated during Q2, yielding the highest new LTV for enterprise compared to all prior quarters." - LTV is high. - "we currently see influencer marketing in more than half of our enterprise RFPs." - that's demand. - "We believe the combination of Tagger and Sprout will allow us to create a market leader in both social media management and influencer marketing." - that's future. - "We have incorporated approximately $3 million of revenue into our guidance for the remainder of 2023." - that's small relative to $328M revenue. - "we have removed our loan customer report from our forecast." - that's about low end. The key is whether management explicitly conveys that the current business is disproportionately large relative to the company's small size. They talk about record ACV growth, but that's growth.
| Ticker | Company | Call | Date | Call grade |
|---|---|---|---|---|
| KOPN | Kopin Corporation | Q4 2023 | 2024-03-14 | C+ |
| TMCI | Treace Medical Concepts, Inc. | Q2 2022 | 2022-08-13 | B+ |
| VNRX | VolitionRx Limited | Q1 2022 | 2022-05-12 | F |
| FLUX | Flux Power Holdings, Inc. | Q2 2022 | 2022-02-10 | D |
VNRX · Q1 2022 → YESThe question is: Does management convey that the business the company is doing RIGHT NOW is visibly outgrowing the company's own current size and setup? That current activity, demand, or commitments a...YES The transcript shows management explicitly describing the Heska deal (already signed and with $10M upfront received) as a long-term, multi-year commitment that will generate ongoing kit/component revenue "significantly greater" than the $28M milestones, with "millions of tests" expected each year — all while repeatedly noting the company is "not a big company" and that this is "the beginning of our commercial journey" after 12 years of R&D. They contrast this with their tiny current revenue ($114k) and cash position, framing the new activity as disproportionately large relative to their size.
TMCI · Q2 2022 → YESThe question is: Does management convey that the business the company is doing RIGHT NOW is visibly outgrowing the company's own current size and setup? That current activity, demand, or commitments a...YES Management explicitly describes the business as outgrowing its current setup in present-tense terms: they are “once again in the process of relocating to a larger headquarters facility” to meet “increased requirements” for training, R&D, warehousing, and infrastructure; the direct sales force has grown 52% to 123 quota-carrying reps and is already trending above the year-end 70% direct mix goal; surgeon penetration has reached 20% of the estimated 10,000 U.S. foot-and-ankle surgeons while procedure penetration is 4.6% of the 450,000 annual U.S.
KOPN · Q4 2023 → YESThe question is: Does management convey that the business the company is doing RIGHT NOW is visibly outgrowing the company's own current size and setup? That current activity, demand, or commitments a...YES The transcript shows management describing current activity (a $55 million backlog, a $20.5 million new order, follow-on orders, and tripled weapon-site volume expected in 2024) as large relative to the company’s still-small size and setup. They explicitly note the backlog is a “record level 10 years,” that they had to extend the holiday shutdown and retool the plant for a “significant increase in production,” and that they are “buying to that level of volume today” while remaining conservative on guidance.