Ann: Quarterly Report, page-28

Hey HBMS, in the example you are quoting from in the Farnam Street Letter, the full context is as follows:

"From 2005-2021, it grew sales at a +6% (p.a.) clip. Progress came from new stores expanding at a +3.9%rate, and same-store-sales improving added +2.1%. This would not qualify as hyper-growth."

In terms of equivalent metrics for CXZ (SaaS), these are very different businesses, so it is difficult to compare.

If I had to compare them, I would say that:

• The new stores' growth of +3.9% p.a. in the example is equivalent to CXZ offering its product to new dealerships.
• The same-store-sales growth of +2.1% from the example is most similar to CXZ offering an expanded product (feature enhancements) to existing dealerships.

CXZ can grow its SaaS revenue streams via:

1. Proprietary feature enhancements valued by its existing userbase of franchised dealerships
2. Commercial Partnerships bringing complementary functionality to this existing userbase
3. Expansion of the userbase itself to new OEMs and franchised dealerships

Using the levers outlined by Farnam Street, I think CXZ could (conservatively) achieve the following over the next decade:

• Sales: +10% p.a.
• Margin +1% p.a.
• Share Count: +2% p.a. (reducing SOI)
• PE multiple: +2% p.a.
• Yield: 0% p.a. (no dividends)

Summing them up, if achieved, CXZ could deliver a 15% p.a. return from here over the next decade. That's purely a hypothetical example, but the framework is a useful method for decomposing the drivers of returns. Another caveat is that CXZ are not currently producing a bottom line (NPAT) profit - instead choosing to optimise for NPAT neutrality and re-invest for growth.

In the last quarter alone, gross profit for CXZ grew by 16%, but that is likely due to the temporary tailwinds now behind them (easing semiconductor shortage).