At this point, I am embarassed to admit that I am not certain about the details of the User Agreement. I just walked through all of the footnotes to the 3rd quarter 2012 financial statement. Not a alot of detail there. The footnote simply states.....In general, the company signs a user agreement with its customer that includes an installation fee for the placement of the system...... The footnote goes on to state that the primary source of income for the company will come from the sale of patient cards.
We are all throwing numbers around in our projections. What is our specific reference point????
Thanks in advance
Our reference point is the 3rd qtr 2012 call. On the call, Richard Steinhart, the CFO of Mela said the follow about melafind user agreements:
"And revenue recognition. As we've explained previously, we receive an upfront payment of now $10,000, note the increase that we took at the end of the quarter. However, all of the upfront system revenue is not recognized immediately, rather roughly 75% to 80% is recognized over the ensuing 24 months. Separately, we provide a box of 25 cards of product installation. We sell boxes of 50 cards, 1 card per patient exam, for $2,500 to our dermatology customers. To date, we have a 100% conversion rate from sending out a user agreement to a system installation."
It is a bit opaque, but as I understand it, they book 2k in current revenue for every unit placed. They then call future payments on the system, 8 quarters at 1k per quarter as "deferred revenue" which I imagine they then book on a quarterly basis as it rolls in. New cards are a set of 50 for $2,500 or $50 per card. I think the revenue potential comes in the cards. Even at minimal 1 per workday usage, a derm will end up ordering a new set every quarter, so you look at say, 1000 units placed times $2,500 per unit per quarter gives card revenue of 2.5m per quarter. In the short run, I think revenue is driven mostly by unit placments until derms get comfortable with the machine. In the long run, card usage is where the real growth is. At least, that is my understanding.