Last week, the US’s Silicon Valley Bank came to a grinding halt, announcing it had run out of money. It was selling its stocks, had a negative cash balance, its share price fell by 60% and its CEO Greg Becker sold over $5 million of company shares a fortnight before the collapse. It has shocked investors, economic advisors and other small banks, giving them the 2008 recession PTSD. Most of all, however, it has suspended start-ups—its primary audience—in limbo.
One of those startups is software company Dubber (ASX: DUB) with its maximum exposure amounting to $1.3 million. The Company is trying to recover these funds and claims that they won’t materially affect its business.
Launched in 2011, Dubber is a global software-as-a-service (SaaS) company that provides cloud-based call recording and voice AI solutions for businesses and service providers. Its technology allows organizations to capture, store, analyze, and manage voice data in a secure and compliant manner. It is headquartered in Australia and has a global presence, with offices in the United States, Europe and Asia.
The news of the Silicon Valley Bank collapse wouldn’t be so horrible for the Company had it not been following a disastrous half-year result for Dubber. In H1 FY23, its revenue fell 13% to $14.09 million as its losses increased by 18% to over $37 million. Dubber’s expenses also shot up as it took a different route compared to other tech companies. It hired more people, thus increasing its salaries and related expenses by 40% to $27.8 million.
As a consequence, the Company’s cash position took a major hit, falling from over $108 million in December 2021 to just over $26 million now. Last year, Dubber was suspended from the ASX after it failed to lodge its audited results by the due date, which also led to its then-CFO being ousted.
Seeing worried investors, the Company has laid out a restructuring plan to begin cost savings that would prove their merit by the end of 2024. On February 14, it appointed Neil Wilson as chair, replacing Peter Clare, and on January 9, Andrew Demery took over as CFO. By June 2023, the Company plans to save around $5 million each quarter as it will undertake layoffs, reduced marketing spending and more.
“We have not gone into this lightly,” CEO Steve McGovern had reaffirmed. However, it is unlikely that they had prepared for what was coming.
The news of the Silicon Valley Bank collapse is not making Dubber’s financial ordeal any better. With over a million stuck there, Dubber will need to re-evaluate its approach to cost savings and perhaps business altogether. For over a year now, Dubber has been going downhill, accumulating major losses. Shareholders hope that it doesn’t suffer a fate similar to the Silicon Valley Bank.
As the bank expects to be shut down in the US and UK, it has raised several red flags for the strength of the US banking system and financial support for small companies. For Dubber, this might be a test of its restructure.
Alinda is a Business Reporter for The Sentiment
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