In this instructional video, Bill Hanna, CPA walks through a CFO‑style financial analysis of a subscription‑based company’s year‑over‑year performance. He highlights that revenue grew 92% in 2023 and 49% in 2024, noting the natural slowdown as the business matures. He then points out that cost of sales rose 80% YoY, outpacing revenue growth, and drills down into the biggest driver: hosting and platform fees, which surged 145% and increased from roughly 7% to 12% of revenue. Hanna explains how this cost pressure, together with higher general and administrative expenses, turned a revenue increase from $54 M to $81 M into a net loss in 2024. He emphasizes the CFO’s role in flagging these trends, discussing them with leadership, and investigating the underlying causes to prevent further financial deterioration.
Chapters
We see the revenue in 2023 grew by 92%, which is great. So we almost doubled in 2023. In 2024, revenue grew by 49%. So the growth has slowed down in 2024, which could be normal if this is a startup company that has been growing in multiples in the first years of the business. Typically, that growth will slow down later as the business matures. But what you want to do as a CFO is discuss this revenue growth slowdown with the rest of leadership of the company just to make sure everybody is comfortable and this is expected of the business, or maybe something else is going on that is slowing down revenue that needs to be addressed. Now we see that cost of sales grew year over year by 80%. So when we compare that to revenue, that is in red, and the reason why it's highlighted in red is because that is saying cost of sales grew faster than revenue. So revenue only grew by 49% while cost of sales grew by 80%. The good thing about the analysis is that now we can look and see the line items that are contributing the most to this change. So we see that hosting and platform fees grew by 145%. So that is a massive growth in that cost compared to the 49% growth in revenue. So that needs to be addressed and looked at. And typically hosting and platform fees for subscription-based companies is going to include the monthly fee that is paid to a company like AWS or Azure for the hosting and cloud services, right? So that is growing at a very high rate, and we can see that manifested in the vertical analysis because that cost typically is 7% each year when compared to revenue, but all of a sudden that jumped to 12% in 2024, right? So that's a big jump that needs to be addressed. And now you can see where this is helpful because now we're identifying the areas of the business that is doing well and the areas that are not doing so. And then finally, as I get to net income or loss, I can see that we have a loss at the end of the year in 2024, and that is represented here in a trend analysis. And that is definitely an alarming trend in the business because revenue grew from $54 million to $81 million, and yet our net income went south. So we have net loss now as a result of the overspending that we've highlighted in the areas of cost of sales, So we highlighted a weakness here, and we highlighted a weakness in general and administrative, right? So that is adding up to the company losing money, actually a net loss at the end of the year.
