Ann: Appendix 4C - quarterly, page-28

Here are some musings and a graph. Please feel free to comment/correct.

Company quote from the recent quarterly:
"If (as expected) this growth profile continues the Company should become cashflow positive in Q4 FY20, with historical growth in ACV resulting in a cashflow catch-up effect as new customers are onboarded, invoiced and pay."

So, there is now a reasonable expectation that the Company should become cashflow positive in Q4 FY20 (this quarter). The predicted cashflow catch-up effect will be quite welcome (and it seems overdue for such an effect). There has been a somewhat noticeable lag between the reported ACV and cash receipts ever since the March 2019 quarter.

The graph below is pretty self-explanatory. ACV and operating expenditure have had a somewhat obvious linear trend upwards, and therefore have trendlines attached. Cash receipts, while generally increasing over time, continue to be a bit over the place, and therefore no trendline has been included.

Comparing the March 2020 quarter to the December 2018 quarter, you'll notice that operating expenditure has increased by roughly $0.2 million per quarter. This $0.2 million increase in quarterly operating expenditure has been accompanied by an increase in quarterly ACV of $0.6 million. In yearly terms, on average (and very roughly speaking), the increase of $0.8 (0.2 x 4) million in operating expenditure per year has been accompanied by an increase in of $2.4 (0.6 x 4) million in ACV.

Increasing operating expenditure by $1, increases ACV by $3? Maybe, maybe not. Unfortunately such a relationship has not been reflected in quarterly cash receipts, at least not so far. We've been told by the company that there is an expectation that there will likely be a cashflow catch-up effect causing the company to become cashflow positive this quarter. So, I guess we'll just have to wait and see.

Once the company passes the cashflow breakeven point (which seems to be imminent), it'll be interesting to see if a more rapid increase (instead of the linear one shown in the graph below) in operating expenditure will continue to be accompanied by such seemingly efficient returns to ACV into the future. Up until now, it's likely that operating costs have likely been tightly reigned in? We may see a much more rapid scale up of the business once any possible conservative operating expenditure restraints have been removed?