@DanMachine I can appreciate what you’re trying to argue here, but I think the problem is rather simple.
For the three quarters year to date, excluding payments to merchants, IOU have had the following expenses: September 21: ($4,475,000) December 21: ($5,098,000) March 22: ($4,301,000)
These are quite simply the mundane expenses incurred in operating the business. Some of them can theoretically be reduced quickly i.e. ‘advertising and marketing’, which for FY22 averages ($557,000) per quarter. Others might move around a fair bit depending on circumstances, such as ‘administration and corporate costs’ which for FY22 averages ($1,670,000) per quarter. Others are static and can’t be changed unless you sack people, such as ‘staff costs’ which for FY22 averages ($880,000) per quarter, and has been growing rapidly – Q2 staff costs were up 30%, and Q3 staff costs were up 20% again (in the March quarter, IOU spent ($1,064,000) on staff costs alone! Separately, this is a huge issue – they’re allegedly a tech company, but the way they approve merchants means it is not scalable: in order to grow they have to keep expanding the workforce).
Again, all of this does not include payments to merchants. Here they are by quarter: Jun-21 ($524,000) Sep-21 ($5,517,000) Dec-21 ($5,262,000) Mar-22 ($13,334,000)
You have to put aside the $13M, they are not going to get this back anytime in the next quarter if you assume the repayment terms are between 3-6 months. So at best they are likely to get somewhere around $5M-$6M in payments back, plus their circa 5% margin, less whatever the bad debts are which is quite the unknown. They now have two options:
1. Halt/reduce further payments to merchants, and put some/all of that cash aside to pay for the ongoing operating costs above and the second IDSB payment, or 2. Lend the cash straight back out again as payments to merchants, and thus run out of cash to pay for the operating costs and have to raise at 52 week lows.
Either way the net result is that BNPL operations have been / are being wound down (evidenced by the TTV tanking the second six weeks of the past quarter) because of working capital constraints. That is very poor management and there’s not much point dressing it up. It really is that simple when it all boils down.
I am happy to be corrected by someone (@kevin103, @Ryzie?) if I have these numbers wrong, but that’s my read of it.
(20min delay)