It's just the beginning for Spenda!, page-42

I watched this video out of curiosity and two comments jumped out at me:

• "Our [cash] burn has been relatively static, it really hasn't changed too much"

Unless Adrian is only referring to a comparison of the December quarter verses September quarter, the statement is otherwise incorrect. The quarter before that, the operating cash expenses went from ($1,355,000) in June to ($2,809,000) in September. That's +110%... anything but "relatively static".

• "We know the market wants to see us close the gap to profitability, that's our focus. So near term, we are putting all the steps in place that we can, to make that possible".

If this is the goal they are setting, then they should be judged by it. Despite other posters suggesting that charting revenue vs expenses was 'meaningless' it's actually very useful because you can make a few basic assumptions to figure out how long it will take to get to profitability. I believe the quarter-on-quarter growth target is 40%, so if you assume that expenses at least stay static from here on, and revenue does grow at 40% quarter-on-quarter, then the company makes an operating profit (revenue less operating expenses) in Q3 FY23 - or another five quarter's time. Here's what that looks like on a chart, you are currently at the black arrow:



Remember this has two big assumptions: 1. that expenses will not change, and 2. that the business will continue to grow +40% each quarter, even as the number gets bigger. Ideally it would be great if SPX could cut back the expenses, but when you look at what is driving the recent blowout to ($2,900,000) a quarter, 95% of this is made up of (e) staff costs and (f) admin/corporate costs. Given Adrian is talking about growth and expansion into overseas markets, I find it less likely they're going to be able to sack a whole lot of people and cut back on corporate costs, right after acquiring two businesses. So even the bull case here probably has to assume expenses just stay the same, rather than decrease.

So that's what to look out for in my opinion: keep expenses steady (or lower), and hit at least 40% Q-on-Q growth (or more). That gets it to operating breakeven/profitability in five more quarters. If growth slows to say the 12-month average of 28%, or expenses go up (even just 5%), then profitability moves at least another two quarters away.

Cheers