Ann: Appendix 4C - June 2015 Quarterly Report, page-16

Personally, I have seen exactly what I had expected. I said earlier this month that I do not expect any massive revenue growth in these quarterlies. They delivered almost 30% growth. This is fine with me at this stage.

The problem is that everybody seems to expect that revenues explode just by signing the deals. This is simply impossible. (I gave reasons in my hotcopper post here.)

Look at the investor presentation, and how the revenue flows in. Where should the money come from at this stage of their company? It is simply too early. Do you expect the new partners to pay everything up-front? The opposite is the case: Newzulu is investing some money in each partnership first, such as for the reporter kits, or for research and development (e.g. in relation to implementing partner interfaces and the like). This is reflected at this stage of growth. Therefore, the cash outflow is still high.

On the cash inflow side, Newzulu will not have received much (if any of) the money they expect from most of the deals signed since April so far. This is because the deals have been signed, but partners need to be integrated first. From infrastructural/organisational to technical reasons. The first new partnerships will lead to revenues creeping in on a monthly basis soon. Once the first invoices are getting paid. This may take a while. Again, I gave reasons here. Signing is step one, but seeing their effects takes time.

My personal expectation is:
» The cash burn rate will remain approximately the same in the current quarter ending September. This is because, although some one-off payments may not reoccur, the Octiplex acquisition needs to be paid. (half in shares, half in cash)
» The cash burn rate will likely decrease in Q4 (December quarter), as Octiplex is paid by then
» Once Octiplex is integrated, app development costs will decrease, and Octiplex adds to the revenues. Not to a massive deal, but it will show.
» I expect new partnership deals to show up in revenues from Q1 (September quarter) at the earliest, more likely in Q2 (December quarter).
» More partnerships will be signed until the end of the year, finally leading to Newzulu becoming cash flow positive within the next 12-18 months. This has been the time frame given by management earlier. Why does everybody expect them to be faster than they actually say they will be?

I spoke with Alex Hartman (and others) at the symposium this year, and he confirmed that it is a problem for the share price that people seem to be expecting results "overnight".

He also said at the symposium that they were closer to getting cash flow positive. He said that only 6 deals were needed to get there. More deals have been signed since: Gtres, ITAR-TASS, and 2 Australian media companies (one of which is a "major" player). The Vietname deal is tiny compared to those. Another "major" one is going to be announced on Monday. [Side note: Fosters valued the Newzulu Live deals at around $1 million yearly revenue each. See this link. Remember that they expected Getty to sign and were right as well.] As someone else said earlier today here on hotcopper, Alex mentioned yesterday at the EGM, that "4 deals" were needed for cash flow positive. This is in line with what he said at the symposium, and with the deals made since.

So far, in my view, whatever has been promised by management, was delivered. Now, if they say they are seeing cash flow positive within 12-18 months, why do so many expect that to happen earlier? I am totally happy with what management delivers at the moment, and if they continue to do so, why would they not reach their goal within a good year?