Thank you for sharing your analysis and insights on the forum - greatly appreciated. I'm trying to get a sense of how you calculated that the incremental revenue required to break even is $4M (i.e. $1M per quarter).@herkshireYou’re welcome.
I was actually talking about a quarterly revenue increase by 1mUS$, i.e. 1mUS$/quarter of initial revenue, followed by 2mUS$ revenue in the following quarter, followed by 3mUS$, etc.So, in the 12th quarter (after 3 years) one would have 12mUS$ of revenue, which would match the current rate of cash burn (~4mUS$/month).
The cumulative revenue up to that point would then be 1mUS$+…+12mUS$ = 12*(12+1)*(1/2)mUS$ = 78mUS$, vis-a-vis a cumulative expenditure of 12*12mUS$ = 144mUS$, i.e. the net cumulative cash burn would be 144mUS$-78mUS$ = 66mUS$.Therefore, the Company would break even (i.e. Revenue = Expenditure) before running out of cash.
Then you can attach a value to the business using an appropriate multiple of the revenue run rate at breakeven, or of the following year’s forecast EBITDA (assuming constant revenue increments and constant expenditure).There is nothing exact in this approach, it is really just a way of finding an order of magnitude for the intrinsic value of the business in the event that revenues do start picking up.
For the sake of clarity, I personally found the last quarterly rather uninspiring, and have reduced my holding by ~25% since. The most recent contract announcements (Pandora, M&S) do seem to show some progress in the right direction, though, so I'm presently in a wait-and-see mode regarding OMN.
Cheers
