My guess is that the 48K would be factored at 80% giving 38.4k. Putting aside 16.4k to cover opex (based on 350k usd, exchange rate of 0.71 and 30 day month), that leaves 22k per day to 'invest' in either prepaid inventory or in additional integrations. To maintain 48 kaud/day revenue (@41% gross margin) requires about 28.3 kaud/day invested in inventory pre-pay. Therefore Con notes are available to plug this gap, to fund ongoing platform integrations and to service the cost of factoring finance. Moreso, if the factoring facility hits its overall 'cap' and Con notes need to pull a greater weight.
But at 48 kaud/day revenue...while we are making operating profit, we are unlikely to be covering cost of capital...so much greater daily rates required before MT to LT trajectories can be confirmed. At 48kaud/d, net income (meaning ebitda) would be 3.3 kaud/d (48-28.3-16.4), which gives a return on capital employed (ROCE) of 11.7% (i.e 3.3/28.3). Against a WACC likely to be in the high teens if not higher.
So we need to scale up fast. To provide a ROCE that is consistent with our high WACC, and also to reduce dependency on the higher cost sources of capital. back of the envelope (and assuming margins stay constant and opex is fixed), we would need to be at 80kaud/day to be generating enough revenue whereby factoring at 80% was sufficient to cover full cost of inventory pre-pay, but perhaps insufficient to cover the cost of factoring and any additional capital required to fund integrations. However, our ROCE would be around 35% which should ensure access to high quality and low cost finance for that, and other growth purposes.
Bottom line, rapid scale is key. Factoring helps...though in reality I suspect it will cap out before we get to a scale that doesn't require con notes. So con notes likely to be largely, if not fully utilized IMO. The 90-120 day working capital gap is a reality of the business and will always need to be financed. For now, we have expensive financing. If we kleep scaling, its cost will diminish. Eventually, if scale continues, it will be self funded (not even factoring) unless cost of factoring is less than cost of equity. First step for me is trajecting to 80 kaud/day (min) and maintaining that for a full quarter. BTW, 80 kaud/d in Q4 is only $7.2 maud for the quarter...which is less than what management had guided to expect in Q4 last year (prior to the capital limitation wall being hit).
All IMO and GLTA.
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