I agree the quarter is weak relative to the last - no doubt about it. I also share in your frustration because I had previously expected that we would do $15-$25m a quarter, and $15m is at the bottom end of my expectation. I was hoping we would hit $25m+ / quarter, or at least match Q4 FY20. Many of us were. Some of the weak quarter may be regulatory-driven (delays to public sector contract wins), some of it may be money upfront to distributors or underperforming distributors who haven't been able to reorder. Perhaps ZNO is a victim of its own success - making a product that lasts too long.
In terms of marketing spend though, I'd argue that ZNO is doing ok - their B2C marketing strategy consists of using influencers to target mums with kids as a cohort. B2C is not the main game, B2B is. The last thing I want is for ZNO to run radio ads, outdoor advertising etc or start stocking pharmacies / supermarkets - nothing will fly off the shelf without an inordinate amount of marketing / advertising expenses. Targeted marketing spend with high ROI via google ads or instagram is ok.
And on the B2B front, the job of marketing generally sits with the distributors. Have a look at peers (with similar market caps) in nanotechnology materials including ANO and PPK. They don't do much marketing - that's up to the distributor. The job of the product owner is to sign up distributors and in ZNO's case, new direct clients too, which they have done.
We signed up a Neil, Amazon (warehouses), United Airlines, Rentokil, Bunzl, Compass and Atalian Servest in the last 3-9 months. Being a supplier to Amazon and United Airlines were not even within the realms of possibility in my mind, just 9 months earlier when I bought my first shares in ZNO.
Many of these names are large, slow-moving organisations and will take time to order and re-order. It also takes time to work through their networks and contacts. For example Atalian is only just starting to make in-roads into France, after success with Zoono in the UK, and they are a French company.
In terms of regulatory approvals, withholding dividends will not help speed up regulators. If you give $5m to the EPA to expedite the process, you will likely end up in jail. There is no amount of management action that will make regulators do things quickly - that is reality. What we do know is that Zoono has been good at passing testing standards (200+ tests now) and has experience at getting regulatory approvals in the past (TGA etc).
IDS Med is dropping the ball in Malaysia, partly due to regulatory delays - but they are having a go in Singapore, Indonesia and Phillipines (apart from Singapore which had prior approvals, all these markets have only recently received some form of regulatory approvals). I suggested that you contact Alex from Zoono directly to understand the situation in Malaysia, but I'm not sure if you have taken up on that offer (maybe you have).
In a nutshell, would I like $7m a month sales, yes I would. But am I upset that Zoono paid a dividend and are tight on costs such as marketing, not really.
What I what to see is continued evidence daily that new business customers are coming on-board, because that means distributors' inventories are getting (slowly) depleted and eventually that will translate to sales growth.
PS I'm happy/open to hearing more of your views, too much optimism isn't necessarily a good thing - as we've all learnt.
ZNO Price at posting:
$1.68 Sentiment: Buy Disclosure: Held
