I think NEA is going to report a circa $30m loss for FY22. Probably a bit higher, because some capitalised sales expense made in FY21 is going to manifest as an amortised sales expense in FY22. That would be at least $2m, probably more. This is what the FY21 Annual report stated:
“The Group amended its sales incentive program during the year ended 30 June 2021. As a result, effective 1 January 2021, the Group capitalises incremental costs of obtaining customer
contracts unless the amortisation period of the asset that would have otherwise been recognised is one year or less. The effect of this change was a reduction in employee benefits expense of $6,059 thousand for the financial year ended 30 June 2021.”
A few years hence the gap between commision earned and what is expensed in any one year should narrow, because each year's accrual would be ofset by amortization of the previous year's accrual, and their difference in value may be small.
What makes FY23 difficult to predict is the IP litigation cost. NEA expenses whatever costs are incurred, and by the time the matter is resolved, that cost may have summed to $10m, but that would be history. But who the court rules should bear the cost is unknown, but I think the parties will settle, and that would be the end of the matter. By FY24 NEA should be meaningfully profitable, IMO.
NEA Price at posting:
$1.32 Sentiment: Hold Disclosure: Held
