OBJ Revenue v Cash - Worked Example

The following explains PRODUCT ROYALTY REVENUE versus CUSTOMER CASH RECEIPTS for OBJ.

We'll start with the JUL 2017 to SEP 2017 period.

1. Lets assume that prior and during Jul 2017 P&G Manufacture a bunch of products with OBJ technology and fill up one of their warehouses. This is good, but it doesn't trigger any royalties. No revenue or cash for OBJ.

2. But at the end of Jul 2017 P&G ship many of the above products to a range of retailers across Asia. This triggers a royalty. (Note: Royalties do not require retail sales... just shipment external to P&G warehouses). For arguments sake lets assume the units result in $300,000 AUD of royalties. This means Revenue for the OBJ accounts... but no cash (yet).

3. Lets assume no other product shipments in Aug or Sep.

4. 45 days after the end of the Sep quarter (late November). P&G add up all the royalty from shipments made during Jul, Aug and Sep. They calculate the royalty ($300,000 in this example) and then physically pay OBJ. Cash at last. We would normally therefore expect payment in Dec 2017 but for whatever reason it was delayed until Jan 2018. Cash management by P&G.

5. OBJ report their Dec 2017 quarter cash receipts in the Jan 2018 4C report and in this case show effectively no receipts from customers . In the above example that means revenue of $300,000 from Jul 2017, wont' be reflected in a 4C until Apr 2018. Crazy.

6. Like us, OBJ will be keen to see how the Dec Quarter shipments went (they should find out mid Feb, 45 days after quarter end). I'm curious if the North American roll-out in terms of product shipment was completed pre Dec 2017.... hope so, but I suspect the bulk was done from US warehouses in Jan... oh well. The real question is underlying demand and whether shipments will continue.

Hope the above helps. OBJ Should be including a slim down version of this in their reports, they should be breaking down revenue by source and they should be including some graphs. It's not rocket science.