Q2 onwards, page-197

Let me explain how the margins work as there seems to be a little bit of confusion.

If you are running a gross profit margin of 40%, this means for every $100 in revenue you are making $40 of gross profit, so you get the gross profit by multiplying your revenue by your GP margin.

Let’s work backwards to get the required revenue to break even.

If we know overheads are fixed at around $500k AUD then that’s $6m per year or $16,438 per day ($6m/365). (I’m not worrying about USD/AUD changes as revenues are in USD as well so would go up/down accordingly)

So we need gross profit of $16,438 per day to break even. Hopefully this makes sense to here.

To get revenue from gross profit it’s the inverse, so instead of multiplying revenue by 40% we need to divide gross profit by 40%.

$16,438/0.4

This gives us $41k of revenue per day to break even.

What if overheads blow out and hit $530k rather than $500k?

For every ~$30k per month that overheads exceed this $500k we would need to generate additional revenues of $2.5k a day in revenue to generate gross profit of $1k/day to cover these costs ($30k/30 days = $1k/day/0.4 = $2.5k)

This gives you a feel for the break even revenue required as overheads move up/down.

I agree the above is just for programmatic and the $500k of overheads per month does make sense if you compare it to the normalised expenses for April as mentioned in the 12 May announcement (remember we are cost cutting) - you see these overheads excluding AdCel equal about $505k.

AdCel is currently running at $6k/day and it is now run-rate profitable so to get a consolidated revenue number for which we are run-rate profitable at a group level add the $6k to the $41k mentioned above and we are there.

So at $47k revenue a day we should be profitable on a consolidated basis.

If programmatic overheads go to $530k/month then we need about $50k/day ($47.5k + $2.5k) in revenue to break even ($6k AdCel, $44k programmatic)

So how close are we?

There was an announcement a little while ago stating that programmatic was only $2-3k/day gross profit away from being run-rate profitable!

Applying the GP margin to gross this up to work out daily revenue just like we did above: $3k/0.4 means we were about $7.5k/day in revenue away at that point. If I recall correctly this was after the first round activations? Second round was expected to generate daily revenues in excess of $10.8k/day so we should be almost there (the publisher traffic/revenues take a few weeks to ramp up).

To summarise I believe we should be almost run-rate profitable now. Ted said he will let us know as soon as we are there so I optimistically think we may hear that we are run-rate profitable this this week along with the update on May.

Cheers,
TT