Retrobyte / Hydrologi Whilst I respect your opinions, I do...

Retrobyte / Hydrologi

Whilst I respect your opinions, I do believe you are being overly pessimistic. I believe there has been sufficient disclosure by Nuheara to extract some meaningful indicators.

My starting point dates back to H2 CYE 16, where the level of sales via the Indiegogo campaign and their online website were reported. I have used 4227 units required to meet current obligation at that time. IMO, a sensible assumption is that the first production campaign would be fairly well aligned to meet the sales obligation. The cost associated with the production is recorded at AUD 481 K. This points to a unit cost of AUD 114. Sounds reasonable (fairly consistent with the number touted on this forum).

Now let’s look at the Sales versus the Production profile for Fy17 / Fy18 YTD.

Sales

Q3 16 .... 4000 units (disclosed)
Q4 16 .... 227 units (correlation with above)
Q1 17 ..... 1273 units ( JM 23 Mar $ 1.5 m preorders to 5000 customers)
Q2 17 split
.............. Apr & May .... 2930 units ( JM 30 May completes 6000 units, Sales Rev just below AUD 2 m, therefore just below AUD 0,9 m for two months. Av SP AUD 307 per unit).
.............. June 2000 units ( AUD 0.5 m Revenue with assumption Ave SP drops to AUD 220 unit >> Enter first stock releases to B & M retailers )

So Revenue reconciles with FYE 17 and units sold equates to 10430 units, of which 4930 sold in Q2 2017.

Serves no purpose to look at first two quarters 2018, given lack of information. However, worth looking at the production profile via Qtrly spend and next Qtr estimated spend.

Production ( actual ex cash flow report/s)

Q4 16 ...... AUD 481 K ( If Av unit cost AUD 114, then equates to the 4227 units... then obligations fully met)
Q1 17 ....... AUD 475 K ( Another 4200 units. VS PLANNED PRODUCTION of AUD 1395 K or 11300 units. See possible concern areas below)

Q2 17 ....... AUD 1776 K ( equates 15570 units VS PLANNED PRODUCTION of AUD 1600 K or 14000 units).
Q3 17 ....... AUD 1600 K ( equates 14035 units VS PLANNED PRODUCTION of AUD 2400 K or 21000 units)

Q4 17 ....... PLANNED PRODUCTION spend of AUD 1500 K or 13150 units.

The Company reported they had manufactured 17000 units as at 30 Jun 17. So according to the above Sales numbers, surplus stock going into FY 2018 was 6570 units ( coincides with their announcement that unallocated stock will begin their WH’s by mid May)

Therefore from 1 July, production planned equals 34150 units. Add the 6000 free stock and we have 40000 units.
Sorry guys, this does not support ideas of 5000 sales for a quarter, particular with their roll out to retail and their on line presence. Bottom line, if you are right, they end CY 2017 horribly overstocked.

So why the pathetic Rev number at the end of Q 3. To my mind, you have the obvious argument of cash inflows only showing cash receipts, so excludes receivables.I suspect that the note in their financials on revenue recognition is contributing to what we see as an understatement of sales. They have their 30 day return policy which may impact. Worth going back and having a read.

In closing, the underlying assumption in much of the above hinges on that very first production campaign aligning with the 4000 odd unit sales obligation. If I am wrong and it was staggered to include the AUD 475 K spend in Q 1 17, then production unit cost ramps ( which may explain the poor Gross Profit number). I personally think they encountered a problem with the first campaign, hence the near identical spend a month later, hence the cost of goods being excessively high and also fits nicely with the fact that delivery was only end March/ early April. They received all the certifications by 11 Jan, so why delayed shipping ?

Sorry so long but hopefully supports my bullish outlook.

Rokewa