Quarterly (Q3 21) - Level Set & Expectations

As I write this, we have share price that sits at 2.9c, 16% higher than where we closed the day our Q2 4C was released back on 28-Jan-21. As we approach reporting announcements, I do like to recap, so here it is:

As reported on 28 January:

• Q2 Revenue $1.3m
• Q2 Cash Receipts from customers $1.07m
• Revenue first half $2.25m
• Three new e-Commerce stores prepared for launch in Q3-21 (presumably Inika, Kadalys, Murray River)
• Q3 Revenue FORECAST = $2.5m
• Q2 Cash and equivalents $5.125m
• Q2 Receivables (net of payables) $510k
• Q2 Cash Burn (operating) -$1,379k
• Estimated quarters of funding available = 4

NEWS SINCE:

1) 23/2 (Half Year Accounts & Corporate Presentation)

• Confirmed Revenue first half of $2,325,142 ($317,917 of 'other' income)
• Reiterated Q3 Revenue forecast of $2.5m
• Confirmed Cash of $5,124,539
• Verified first half sales as split between 'Product and platform sales' (745k), and 'Digital marketing services' (1,262k), with Product & Platform Sales being the significant growth item compared to prior year

2) 1/3 (Change of Directors Interest x3) - combined 1M shares acquired off-market @ 2.5c by Directors

3) 30/3 (Profit Guidance)

• Q3 Revenue FORECAST increased from $2.5m to $3.5m
• YTD Revenue $5.75m through 3 quarters.

EXPECTATIONS FOR Q3 4C:

We all know that REVENUE does not equal CASH. So we shouldn't be trying to equate the two. That said, with only 4 quarters of cash remaining (per the Q2 4C), the cash position is strongly in focus. If we are talking about the single biggest factor that will increase the share price, for me it's reaching a position of 'cash positive operating'. So, how about it? We increased revenue from $1.3m (Q2) to $3.5m (Q3), doesn't that mean we should be cash positive? Perhaps the answer is "no", but the hope here is that we lessen the gap. My triggers are as follows on operating cashflow:

AWESOME: break-even
GREAT: <$250k
GOOD: <$500k
OKAY: <$1m
LAME: >$1m

Of course, a huge factor here is 'how much revenue converts to receipts?'... If we don't get a strong improvement in cash burn, then my mind will shift to receivables (net of payables) and hopefully will see a huge jump from $510k to something north of $1m - this is where the balance should be. If neither of these happens, then I will be disappointed, because it will mean that our margins are super thin and our costs are moving closely in-line with revenue, which makes me start to question the business model.

What else?

I haven't said anything about this above, but in the last 4C we mentioned that contract wins were $20M in the past 10 months. Then, the Corporate Presentation suggested a $22M 'contract value announced' number. We haven't seen any new contracts announced since, so will we see this number revised? Have their been smaller wins in the background or not? This is something else to look out for in the commentary.

Last point - and a hugely important one.... Guidance for Q4 and full-year guidance for FY21. With April almost completed, I'd be shocked if we don't get some additional guidance on Year-end expectations. This could be Revenue (like it has been in the past), or it could go further to discuss profitability or cash neutrality. We'll need to wait and see on this, but could we get close to a forecast/target of $10M revenue by year-end? This would take a Q4 forecast of $4.25M (over a 20% jump on Q3's last expectation). Let's wait and see, but cross fingers for this.

GLTAH. I'm cautiously confident that we are on a huge winner here, let's hope tomorrow plays out in our favour.