Share Price Rising, page-310

Hi Kicks (& Pastor)

In so far as this quarterly is concerned, you may recall my comments post the last quarterly, indicating that this would be the ‘blind’ quarter. Essentially, the last financials up to 30 June become outdated and somewhat diluted in terms of providing a reference point.
That said, we do have some new information which allows one to form an opinion and therefore quite happy to share my thoughts.

Known facts and/or deductions :
* 2500 Boosts manufactured and delivered Apr to Jun 18
* Reported inventory 30 Dec 17 and 30 Jun 18 implies overstocked on IQBuds. Therefore no reason to manufacture further stock of IQBuds. 
* Reality that Qtrly for Jul 18 to Sep 18 showing only $661 k (amazingly below the Receivables number reported 30 Jun 18). So no incremental sales of IQBuds or Boosts receipted during the period 1 Jul to 30 Sept 18. On the surface a sad situation, but fortuitous (If my read is correct) that we can allocate the entire manufacturing spend in the period 1 Apr to 30 Jun to 2500 Boosts. $881 k divided by 2500 yields a cost per unit of $ 353. Sounds plausible / reasonable when considering the Boosts at launch were discounted to AUD 386.
* Using the est. unit cost above, the Qtrly 1 Jul to 30 Sept showed the manufacturing spend as $1.2 m translating into approx 3400 units, with a note in the Qtrly signalling that this spend includes advanced inventory.
* Then looking at the est Spend on manufacturing 1 Oct to 31 Dec, reported as $ 1 m (equates to 2840 units) and assumes still no need to manufacture more IQBuds. At the time of disclosing this, JM would have had 4 months of actual sales. 
Whilst it is extremely dangerous to rely to heavily on cash outflow forecasts, to my mind, given the fact that they indicated fresh production being supplied early July, says order of magnitude we could conservatively see a Receipt number based on approx 2500 Boosts this quarter. If they were netting AUD 450 per unit through their channel partners for Boosts, would yield a receipt number of $1.125m. Add say $ 300 k for IQBuds (hopefully the sales have not stalled completely), and Cash Receipts as at 31 Dec could be $ 1.425 m.

Would this constitute a great quarterly ? To LTH’s, I suspect this would be considered favourably given the prospect of growth through the new channel partners and of course the upcoming NHS contract. The market would IMO, regard the quarterly as again  poor, falling well short of offsetting the considerable Qtrly spend ($4m plus). After raising, what’s it, $38 m capital (pls correct me if I am wrong), I think most investors would tag NUH as a Company burning cash with no demonstrated traction in sales.

So that’s one angle, but let’s look at another.

During CY17, NUH sold 17000 units. $ 4.426 m Sales Revenue for IQ Buds equating to AUD 260 per unit.
Recently, JM declared that the Company has sold 30000 to 40000 units since the Company started. Sufficiently vague by design (guarding vs competitors) or a CEO who is trying to Boost the number via a range which reflects that invoiced and the nett result after factoring in the returns. I personally believe the returns have been a major problem for Nuheara and therefore I am using the 30000 unit number, well until proven incorrect 

Due to the overstock situation on IQBuds (IMO for the entire CY2018), quite easy to take a stab at how many units of each product sold in H1 CY 2018. In Q1 only IQBuds being sold. Total Rev for H2FY2018 equal $2m. Deducting 2500 Boosts sales realising $965 K, means Rev for IQBuds equates to $1.035 m. Assuming a nett unit sales price of $290, equates to 3570 units. So total units sold H1 CY 2018 equals 6070 units.

30000 units less 17000 units (CY 2017) equals 13000 units (CY 2018). If H1CY 2018 sales were 6070 units , this means H2CY 2018 would amount to 6930 units. If we peg the Rev for IQBuds at $300 k per quarter (sales essentially stalled), would equate approx 2060 units for the 6 month period. By deduction, Boost sales would need to be 4870 units over H2CY 2018 ( based on AUD 420 per unit assuming some continued discounting and pricing to new channel partners).

Given the payment terms story, Qtrly likely to disappoint but H1 2019 Financials could look strong when we see Revenue (Receipts plus Receivables). At 40 / 60 split, Oct to Dec quarterly likely to be $1117 K.

Sorry so long, but this depicts my framework going into the quarterly and then the Financials.

Regards
Rokewa

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