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@ Two-Good
1) Two-Good: Samsung IP revenue recognition is £6m a year.
Amerloque: Nanoco has defined Samsung revenue recognition to be 3.1M bi-yearly. This is in stone and will continue to be treated as revenue for many years. Nanoco expects to receive licensing fees from other customers in the future, perhaps even in 2025.
2) Two-Good: Cash already received, can't have it twice, nice idea, hence its just spreading the settlement" into the future and recognising it as future (fully paid) licence revenue..
Amerloque: A. Can't have it twice??? "Long-term prepaid subscriptions (e.g., annual plans) should not have revenue recognized upfront for the entire amount. Revenue is recognized gradually over the subscription period, aligning with performance obligations. Deferred revenue moves to recognized revenue incrementally." Nanoco would report an annual total of 6.2M Pounds in quarterly increments. Since Cash has already been updated at the time it was received, one would never update it again. Revenue Recognition affects earnings, not Cash Balance.
3) Two-Good: Whereas cash spend is a given £400k a month upto £4.8m burnt which needs to be covered.
Amerloque: ???? No argument here. Nanoco specifies that they will recognize sufficient earnings to breakeven. Given identified earnings of 7.1M per year and prospects for new sales, this should not be difficult.
4) Two-Good: Breakeven I believe was in cash terms not underlying or reported profit terms.
Amerloque: Although Nanoco did express cash flow breakeven confidence, profit breakeven seems to be a much easier goal. If Nanoco achieves cash flow breakeven, we should see a nice profit, especially since the licensing revenue carries almost no Cost of Goods expense.
Amorleque
Samsung IP revenue recognition is £6m a year.
Cash already received, can't have it twice, nice idea, hence its just spreading the settlement into the future and recognising it as future (fully paid) licence revenue..
Whereas cash spend is a given £400k a month upto £4.8m burnt which needs to be covered..
Breakeven I believe was in cash terms not underlying or reported profit terms.
Hope that helps
@twogoodtodie
Thanks for the calculation. However, my calculation differs considerably from yours, as explained below. I welcome any corrections to my calculations.
1) If Nanoco can achieve a gross marging of 40%, they would need a gross revenue of 10.5 British Pounds in 2025 to cover the 4.2 Pounds Burn Rate.
2) Since the revenue table is only for first half of Calendar Year 2024 (beginning in August, 2024), the anticipated 2025 License revenue should be 2*3.1 or 6.2 pounds. This license revenue is built in to Nanoco P&L's for many years. Service and Material revenue brings the total revenue to 7.1, leaving a deficit of 2.4 pounds.
2) Thus, the expected EBITDA margin of 40% would require only 3.4 Pounds of additional revenue to meet breakeven.
3) While licensing helps to provide breakeven, there would still be a cash flow deficit, since the Samsung licensing revenue has already been recognized in the books (I am not sure how delayed revenue recognition affects Cash Flow). If Nanoco correctly anticipates positve Cash Flow in 2025, Nanoco must expect another large material contract coming in the near future. Apple's decision to introduce Pro Vision into China in 2024 would possibly support this, as would Nanoco's years-long involvement with a large Asian company.
Saldog
Doubt it, main licence fee income is the 'smoke screen' of IP revenue recognition for IP we flogged without shareholder approval under the Samsung settlement agreement which makes Nanoco look really profitable 📈 distorting financials just misleading.
Twogood
Maybe licence income?
Just need to trust the guidance 🙌
NGR1616
Let's hope so!
If we are to believe that mass adoption in mobiles is happening in 2026 then it’s entirely feasible for pre assembly orders to be placed in 2025 for the CMOS sensor that would require an earlier order of Nanoco materials in 2025 to put into the sensors.
The Boards guidance is breakeven will be reached next year.
Average monthly cash burn rate £350k or £4.2m pet year.
EBITDA margin 35% to 45% meaning based on an average 40% margin the business needs £10m to reach breakeven.
If we look at gross margin 60%+ assuming we have double counted on operating costs as these would be covered by existing revenues, we still need around £7m in additional revenues to reach breakeven next year!
Now the Board have guided that orders this year will be 'very small value' so how on earth will Nanoco generate an extra £7m to £10m in revenues needed to reach break even as itvtakes several months feom contractual signange to production ramping up and such order would need to be received this year?
It's simple maths Brian why does your guidance not fit the requirements to reach break even next year, the numbers simply don't stack up!