Here's some bright, cheery Sunday thoughts.
What would it take for VEND to become profitable or at least cash-flow positive over the last 6 months of 2019?
Let's assume that they deliver kiosks / report revenues at the high end of the range - 800 over the final 6 months of 2019.
Extrapolating from the numbers in the last 10-Q, my guesstimate is that they would need to generate at least 8.2 million in gross profit on those 800 machines to report positive net earnings (although that assumes that stock-based compensation doesn't spike, which I'm afraid might happen if things go well).
So, that works out to a gross profit of $10,250 per machine for all 800 machines. Based on VEND's projections for revenues, that doesn't look like it's in the cards, but, hey, with higher sales prices and reduced costs, you might get there eventually.
Now, what if we ignore those nasty non-cash charges like stock-based compensation, depreciation, interest accruals, etc.? That looks like it brings the break-even gross profit number down to around $8,375. Unfortunately, with projected sales prices at only $41,000 per kiosk for the 2019 deliveries, VEND is still short. And that's even if Nick shaves $4,000 per kiosk in manufacturing costs like he suggested in March.
So, it looks like GAAP profitability and positive cash flows will remain elusive for the balance of 2019. But, we're getting closer!
If you want to indulge in some super-optimistic assumptions to see the profit light at the end of the tunnel, you might think:
- hey, those SG&A costs are still too high. There must be some fluff in there that could be cut. How much are they paying Frank Yates, for instance?
- Maybe the manufacturing costs will plummet when Stoelting comes on the scene.
- Maybe stock-based compensation will drop like a rock.
- Maybe some of those lower-priced franchisees will drop out and be replaced by those high-flying $58,000 payors.
- Maybe those Print Mates kiosks will start printing money. (OK, now I've gone too far.)
On the other hand, increasing production and deliveries accompanied by any recovery in the rate of franchise sales would tend to drive the business's working capital requirements up and up. So, even if break-even is achieved, cash flow still looks like a downer.
But, hey, there's always 2020.
AI
