Ann: Appendix 4C - quarterly, page-32

What an amazing growth in revenues! I wonder if people are holding off because they saw the projected cash outflows for next quarter to be $18.7 mil ? So I dug a bit deeper to see what implications this might have. The red flag that I'm looking for when skimming through financials is whether revenue growth has been at the expense  of higher costs. But that shouldn't be the case as NOV is in the a payments and transaction business - NOV earns commissions.

Looking through previous quarters it looks like NOV has very healthy over all margins. If we take away the "product manufacturing and operating costs" from the cash receipts it averages out around 25-30%. All other costs seems pretty fixed from quarter to quarter like staff and admins.

So going by the last quarter we have:

Cash receipts - $8,730k
Product manufacturing and operating costs - $6,576
Margins = 25% (of cash receipt)
Other costs (staff and admin etc) - $1,974(pretty fixed from quarter to quarter)

So going on previous quarters cash receipts has always been a function of product manufacturing and operating costs, or vice versa. So looking at the cash outflow projection for this quarter(March 2018):

We have $16,906k as the Product manufacturing and operating costs. As it is a function of cash receipts if we use 25% as margins and divide $16,906K by 0.75 we get projected cash receipts of $22,541k. If this is proven to be accurate then that's a whopping 258% growth on previous quarter! So going on a bit further we have:

Cash receipts of $22,541k less product manufacturing and operating costs of $16,906k = $5,635k in margins. Less other costs as per above (exc fund raising costs) of $1,566k we should get a projected positive cash flow of $4.069 million ! Now, if this is proven to be accurate then what ever price you pay today will look extremely cheap in 3 months time!

The above calculations might seemed too good to be true but going by previous figures I don't think it is unrealistic. The only unknown at this point is if there is anything in that figure of $16,906k that could greatly diminish the 25% margins used.