QUICKFLIX LTD. Quarterly Update
(& Appendix 4C) September 2015
Restructure and cost-reduction programme underway.
Quickflix Limited
& Controlled Entity
ABN 62 10 2 459 352 www.quickflix.com.au
Quickflix Quarterly Report
Quarterly Update
| Restructure and cost-reduction programme underway | Reduction in cash burn
During the September quarter, Quickflix commenced a restructuring and cost-reduction programme which upon completion will be followed by adoption of a new strategy for the Company's SVOD business and a re- capitalisation of the Company. The restructure programme is initially focused on restructuring debt arising from minimum guarantee obligations from streaming SVOD content licensing arrangements as well as a cost- reduction exercise to ensure the Company is sustainable.
Quickflix has successfully reached agreement or in-principle agreement with major studios to restructure over $6 million of commitments relating to SVOD licensing arrangements. The Company is seeking to reach agreement with other licensors and creditors for the restructuring of commitments which if achieved will further strengthen its balance sheet and enable a re-capitalisation to proceed and place the Company on a sustainable path.
The Company has implemented savings of $4 million per annum across operating and investment areas. Since the start of the programme the Company has reduced headcount by over 20 per cent which has yielded a 33 per cent reduction in staff costs or $1.7 million per year. Other cost initiatives have delivered savings across call centre support, corporate overhead, technology development and infrastructure, content management and marketing of approximately 18 per cent or $2.3 million per annum.
As a result of the cost-reduction programme and progressing the restructuring of the Company's commitments, expenditure was significantly reduced for the quarter. Net operating and investing cashflow for the period was
$0.07 million, reduced from $1.1m in the prior quarter. A significant reduction in marketing expenditure to drive acquisition of customers to replace churn, also resulted in customer numbers and revenue declining during the period.
Quickflix has secured additional sources of revenue in the near-term through reaching agreement with affiliate SVOD operators in Australia and New Zealand for the introduction of special free trial offers to Quickflix customers. These offers are complementary to the Company's existing service offerings.
Key highlights in the September quarter were:
Total customers of 109,051 down by 10 per cent;
Paying customers of 100,121 down by 7 per cent;
Revenue receipts decreased by 8 per cent to $3.9 million;
Operating and investing expenditure decreased 26 per cent to $4.0 million;
Net operating and investing cash outflow of $0.07 million; and
Cash at bank of $0.84 million.
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Quickflix Quarterly Report
Quickflix customers (Quarter)
*Paying customers are customers who purchase a service (subscription, pay-per-view or pay-to-own) during the quarter.
Customers and sales
Paying customers at the end of the September quarter were 100,121, seven per cent lower than the previous quarter. Paying subscriber churn reduced to average 9.7 per cent over the quarter, down from 11.3 per cent in the June quarter following the launch of Netflix in Australia.
End of Quarter | Sep-15 | Jun-15 | Change QoQ | Sep-14 | Change YoY |
Paying customers | 100,121 | 107,969 | -7% | 118,204 | -15% |
Trial subscribers | 8,930 | 13,158 | -32% | 12,361 | -28% |
Total customers | 109,051 | 121,127 | -10% | 130,565 | -16% |
Paying subscriber churn (monthly average) | 9.7% | 11.3% | 14% | 6.9% | -41% |
Devices registered with Quickflix (000's) Streaming plays by device (million)
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Quickflix Quarterly Report
Proportion of Quickflix customers with access to streaming and DVD
Receipts from customers
Cash receipts from customers (including subscription fees, paying trial fees and pay per view fees) were $3.9 million for the quarter, down 8 per cent compared to prior quarter. The reduction is due to the lower number of paying customers. The average monthly receipts per customer increased by one per cent to $11.39.
Quarter total/average | 30-Sep | 31-Jun | Change QoQ | 30-Sep | Change YoY |
Receipts from customers ($000s) | 3,885 | 4,231 | -8% | 5,032 | -23% |
Average paying customers | 103,378 | 113,986 | -9% | 120,715 | -14% |
Average monthly receipts per paying customer ($) | 11.39 | 11.25 | 1% | 12.63 | -10% |
Operating and investing cash flows
Net operating and investing cash outflow for the September quarter was reduced to $0.1 million compared to an outflow of $1.1 million in the June quarter. Total operating and investing expenditure reduced to $4.0 million as the Company continues to manage expenditure levels and trading terms to preserve cash resources as it progresses its restructure process. The Company's cost reduction initiatives are expected to deliver sustained savings over the next two quarters. The Company's cash reserves will be improved through the receipt of $0.62 million R&D tax rebate due in the current quarter.
Quarter, $000s | Sep-15 | Jun-15 | Change QoQ | Sep-14 | Change YoY |
Receipts from customers | 3,885 | 4,231 | -8% | 5,032 | -23% |
Net cash (used in) operating activities | -3,790 | -5,031 | -25% | -7,242 | 48% |
Net cash (used in) investing activities | -168 | -296 | 43% | -806 | 79% |
Net operating & investing cash flow | -73 | -1,096 | 93% | -3,016 | 98% |
Net cash provided by financing activities | -2 | 747 | - | 3,287 | - |
Net increase (decrease) in cash | -73 | -349 | 79% | 271 | -127% |
Cash at end of financial period | 840 | 913 | -8% | 2,682 | -69% |
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