I’ll return to more detailed figures with the report in the morning. For now, I’ll just say that I changed one of the basic assumptions for Aurora AEYE during the update, which is the sales distribution. It has now become quite clear that AEYE Health has apparently sold more Aurora AEYE than Optomed. The original assumption was that Optomed would sell 70% and AEYE 30%. I have now set it to a 50/50 assumption, as it is at least closer to the truth and more neutral anyway.
Someone is probably wondering, what difference does this make? Well, quite a lot for the income statement, though less so for cash flows. That is, if Optomed sells a device to a customer, it records 100% of the revenue itself and pays 50% (assuming a 50/50 split) to AEYE Health. So, 100 in revenue and 50 in margin after AEYE, from which the device is then delivered, etc. But if AEYE Health makes the sale, Optomed only receives its own 50, but of course, nothing more is paid to AEYE from that. In the first case, significantly more revenue is generated, even though the actual income flow is the same in both.
When I corrected that ratio to 50/50, those Aurora AEYE income streams started to look significantly more sensible relative to the small recurring revenue streams the company reports. In other words, revenue is lower even though the volume itself is similar to what I previously assumed. In practice, the question is then just why those gross margins are so weak, but there have apparently been all sorts of expenses there that don’t necessarily relate to this.
This dynamic has been discussed in reports and here before, but I suspect it’s hard for many to grasp – it makes interpreting the figures difficult for me as well. I’ll have to return to this when I have more time; now I’m heading off to recharge for tomorrow’s earnings day.