Quickflix cash turns positive with redundancies

Australian subscription video-on-demand (SVOD) provider Quickflix has announced net operating cash flows for January to March of AU$462,000 -- a AU$551,000 jump from the negative AU$83,000 announced for the December quarter.

Although receipts from customers fell by 5.8 percent, from AU$3.263 million [PDF] down to AU$3.074 million [PDF], Quickflix's total operating and investing cash flows also turned positive, from negative AU$180,000 in December back to AU$381,000 in March.

Cash at the end of the quarter stood at AU$1.04 million, 57.8 percent higher than last quarter's AU$659,000.

This was partially due to a substantial decrease in staff costs -- from AU$1.141 million down to AU$930,000 off the back of a series of redundancies announced earlier this month.

Its advertising and marketing costs almost halved, from AU$431,000 in December to AU$231,000 in the March quarter.

Quickflix announced in early April that it would be shuttering its Sydney CBD and Auckland offices and making 15 percent of its staff redundant, adding that it would also "insource" its customer care and support, reduce costs in its Perth office, trim down its delivery network charges, and get one board member to step down.

Quickflix said it hoped to save around AU$1 million per annum through these measures.

Its executive directors also agreed to a "substantial reduction" in their salaries: CEO and founder Stephen Langsford's salary was reduced from AU$280,000 down to AU$200,000, while CFO Simon Hodge's salary shrank from AU$250,000 down to AU$170,000 as of April 1.

Any part of their salaries exceeding AU$150,000 will also be deferred in payment so as to provide the company with extra cash reserves until it raises a minimum of AU$2 million through the issue of new equity.

Quickflix had also dumped 20 percent of its workforce in October to attain AU$1.7 million per annum in cost savings, with another AU$2.3 million per annum in savings achieved by adjusting the company's content management, tech development and infrastructure, corporate overhead, call centre support, and marketing processes.

The company then successfully restructured debts of over AU$7.5 million by signing deals with several "major" studios.

Quickflix must also address the redeemable preference shares (RPS) that made their way into the hands of one of its competitors, Stan, in order to make its business more lucrative to investors, however.

Stan, a joint venture of Nine Entertainment and Fairfax Media, took ownership of the Quickflix RPS in July 2014, when Nine acquired the shares from HBO for an undisclosed amount. HBO had been issued the RPS by Quickflix in March 2011 during their commercial relationship.

Stan's RPS, though legally an equity, are recorded as debt amounting to AU$11,653,329 due to accounting standards.

RPS outrank ordinary shares in terms of dividends and capital returns, meaning Quickflix is having difficulties in attracting investors while the RPS is in continuation. Due to its plummeting customer numbers and declining sales, Quickflix also cannot fund redemption of Stan's RPS.

"We're certainly in negotiations with them [Stan], and obviously I can't go into the nature of those, but we have stated clearly to the market that we're a small player that's made an investment, that's delivering a service, that in the whole completion of the restructuring process, we need more capital, and to have that structuring base is essentially an impediment that needs to be addressed," Langsford told ZDNet in an interview at the start of this year.

Langsford added that Quickflix has lost so much ground to its competitors that it is turning its attention towards launching into the technology and ecommerce service sectors.

Quickflix has yet to provide an update on customer numbers after losing 7,856 customers over the December quarter.