It so appears that music tech company Jaxsta (ASX: JXT) is a shopaholic lacking a solid financial plan as the Company reports a monthly burn rate of about 16%, with cash burn in its September quarter amounting to nearly $1.4 million. Data costs, marketing spend and more made up most of its expenditure.
Compared to the previous quarter, the Company’s bank balance has declined by nearly 50% to $1.6 million as of the September quarter. Jaxsta is no stranger to grim finances. So, in April 2022, its new CEO Beth Appleton set out to revitalise the Company by changing its subscription models and introducing ads. Turns out, little impact was made in that regard as even in September, barely 5 percent of Jaxsta’s total subscriber count includes paid customers.
Jaxsta CEO, Beth Appleton, commented, “The last quarter, we have been focused on revenue growth, cost management and business development. Our annual costs, which were tracking annually at $6.4m in March will reach an annual run rate of $2.8m by the end of the coming March quarter.”
Despite the continued cash burn, Appleton has a positive outlook for FY23 as she notes, “We currently have 8 API Clients, 7 Enterprise and 6 Business subscriptions and expecting to see these numbers grow now we have gone live with our works data offering. In the last 7 months our monthly revenue has increased over 108%. Whilst this is from a low base we are confident this growth will continue, building stability and getting us closer to our short term objective of reaching profitability”
A significant part of its “short term objective” is more cost-cutting initiatives. For one, she announced that Jaxsta will be a remote team from January 2023. Secondly (and unsurprisingly), the Company is counting on the R&D tax credit of $1 million which it will be receiving in October, in addition to its EMDG (Export Markets Development Grant), courtesy of the Aus government. Moreover, the Company is pursuing partnerships, such as the one with music licensing platform Songtradr, to fund its operations. The Company also cut down its marketing costs by $118k to instead focus on its business and enterprise licences.
Through these initiatives, the Company expects its quarterly burn rate to reach $700K by the end of the March quarter. Previously, Jaxsta had an operating net cash burn of $1.379 million, which was a 8.5% decrease on the previous quarter’s $1.508 million operating net cash burn, from a mix of decreased spend on staff and various vendors as part of the Songtradr Operating Plan and paydown of existing payables from previous quarter.
Over the past quarter, Jaxsta focused on materialising its goals laid out by Appleton. It prioritised delivery of the new Business and Enterprise subscription tiers, the launch of on site advertising, delivery of additional social sharing assets for Jaxsta Creator, and completion of the Songtradr transaction of $3 million.
These goals resulted in numerous changes across the organisation, such as a decrease in staff costs of $98K. There was also a net increase in data costs of $33K from payments made during the quarter as the Company is transitioning to new more economical contracts in the future.
Over the past few years, Jaxsta has been recording losses to the tunes (pardon the pun) of millions. In FY22, the loss amounted to $6.2 million compared to $5.7 million in FY21. Clearly, this is not “jaxsta” phase for the Company.
All things considered, it is determined to change tack. In the coming quarter, Jaxsta plans on exploring opportunities in B2C, Vinyls and even NFTs (non-fungible tokens). Will crypto save the drowning music tech company?
Alinda is a Business Reporter for The Sentiment
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