At Moment we believe in understanding our results. We want to build a profitable company that ignites the call to explore. And the only way to get there is to make small improvements every single day.
Rolling 12 Months | 2018 Results | 2017 Results | 2016 Results
In 2015 we wanted to prove this can be a big business. To get there we need to answer three important questions.
Q: Do we have a repeatable business model?
A: Yes. We have proven in 2015 that we can profitably acquire new customers, 40% of which come back and purchase again.
Q: Can this be a +$100M revenue business?
A: Maybe. Although 2015 was a 3.4x growth rate from $1M to $3.4M we need more time to prove a $100M run rate. We are proud to have 25K paying customers, but have a lot to provide in scaling this to 1M customers.
Q: Do we know how much money it takes and where to invest it?
A: Yes, for the next 18 months. Our initial customer acquisition strategy has worked on a small scale, but now we need to prove it scales from 25K to the next 250K customers.
After 2015 we are closer than ever to answering these questions.
And Year End
Q4 was another record breaking quarter both in revenue and profits. Finishing the year at nearly $3.4M in revenue we are proud of our 3.4X growth over 2014.
The quarter didn’t end without its struggles, especially when it came to keeping product in stock. The entire month was a battle as we sold out, re-stocked, and sold out again. It sounds like a great problem to have except when you accept more orders than you can deliver, causing high levels of customer frustration. This resulted in a back breaking level of customer emails and long nights managing order fulfillment.
Even with this stress, we are proud to have delivered the most profitable quarter in our history, a trend we plan to continue.
Some highlights from the quarter…
We haven’t worked harder than we did this last quarter. By the end we were ready for a break!
Moment’s business is about customers and how much they spend. So we are focused on four drivers.
1. Number Of Customers.
We added 16.7K customers in 2015, which was a 203% growth over 2014. Of which 6,589 were added in Q4 alone.
Looking at the whole year we see Kickstarter (July) and holiday (December) being the biggest drivers for customer growth.
2. How Much They Spend.
Customers spend more money with us over time. In particular the more products we have available for purchase, the higher the average order value is. Now at $145 per order, we see that nearly 72% of our customer purchasing is spent on their first order. This re-enforces how important it is to remain in stock at all times.
Not being in stock at all times is directly reflected in items per order. With the Wide Lens and 6+ Case out of stock in Q4, our items per order dipped.
Customer spend per cohort is following a similar rise. Higher order values has been the largest contributing factor.
Breaking down dollars per cohort over time we see an interesting trend. Holiday appears to account for 40-50% of a cohort’s future spend. While Kickstarter (i.e. introduction of new products) appears to drive 35-45% of future spend.
Being able to drive future revenue from existing customers will also help us strengthen the profits of the business. With some cohorts reaching 35% of future sales we need to find ways to drive each cohort to contribute to 40% of future sales
3. What It Costs To Acquire A Customer.
Outside of some basic re-targeting efforts, our entire customer acquisition strategy been built around an organic, word of mouth approach. Our content to commerce strategy is built around Content, Community (customers -> influencers), and Shopping (direct to consumer platform).
We see this strategy reflected in our acquisition channels, where over 70% of our customers come directly to our website. Looking at the data in 2015 versus 2014 we are pleased to see that acquisition through email rose from 3.5% to nearly 14%. This is a tribute to our efforts to improve both our content and commerce emails.
Conversion rates continue to be higher for repeat visitors. As we move into paid acquisition tactics it will be interesting to see how many times people need to see Moment until they buy.
A disturbing trend is that our customer acquisition costs continue to rise. Even during record quarters, the addition of people is resulting in a rising customer acquisition cost. In addition our first attempt at adventures didn’t produce a positive content ROI, something we will be revisiting in 2016.
(please note that we adjusted our CAC numbers in Q4 by removing credit card fees, as we were advised these aren’t really part of a CAC cost).
We continue to see strong profits over the life time of a customer. While our cost to acquire continues to shrink our LTV to CAC multiple. Although these numbers are solid, we would like to see them moving the opposite direction.
4. How Happy Our Customers Are
Being out of stock had a direct impact on our NPS score. We are still pushing to reach an NPS over 70.
Product and merchandising improvements are definitely areas we can focus on to drive our NPS number up
We thought Q3 was a record high for managing customer emails, until we hit Q4 where the demand increased by 54%.
Comparing customer volume in Q4 2015 to the previous year we see a 232% increase year over year. Thankfully that was less than the 3.4x growth we saw in year over year sales.
We started tracking customer happiness and were pleased to see that over 83% of our customers thought our service was great.
2015 FINANCIAL RESULTS
2015 was a historic year for us in both revenue and profits. It was also our first calendar year of results, as we we didn’t start shipping product until Q3 of 2014.
A few highlights from the year.
Revenue
Q4 was another record quarter, nearly reaching $1.5M in revenue. That resulted in year over year growth of 352%.
Looking at where this revenue comes from we see that about 30% of our customers are outside the US. There is a lot of potential growth internationally, especially considering that 75% of Instagram’s users is outside the U.S.
On average, about 40% of our customers repeat purchase. This is a trend we desperately need to continue as we growth. Getting a new customer is much more expensive that enabling our existing ones.
Lenses are still the lead product for us. With the introduction of the Moment Case in Q4 it will be interesting to see how this mix shifts over time. Having 23% of our customers buy at least a lens, case, and accessory is a solid start.
We are encouraged by the growth in accessory sales, which we call Essentials. This is a trend we will look to improve upon in 2016 with better store merchandising.
COGS
Shipping continues to be a meaningful contributor to our overall cogs. Our direct to consumer approach does impact our margins as charging the full rates we believe would lead to lower sales. Granted this is less than the impact on margins that retail channels would have.
On a per order basis we closed the gap throughout the year between shipping cogs and revenue. This is a positive sign.
We see this gap better reflected when looking at shipping costs as a ratio over shipping revenue. What this tells us is that we started the year with shipping costs being over 2x the value of shipping revenue. We have bought this ratio down to 1.5x where shipping costs are 50% move than shipping revenue.
Gross Margins
Gross Margins improved by 24% year over year. This is definitely a positive sign considering both years included a Kickstarter project which are notorious for large, unforeseen shipping costs. This time around we did a better job of managing customer expectations, charging for additional shipping, and canceling orders that were cost prohibitive locations.
The biggest potential improvement in gross margins will be to reduce our product cost basis through volume and to sell more cases where margins are higher than lenses.
In Q4 we held our first annual, 72 hour sale. This included a 20% discount which was reflected in the lowering of our overall selling price. Despite this dip, our margins rose in Q4 over Q3. The addition of the Moment Case and new Essentials helped to maintain healthy margins despite slightly lower prices.
A growing Gross Margin ROI (GMROI) continues to show us that an investment in inventory provides us a positive return.
Inventory
Running out of stock on key products had a meaningful impact on the business in 2015. Although it’s not totally reflected in end of quarter numbers because of last minute restocking, we did miss sales which coincidently lead to a massive increase in customer emails. The resulting strain was felt across the entire company. If we learned anything, it is to be more aggressive with our line of credit in ordering future product.
Selling out quickly of key products did increase our inventory turns.
Investment In Product
We continue to invest in new products, focusing Q4 on finishing the Moment 6+ Case. People and tooling continue to be our largest drivers.
We haven’t been able to track all costs to each product project but we are now starting to see a massive ROI on our efforts. What we do know is that a new product takes about 6 quarters in the market until the ROI really spikes.
Running The Company
We continue to run an efficient organization. Software and minimal overhead allows us to keep everyone working on driving customer value. At 12 full time people we are starting to test this model.
Despite our growth in people we have seen a 225% increase in revenue per employee. Finishing the year at $287K we have a long ways to go in reaching either FitBit ($1.6M per employee) or GoPro ($1.4M per employee).
In looking at the costs to run the company we do include our e-commerce credit card fees, loss from fraud, and future investments in patents.
In 2015 we lost $57K from fraud and or fraud prevention. This was our first real cases of fraud, where customers would use stolen international cards to buy product. They would then have the product shipped to different addresses within the UK at which point we didn’t know it was fraud for 45-60 days later when the bank of the stolen credit card would report it. By the time we realized the loses in Q3 it was too late to stop what had already happened. We now work with a company called Signifyd that charges us 1% of sales to guarantee that all sales are free from fraud. Although expensive, the cost is less than the amount we lost in money and time.
Cash Flow
Cash is still king, especially in managing our supply chain. To date the business has worked off of spot orders which means large payments for bulk product orders. This forces our cash reserves to swing wildly while leaving us with large inventory gaps if we sell out before the next order arrives. This cycle will be much smoother in 2016 as we work with our suppliers to smooth out consistent monthly deliveries.
At the end of the year we still have $300K of a $500K City National Bank credit line. We plan to use this line in 2016 with inventory purchasing.
Net Income
We had our second profitable quarter! We couldn’t make up the loses in the back half of the year from the first half, but we did experience quarter over quarter growth in profits. This is a positive trend we want to continue into 2016.
Within the $250K that we lost in 2015 about 70% was from our up front investment in product tooling. This is a cost that we expense even though it is realized over the life of a product. The other large contributor was fraud and fraud prevention, which made up another 22% of the loss. This was an expense we weren’t accustomed to in 2014 and did a poor job of being prepared for it as the business grew. Thankfully it’s a lesson we are learning early in our history.
This was the best quarter in the history of Moment.
It was also the most difficult.
As we shared last quarter, bringing a new product to market is hard. No matter how many times you go through this process it’s never easy. Especially in trying to ship two new products at the same time.
The Moment Case represented our most technically complicated product yet. With hardware and software dependencies the process of manufacturing definitely challenged our resolve. While the new Moment Macro Lens was slow to develop as we spent all of our manufacturing cycles on the Moment Case.
Despite these challenges we are proud to deliver our first profitable quarter. A turning point we hope to continue from this point forward.
Some highlights from the quarter…
It was a busy quarter, to say the least.
Moment’s business is about customers and how much they spend. So we are focused on four drivers.
1. Number Of Customers.
We added 5,069 new customers, which is a quarterly high. This puts us at 10,137 new customers for 2015 and +195% ahead of this point last year.
Customer growth in July was largely driven by shipping our Kickstarter orders. But post this delivery we saw a nice increase in new customer growth.
2. How Much They Spend.
Customers are spending more money with us over time. We can see that our average lifetime revenue is increasing, which is driven by an increase in the number of items customers buy per order. This validates one of our core assumptions…the more products we have to sell the more our customers will spend. Our average lifetime revenue is now over to $200 per customer.
Looking at our cohorts on a quarterly basis we see a similar trend in each cohort spending more money with us.
When we start to look at this data on a per customer basis we notice that most repeat purchases coincide with new product offerings. Entering our second holiday season it will be important to see if we can entice customers to purchase Moment products they don’t yet have and/or gift Moment to loved ones. Otherwise we will probably find that our business is driven purely by new products, which means we should accelerate our new product offerings.
Being able to drive future revenue from existing customers will also help us strengthen the profits of the business. With some cohorts reaching 20% of future sales we need to find ways to drive each cohort to contribute to 40% of future sales
3. What It Costs To Acquire A Customer.
Outside of some basic re-targeting efforts, our entire customer acquisition strategy been built around organic, word of mouth tactics. These tactics include sending the Moment Collective on rad adventures, building a street team, placing product, and publishing inspiring content.
The result is an attribution model that reflects over two thirds of our customers coming directly to our website through search or knowing the URL. People are hearing about Moment through a variety of tactics and then searching us out.
It will be important for us to figure out how to increase the first time visitor conversion rate. On every device type (mobile, tablet, and desktop) our conversion rates double if we can bring them back to the website.
In the end our acquisition costs are just over $20 per customer. And since each new customer is adding positive revenue and profits, we should start being more aggressive in our spend to reach more customers.
4. How Happy Our Customers Are
Product quality kicked our butt this quarter. Our challenges with the technical complexity of the Moment Case came through in lower NPs scores. In particular, promising our first production run to over four thousand Kickstarter backers meant that we didn’t take the proper time to work out manufacturing issues before scaling the volume. Instead of making a small batch, fixing issues, and then continuing…we produced 10K cases on the first run. Although going through this experience is painful, it’s an important lesson to learn early in our history.
Sorting through the qualitative data we receive about why, we can see that positive scores come from quality product experiences while negative scores come from poor quality product experiences. There are definitely some small service and delivery requests we can improve upon, but our NPS is highly tied to how our customer perceive the quality of the product.
An additional factor to consider with NPS is the quality of our service, which was definitely strained in Q3 with a massive increase in customer volume. Having to handle 87% more daily requests we had to quickly improve our process and efficiency while carefully adding new people to the team. We ended the quarter with significantly better service than when we started.
We enabled customer service feedback in the signature of our emails. Now we have a benchmark we can build upon.
We are getting closer and closer to understanding the unit economics of the business. And in being aggressive about profits we just turned our first profitable quarter!
Revenue
Including the shipping of Kickstarter, we had by far our largest quarter in company history, breaking over $1.1M for the quarter. Not only did we more then double the business year to date in a single quarter, but we are ahead of last year by 365%.
Looking at where in the world our customers are coming from we see a growing base of international customers. Having started with around around 30%, international orders are now up to 40% of total orders. It shows that we need to be thinking globally about everything we do.
COGS
Product and shipping costs continue to be the largest drivers for COGS. And not much has changed in Q3 compared to the rest of 2015.
We continue to focus on narrowing the per order loss we experience with shipping. Moving to PCH helped in reducing our shipping costs, but there are still improvements to be made in tightening this gap.
Gross Margins
Our gross margins took a hit in Q3 due to the shipping of Kickstarter orders. The Moment Case and Lenses were cheaper through Kickstarter, which had a direct impact on our overall gross margins.
Just looking at our average selling price per major product you can see a dramatic change pre (June) and post (September) shipping of Kickstarter.
Our return on gross profit for every dollar invested in inventory continues to grow.
Inventory
Inventory management continues to be critical for us. Our weekly and monthly closing processes are much tighter along with our forecasting, but making sure we stock the right products is critical.
Although our inventory balances have increased we are pleased with the continued improvement in inventory turns. Reaching four turns per year is good.
Investment In Product
We continue to invest in new products, focusing Q3 on the Moment Case and the new Moment Macro Lens. People and tooling are definitely the two largest drivers.
It has taken a few quarters, but we are now starting to see positive ROI for our product investments. We don’t have this broken down by specific product initiative but we think it takes us about 9-12 months to recoup our original investment. If we can grow our customer base this will help to shorten this timeline.
Running The Company
We pride ourselves on running an efficient organization. The use of software and minimal overhead has allowed us to add bodies that help us grow our business versus bodies to manage it.
Now with 11 full time people we continue to increase our revenue per employee. Not yet at Fitbit ($1.6M per employee) or GoPro ($1.4M per employee) levels we are happy to be nearing $300K.
Cash Flow
We have begun to stabilize our cash balances. Now that we are driving monthly profits our cash reserves can go directly towards inventory purposes. Most exciting of all is we have partnered with City National Bank, which is providing us with a $500K line of credit to manage our inventory working capital. We have yet to drawn down on this line.
Net Income
Yay, we had our first profitable quarter! Bringing in $140K in profits this quarter we are scrambling to turn our negative cumulative balance into a positive number for 2015. We are pushing hard in Q4 to make this happen.
When it comes to profits we do expense nearly all of our business operations. So if you subtract out intellectual property and tooling investments we are nearly profitable for the year.
Bringing a new hardware product to market is hard. No matter how many times you walk this path it is always filled with stress, unpredictability, and grueling schedules.
Our second quarter of 2015 was spent entirely in moving the Moment Case through production. With a target to begin shipping the Moment iPhone 6 case in June we had our work cut out for us the entire quarter.
We started the quarter with Moment Off-site #5 to Cle Elum, WA. Located a few hours outside of Seattle this off-site enabled us to improve our decision making and project management structure, while breaking down how to keep the iPhone 6 case on schedule.
Post the Moment Off-site we were focused on three major themes.
At Moment we aren’t building a core competency in logistics, so we found a partner who is. PCH International is one of the most sophisticated logistics providers in the world, especially with their direct to consumer platform. They happen to power some of the largest consumer brands (i.e. Apple), which enables Moment to benefit for reduced shipping prices while providing 3-7 day shipping reliability from Hong Kong to anywhere in the world. It was a push to get this done in time for Kickstarter, but by June 12th we were up and running.
Moving the Moment iPhone 6 Case through production was our biggest challenge. It required two trips to Asia plus a lot of sleepless nights. The mechanical details on this product got the better of us, requiring multiple tweaks to the tool and multiple short production runs to iron out the kinks. And although we missed our June ship date by a few weeks, we learned lessons that will serve us well for future manufacturing projects.
Growing our customer base was largely focused on improving our content engine. The addition of two team members over the quarter enabled us to gradually improve the content we published as well as the analysis behind customer conversion.
Moment’s business is about customers and how much they spend. So we are focused on four drivers.
1. Number Of Customers.
Not counting our 4,700 Kickstarter backers, we added 2,028 new customers in Q2. This brings our total count to 13,178 through Q2.
2. How Much They Spend.
Data around customer spend starts to get interesting when you look at Q3 results, which includes the introduction of the Moment Case. But focusing on YTD through Q2, we can see that Moment customer spend remains largely unchanged. With only two major products (Wide Lens + Tele Lens) in the market not a lot has changed between the first and second quarter. The good news is that even without shipping the Moment Case, our average lifetime revenue is now up to $166.04 per customers.
Looking at cohorts by quarter we can see a gradual increase in spend over time. Each new cohort has a higher first order value than the previous cohort, while repeat accessory purchasing keeps each cohort moving up slowly over time. It will be exciting to see what happens with the introduction of the Moment Case in Q3.
Diving one step further into purchasing data we can see how much people spend based on the contents of their first order. This can guide is in better merchandising our own products to increase items per order and in our post purchase email efforts to entice customers to purchase the products they are missing.
3. What It Costs To Acquire A Customer.
Customer acquisition is the most expensive number in our business and a number we are still learning how to control. Our results to date are based off of word of mouth tactics including content, influencers, and the Moment Street Team.
This is word of mouth approach is reflected in our acquisition channels, with search and referral traffic being the highest drivers.
In calculating cost to acquire we divide total spend (pie chart above) against the total number of new customers added. Unfortunately much of our effort towards capturing new customers through Kickstarter is not rewarded in our YTD numbers. If you add in July alone (i.e. when we shipped most of Kickstarter) our lifetime CAC cost drops from $35 back down to $30 per customer.
Taking it one step further we continue to see a strong return (both in sales and profits) from each customer added. Now with some benchmarks in place we can begin playing with levers to maximize customer growth over initial purchase profit.
4. How Happy Our Customers Are
We started tracking NPS at the end of Q1, but didn’t make any meaningful changes in Q2 to improve this number. Shipping was our #1 customers issue, but we didn’t move to PCH until the end of the quarter, which means this improvement did not impact the overall number. Our goal is to reach a score of 70 over time.
Along with improving NPS we care a lot about delivering the best customer service we can. We measure this by first response time and overall time to resolve a customer issue. Although the customer service volume remained fairly consistent over the quarter, we definitely made large improvements in our efficiency in resolving cases faster.
We continue to be aggressive about profits and patient for growth. We are still experimenting, testing, and learning about how to profitably reach another customer. With a goal of having real data to drive the Series A we plan to raise in 2016.
In regards to Q2, we have a timing problem. Because we recognize revenues based on when we ship, all of our cost to bring the Moment Case to market are reflected in our first half numbers without the revenues to show for it. The result is an unprofitable company in the first half of the year that instantly switches to real profits in Q3 with the shipping of our Kickstarter orders.
Revenue
Without recognizing Kickstarter sales our second quarter was slower than our first. This result is consistent to last year where we saw a big spike in traffic during Kickstarter and then slow sales until we started shipping Kickstarter orders. After two seasons of this pattern, it appears that a lot of customers like to wait and see if you actually deliver in your promise.
Our timing problem becomes apparent when you take a peak at Q3. Already half way through the quarter and we have doubled the business for the year. Post shipping Kickstarter we are definitely seeing an increase in business.
Revenue continues to be driven by product sales. While shipping revenue is expected to increase slightly as a percentage of sales because international customers only have Express shipping available through PCH. Our international shipping will be more expensive, but much more reliable.
COGS
Product and shipping costs continue to be the largest drivers in our COGS. We expect this mix to change slightly over time as our products become more technically challenging while reaching a broader set of customers. Both trends tend to lead to an increase in returns over time.
Customers appear to want faster shipping, which is driving shipping to be a growing percentage of our total COGS. In the first three quarters of 2014 we only offered slow shipping which lead to a $6 per shipment cost. Since introducing 3 Day shipping in Q4 we have now seen this per shipment cost increase to almost $16.
To help combat this we slowly raised our shipping prices over the past 90 days.
Shipping continues to be a cost center. Although PCH’s improved shipping rates will lower this gap over time, we don’t expect to making money on shipping anytime soon.
Gross Margins
Our margins have continue to improve slightly over time as we tighten our shipping losses. It will be interesting to see this data at the end of the year once the Moment Cases are selling in volume as this is a much higher margin product line.
Our return on gross profit for every dollar invested in inventory, improved in Q2 as we worked down inventory levels. Our supply chain is still purchasing product in bulk chunks which has a negative impact on both cash and GMROI.
Inventory
We have begun to increase our inventory levels as we move into the busy Q4 season. We are still buying in lots with our suppliers and are trying to move to a much smoother, bi-weekly build schedule. We have begun to do this with the Moment Case which will help to smooth out future cash flows.
Investment In Product
As a young brand, Moment is still predominantly a product company. New product introductions are the largest catalyst for growth as each introduction drives press coverage, reviews, and customer evangelism. Our product spend through the first half of the year continues to focus around the Moment Case and Moment App product lines.
ROI on our product investment will be better realized by the end of Q3 with the revenue realization of the Moment Case. Now with lenses, cases, and accessories in the market we should quickly see the impact of the product investments we have been making the last 18 months.
Running The Company
We continue to run very lean. Outside our continued investments in patents and trademarks, we are able to run a company of 10 with one person. The introduction of analytics and better internal process has enabled us to be more and more efficient with our resources.
Subtracting patents and trademarks, we have seen running the company as a % of total spend increase because we started paying rent. This is a novel concept but the new Moment Studio is costs us about $4,500 a month, which is a bit more than the $1,000 per month we were previously spending.
Cash Flow
Through Q2 we continue to manage cash tightly. Although our monthly burn rate is at a minimum, the requirement to buy more and more product is beginning to stretch our cash reserves. Growing customer demand combined with the introduction of new sku’s, we expect cash management to be our number one concern going into the busy holiday season.
Net Income
Another metric impacted by the timing of Kickstarter shipments. With all of the costs built into our financials for bringing the Moment Case to market (including tooling and certifications) and without the revenues to show for it, we continue to be unprofitable through Q2. But as soon as you start adding Q3 we quickly turn this trend around. Through Q2 we have lost $377K for the year which averages out to a burn of $63K a month. Adding in July we bring the year loss down to $220K for the year, turning our monthly burn into a net positive.
In a hardware based business, Q1 is always unknown. Post the crazy holiday buying season you never know what to expect. Thankfully the first quarter surpassed all of our expectations.
We try to start every quarter with a Moment off-site and Q1 was no different. Looking for a place to enjoy the PNW winter we found an old western town, Winthrop, WA about four hours outside of Seattle. Staying in the beautiful Rolling Huts we spent three days building deeper relationships, shooting our Kickstarter video, and planning out the year.
From this point forward, the quarter went quickly.
Hitting Kickstarter the third week of the quarter we quickly had our hands full in managing our campaign. The response from the media, influencers, and customers was fantastic. Even the community team within Kickstarter was passionate about helping us maximize our success. Comparing our campaign to a year ago we surpassed our first campaign by 50% in total dollars, driven by a 50% increase dollars per backer.
The Kickstarter community continues to surprise us. Bringing in 40% of our total campaign it demonstrates that Kickstarter is clearly a community that loves mobile photography.
Call it good fortune, but before the campaign was even over we received an iconic review in the Wall Street Journal that captured the essence of our existence. It drove our single highest revenue day and continued our Q1 momentum.
One of the things we believe at Moment is that the right physical space is critical to building a creative culture. Having spent our first 16 months borrowing everyone else’s space we finally found a place to call home. Nestled just south of Pioneer Square (Seattle neighborhood) the new Moment office is located in an old manufacturing building. With its big windows, high ceilings, and five inch thick old wood floors we fell in love the minute we walked in the door.
Moment’s business is about customers and how much they spend. So we are focused on four drivers.
1. Number Of Customers.
Not counting the 4,700 Kickstarter backers we added 2,998 new customers in Q1. This was a 6% increase in customer growth over Q4, which is our busiest quarter of the month.
This result was largely driven by word of mouth and third party referrals (i.e. press articles).
2. How Much They Spend.
Going into our second year we want to really understand if customers will continue spending over $100 per year with us. They spent $122 on average in 2014 and are up to $129 through Q1 of 2015. The introduction of the Moment Case and the Moment Macro Lens later in the year will be large drivers in testing this goal.
Looking at new versus repeat purchases over time you can see it is largely driven by the availability of new products. Last year we introduced new mounting plates and carrying accessories in Q3/Q4 which lead to a higher percentage of repeat buyers. In Q1 (excluding Kickstarter backers) we didn’t introduce anything new for people to buy. It will be interesting to watch this data over 2015 with the introduction of new products.
3. What It Costs To Acquire A Customer.
We have much better data capture now in place around customer acquisition but we have yet to dive into the details in maximizing each channel. Without a performance marketer on the board we have focused our energy around press, seeding Moment product, and inspiring content. Going forward we expect to develop better insights with granular acquisition costs by channel.
Diving into the actual cost to acquire a customer there is a big difference with and without the inclusion of Kickstarter backers. Most of our Q1 marketing efforts were around driving the Kickstarter campaign, which means this effort is negatively reflected in our CAC number. Therefore we added our KS backers to see the eventual impact on this number.
Taking it one step further we continue to see a strong return (both in sales and profits) from each customer added. Now with some benchmarks in place we can begin playing with levers to maximize customer growth over initial purchase profit.
4. How Happy Our Customers Are
We are finally started tracking NPS by emailing our customers 30 days after purchase. So far about 25% of our customers have participated in the survey which gives us a solid data set to start with. An initial score of 65 is a great place to start.
Our biggest customer issue is shipping. To date we have used a single 3PL out of Hong Kong which has helped to minimize logistical challenges, but it has results in a poor ‘ground shipping’ option for customers. Often customers have to wait days (sometimes weeks) to receive their product. The good news is we are moving to a new 3PL in the coming weeks that handle’s all of Apple’s logistics. This should dramatically improve the customer experience while lowering our per shipment prices.
Along with improving NPS we care a lot about delivering the best customer service possible. Despite only saying we are open from 8-5pm Mon-Fri we pride ourselves on having a low response rate 24 hours per day.
In driving a real businesses we continue to work hard on improving our financial performance. Cash is king in hardware so we first focus on making sure we have enough cash in the bank. Then second we are focused on profits. We believe that understanding how to profitably drive the business on a small scale will teach us where to invest future capital to accelerate the business.
Revenue
Delivering $450K in revenue in Q1 (excluding Kickstarter) was a solid start to the year. Bringing in 45% of last year’s total revenue in a single quarter bodes well for the rest of the year. If you count Kickstarter we did almost $1.1M in the first quarter.
Shipping continues to make up about 6% of total revenue. This should increase slightly in Q2 as we increased our shipping rates at the end of the first quarter.
Shipping is still a loss center. After realizing the impact part way through the quarter we spent the second half tightening the gap between shipping revenue and cogs.
COGS
Within our COGS the cost of the product and shipping continue to be the largest drivers. Continuing to see a very low return / defective rate is a positive sign.
Customers appear to want faster shipping, which is driving shipping to be a growing percentage of our total COGS. In the first three quarters of 2014 we only offered slow shipping which lead to a $6 per shipment cost. Since introducing 3 Day shipping in Q4 we have now seen this per shipment cost increase to almost $16.
To help combat this we slowly raised our shipping prices over the past 90 days.
Gross Margins
We have maximized the gross margins we can capture with our lens product line and single direct to consumer channel. Averaging just under 60% without shipping the only way to improve our net gross margin of 48% is to close the gap between shipping revenue and costs. A move to a new logistics partner and the introduction of a higher margin product (Moment Case) should help to improve our gross margins throughout the rest of the year.
We continue to return gross profit for every dollar invested in inventory. Our supply chain is still purchasing large quarterly quantities so as we mature we should be able to maximize our return on inventory.
Inventory
Inventory levels increased towards the end of the quarter as we began to receive our Q2 product. Despite this increase we saw a faster turn rate as we sold through the remaining 2014 stock.
Investment In Product
We continue to invest heavily in new products. Currently focused on manufacturing the Moment Case we saw large spends towards the end of the quarter in advance of production. We pay for and expense tooling upfront, which results in wild monthly profitability swings.
We haven’t had the time to break out an ROI by product line, but overall you can see our efforts in new products (lens, case, and app) have yet to provide a return. This should turn positive over the coming two quarters as we begin to ship the complete capture ecosystem.
Running The Company
We continue to maximize our company efficiencies. Now down to $1800 per employee we probably can’t lower our overhead footprint anymore than it already is. In fact this will probably rise as we began to pay a real monthly amount for rent.
Subtracting our large investment in patents in Q1 ($35K) we saw the cost of running the company drop to under 10% of our total spend.
Cash Flow
We continue to manage our cash very efficiently while the introduction of new products through Kickstarter results in no additional outside capital required. We are working towards a Series A early in 2016 and feel confident we have the cash run way to make it well past this point if required. Keep in mind this is highly depending on shipping the Moment Case on time and at the quality level we expect.
Net Income
This is very hard to manage in a young startup, especially when we continue to invest heavily in the future. But excluding Kickstarter sales, our investment in patents, and the tooling costs for the Moment Case, we only lost $67K for the quarter. Managing our business tightly we feel good about an average monthly burn rate of $23K. Based on our current product line, our monthly break even is about $200K in sales.