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Author: Saul Goodman

Everyone talks about Brightcom Group’s account receivables, though it is high compared to other industries it is not so bad compared to Ad Tech industry peers. Brightcom’s receivables are 34% of the revenue but The Trade Desk’s is almost double it’s revenue.

Here’s a comparison between The Trade Desk and Brightcom Group account receivables in dollars taken from their Annual Reports.

The Trade Desk

2019

• Revenue : $661,058,000 ($661 Million)
• Receivables : $1,116,372,000 ($1.12 Billion)
• That’s 1.7 times revenue

2018

• Revenue : $477,294,000 ($477 Million)
• Receivables : $834,764,000 ($834 Million)
• That’s 1.75 times revenue

2017

• Revenue : $308,217,000 ($308 Million)
• Receivables : $599,565,000 ($599 Million)
• That’s 1.95 times revenue

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Brightcom Group

2019

• Revenue : $368,799,000 ($368 Million)
• Receivables : $128,636,000 ($128 Million)
• That’s 0.34 times revenue

2018

• Revenue : $375,875,000 ($375 Million)
• Receivables : $134,359,000 ($134 Million)
• That’s 0.35 times revenue

2017

• Revenue : $365,546,000 ($365 Million)
• Receivables : $199,734,000 ($199 Million)
• That’s 0.54 times revenue

From the above details we can conclude that Brightcom is doing better than TTD when it comes to receivables. It is not just BCG that has receivable problems, the whole industry especially the smaller players have this issue.

Once they get enough funds and grow the business bigger from the current levels of $370 millions to above $500 millions as Mr.Suresh Reddy said in a conference call then the company can have less receivables and more free cash. That’s the reason they are seeking a line of credit (LOC).

They still have business pending but they are not able to take advantage because more business leads to more revenue and hence more receivables because they have to use all the cash but if they get that LOC they’ll have more cash and if they plan properly then they can convert those receivables into cash.

It’s not an average IT company to have less receivables and more cash.Ad tech companies spend their cash on improving technology but IT companies don’t spend more on improving technology. Once they get a strong foothold then they generate more cash than normal IT companies. Ad Techs generate more income with fewer employees compared to IT companies.

You can check with other big tech companies,all had receivable problems in the beginning but now they generate more cash than other industries.

We have to support BCG now, if they use that LOC well and grow their business then there won’t be anything that’ll stop them.

[nitin_asce]

Very good study. At least it helped me to clear doubts regarding receivables and why so much investment in technology.
I am now slowly understanding what Mr reddy wants to do.
But one question still remains why now. He could have done this couple of years earlier also. Is it like the company was not ready so da was dragged and now company is ready to grow.

[VALUEBUYER001]

If brightcom group has gone for loc earlier itself it should have paid more to daum so this drama is enacted nitin_asce

[brighter21]

In this industry I believe most of receivables are linked with revenue generation or targeted results, so sometimes they get disputed or curtail down and hence exact conversion in to receipts is really difficult to gauge. Hence the valuation mismatch which depends upon genuineness of management.

[Logan]

Hi Nithin, that’s a good observation. The company tried to raise money back in 2017 from White Oak. The amount was $150 million (around 1000 crores).

I don’t know whether it was debt or equity, but it would’ve helped the company in many ways. First they could’ve settled Lycos case with Daum then they could’ve used the remaining amount for growth and to sort out receivable issues.

When Daum got to know about this, they dragged White Oak to the court and subpoenaed them to reveal the details. Since White Oak wasn’t involved in the operations of the company, they backed off. Nobody wants to get involved in a legal case. This also made other potential investors to back off.

I think this made the company to give up hopes on Lycos and they lost the ownership.

And regarding your other question on why now and not earlier, my guess is that since they are spread all over the globe and different countries will have different rules and regulations, it would be hard for them to manage all those processes.

They must have tried many options and concluded consolidating all the subsidiaries would be the best option, and they didn’t rush it and may be this took time.

[Logan]

Since they do most of their business in the US, they are consolidating all their subsidiaries and forming a new entity there.

I checked some of their publishers and most of them are in the US, the banks will know about their business and this helps them get funds easily.

In my opinion if they don’t consolidate their subsidiaries then some of them might find it hard to raise fund in their respective countries.

Suppose if the interest rate is 1% in the US and 5% in Canada and if they raise cash in the US they can’t send it to Canada directly, they’ll have show it as income which will be subjected to tax. Since they are spread out in 24 countries, each and every country will have different rates and different rules on raising funds.

So taking all this into consideration, consolidation of the subsidiaries make sense.

[Investor_2022]

A very “Warm Welcome” to Saul Goodman.
I am feeling too much positivity from your messages.
I hope you are the one we were eagerly waiting for!
Do you think consolidation of subsidiaries into one US entity will be done before Q4 result (June end)?

[Logan]

Thank you Investor_2022.

I really can’t predict the timeline of the events especially now with COVID-19 pandemic.

If all went well, Lycos case with Daum would’ve been settled by early March this year. Mr Reddy was supposed to travel to South Korea and close that off.

South Korea was hard hit by the virus in February and early March so he didn’t go there. I’m not sure whether it’s safe for him to travel there now also.

These days the company is updating us regularly through the exchanges.We should appreciate that.

May be we’ll get a clarity from the CEO in the conference call after the results.

[aindia]

Request a check on whether comparison in revenues is a an apple to apple comparison? Perhaps it could be. Just to re confirm.
Why doubt?
There is an Element called TAC = Traffic Acquisition Cost.
Please chk the revenue numbers shared and compared are incl / excluding or is a case that it is included in one n not the other

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