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clock Created with Sketch. 03/09/17
15:38
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Originally posted by UnicornHunter
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IMO you've completely missed the point and your motives to fester negativity to buy back at lower levels are completely on display. The market is always forward looking and will mark up a business well in advance of certain points e.g. The point at which accounting profitability is established. Just look at BUD ($200m MC) and UPD (~$700m MC) which have no revenues but promising yet uncertain futures and are currently generating little to no revenue. Meanwhile BIG is growing revenues at a ridiculous exponential pace and expanding internationally, is cash flow positive and will soon be profitable on an accounting basis. As I have previously discussed, the margin issue is a non-issue and is purely transitional on an accounting basis. The company has stated on its website, through its contracting terms and in numerous other ways that the businesses expenses are front loaded to the initiation of a 12 month membership ie filming and editing costs. There are very little costs involved afterwards and companies are free to use BIG's video content for the duration of the membership period. On an accrual basis these are recognised as incurred. Similarly on an accrual basis revenues are calculated using pro rata calculations whereby only the period of the membership that is earned is booked as revenue. Anyone who thinks margins are actually heading lower into FY18 is delusional.
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Margins are definitely heading higher in FY18. The issue is they are pretty rubbish to begin with. Even at 30-40% gross margin, still shocking for a SaaS company.
