Ann: FY16 Results Ahead of Guidance - Revenue and EBITDA up-MBE.AX, page-55

A few observations from a long term holder.

Positives
1. The company is really starting to hit its straps in terms of generating cash. We have seen $4.6m free cash in FY2016. As there is no dividend, this can be put towards meeting the deferred consideration payments of about $13m.
2. Now that tax is being paid @ 30%, we will now have a normalised base for NPAT that can be readily comparable into the future. EPS has suffered as the company has moved to normalised tax payments. No doubt many investors look at the NPAT line, it should now move up in line with revenue going forward.
3. International is about to make a meaningful contribution to profits at low incremental costs.
4. Marketing Punch added $2.1m to EBITDA in 10 months of ownership, this gives FY2017 further upside from a full 12 months.
5. There will be more acquisitions to boost earnings as the company has taken on debt while $18m sits in the bank ready and waiting courtesy of the recent capital raising.

Negatives
1. The bonus payments to executives are based on EBITDA hurdles and not EPS hurdles. What that means is more share issues, and possible dilution for holders if not done pro-rata.
2. Acquisitions may boost earnings (and bonus payments to executives), but the company does have about $18m combined debt and deferred consideration now and the risk profile is therefore increasing.
3. Only 60% of trade receivables are categorised as within initial trade terms. Naturally MBE are dealing with large multinationals and we need to be vigilant to see that they get paid for their services (note the recent receivable problem at fellow smallcap mobile marketing company TMP).

Let's hope for more of the same in 2017, but without any more share /option issues.