BIG - An analysis of the announcement, page-12

@djwillis

In regards to the plateau effect you mentioned increasing the acceptance rate does certainly help the situation as you could see between the 2 scenarios in the original post between the 31% and 46% acceptance rates. The reason I focused on the turnaround time of the process as being key as this is completely in the businesses control whereas acceptance not so much. It also has the biggest impact as if you can halve the time it takes to go from customer accepting video offer to producing, editing and getting them accepted this would have the same effect as doubling the acceptance rate. You have to ask yourself what is going to be easier, bringing the turnaround time from 8-11 weeks to 4-5.5 weeks or doubling acceptance rates from 31-46% to 62-92%?

There are likely things that BIG could do to try and improve the acceptance rates but this is likely to require changes to the sales channel as well as the commission and remuneration of the sales teams. Also something as simple as requiring the sales staff to do a quick credit check on a prospective client to ensure there isn’t someone already chasing them for money which would probably just result in FCC rejecting the customer for finance anyway could assist the conversion rate by minimizing the number of clients FCC declines finance too. Again though any changes here would impact the number of clients they are onboarding and depending on managements focus they may be prioritizing getting more clients onboarded rather then focused on the conversion to paying customers at this point.

The 791 accepted customers represents the number of customers financed by BIG that have reached step 10. Aka they have accepted their video and the security deposit in relation to them has already been released. In the table supplied by BIG the Paid Sponsored clients includes both Accepting and Potential.





Since we know that Potential + Accepting = 3,518 and BIG said it expects accepting to be 791 then we can determine that included in that figure is currently 2727 potential customers.

These are the clients that have requested the video but have not yet accepted the video and are presently at Step 5 from the flowchart. Where these customers decline their video (Step 6) then they would be transferred from Paid Customers – FC Sponsored in the table to a Non-paid membership. If they accept the video they would remain in the Paid Customers – FC Sponsored row and be added to the accepted clients figure.

@matchbox20

Yes there is no repeating cash receipts from these clients however BIG do treat the payment as deferred revenue which sits as a liability on balance sheet. I suspect that the repeating cash receipts from existing customers is BIG selling financed deals to their existing customers as well as new customers.



The only question I have in this regard is when do they start recognizing the deferred revenue. As they note they pay FC the 24% commission as soon as they receive the offer amount which is expensed in full and credit the balance to deferred revenue.

But it doesn’t make clear when they start transferring this to sales, whether they start from the point the offer amount is received or whether they start it from when a customer actually accepts a video. They note it is done on a monthly basis in line with the 12-month membership however what if the original client chooses not to accept the video and a replacement is needed. I guess some clarification from BIG in regards to this would be helpful.