Hopefully the information in the first post was helpful and have finally put my scribbled notes into a more organized post.
Having had some more time to digest and try and understand all the information supplied in the announcement there was one thing I wanted to clear up which is significant and I believe I got wrong in the previous post.
Initially I thought that the sponsorship pool referred the 41% because in the 1
st response to the ASX query it was noted that approximately 19m had been used and in the response to the 2
nd ASX query it noted that there was 19,859,415 held in security deposits. This would have meant that BIG had basically maxed out their sponsorship pool. However on reflection and further consideration I now suspect that this is actually referring to the 35% that BIG is advanced prior to the video being made.
My reasoning is that in referring to the sponsorship pool it notes the pool is made available for the producing and editing of videos.
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The side effect of this is that given we know what the 41% was at the end of December we can calculate at the end of December the amount of the pool used was $16,953,159. Further given that they said that as at the 20
th February the pool used had increased to approximately 19m then it would indicate that there had been at least an additional 5.7m in cash sales to this point and more depending on the video acceptances.
We can also deduce that in total this quarter the maximum they could generate cash sales by increasing the pool is
$8,705,260. So when we receive guidance or the next quarterly this will be an important figure to monitor as any cash receipts above 8.7m would indicate the minimum levels of video acceptances.
As an example if they did 18m of cash receipts in Australia again this quarter it would indicate a 9.3m worth of video acceptances for the quarter as a minimum.
It also means that unless the facility is expanded then its likely next quarter that Australian cash sales would be meaningfully affected as I suspect they will hit the cap on the pool this quarter if they haven’t already.
2.0 Other Sponsorship Agreements
Something I found interesting and doesn’t seem to have been discussed as much was the comment about the sponsorship agreement in the US. Given on the 8
th February they noted that they were exploring the ability to offer sponsorship in the US I was quite surprised when the latter announcement noted that the 2.3m from Non-FC paid customers actually came from 2 pilot sponsorship programs under testing.
8th February - Exploring
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20th February - Last quarter non-FC receipts were from US sponsorships
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Given that myself and many on here were under the impression that none of the US clients were presently done via a finance option to see that the entire amount received from US clients had come from financing was a bit of a surprise. I am not sure why the company didn’t announce these pilot sponsorship programs to the market especially when they announced the FCC deal in the market and when all their clients in the US are being funneled through this mechanism.
I think BIG should come forward with a detailed explanation similar to what they have done with FCC on how these sponsorship deals are structured so that we the shareholders are able to evaluate the company properly and access and potential risks to the company these deals might present.
From first appearance the structure seems to be different to the Australian deal. Seemingly in Australia the whole of the offer amount is recorded as cash receipts however over in the US we know that as at 27
th November they had onboarded 800 clients to that point in the quarter and that they expected another 600 prior to the end of the quarter. Given we know that the ARPU was 5900 this would indicate 4.7m in cash receipts to that point at 800 customers and 8.2m in cash receipts if they reached 1,400 businesses onboarded.
Given they only declared $2,354,164 in receipts for the quarter or just ~29% of what the value of the onboarded clients would have had video offers worth there must be some different mechanisms in play.
I am not saying that BIG financing their clients is a bad idea but we really need more information so we can make an informed decision when valuing the company.
Either way I expect we will see a significant ramp up in US cash receipts.
3.0 The future of BIG
While some have try trashing the company about why a company that produces youtube videos is worth so much I thought I would share what I see in BIG and why I initially invested in the company.
As some have pointed out video is becoming increasing important in the online world, if you look at Facebook and Google both are pushing the video offerings of their platforms more and more as they strive to engage with consumers and capture more time spent on their platforms.
This is where BIG comes in as realistically I don’t see Facebook or Google getting into the video production side of things in a meaningful way and even if they did its unlikely to take off as they would try and horde the content on their own platforms rather than making it easy to utilize on multiple platforms.
BIG are well positioned in this regard, they can set up their platform to integrate with both Google and Facebook allowing businesses a one stop shop to handle their online marketing. Unlike traditional TV ads, radio, or print when it comes to online marketing with the information that Facebook and Google have on their users the ability to target an audience more local and to a demographic that is what they want meaning the ROI is significantly higher than the shotgun approach of mass media.
BIGs value comes from its ability to produce professional video content for a small business that it can then use in advertising via youtube, facebook, etc or use it in their own websites or promotional material.
Pillars 2 & 3 I feel are a long way from producing sizable revenues and even further away from being profitable however Pillar 1 I feel has the potential to outstrip the value of pillars 2 & 3 combined in my opinion. Aka the Mcdonalds of the video production industry for SME.
