How can you write off $100,000,000+ and record sales of $31,000,000
I only recently got into Velti, mainly because despite its problems it was trading at a fraction of sales (P/S) especially compared to competitors.
Given the high AR and possible writeoffs, I still found it to be a good idea to buy.
But $100,000,000+ in writeoffs! On Q revenue of $31m. That's just fraud - fraudulent pretend sales that were booked. Somebody needs to go to jail, because honestly my thesis for investing here should have paid-off at the metrics I was seeing.
That may be because you are viewing the Q2 2013 $31 million as "net" revenue. It is not. Velti's line item descriptions are confusing, imo. Even though they "booked" $31 million, they actually NETTED $9 million in revenue. This is due to "re-transmission costs."
Essentially, Velti is an SMS company - this business accounts for over 2/3 of their Q2 revenue. They license their platform for some revenue. They also buy SMS capacity in bulk from carriers (Verizon, AT&T, etc.), and then re-sell it to clients at a mark-up. They book the top line sales number - and have done so for years. This type of stuff has pricing in the fractions of pennies. Velt buys 500K SMS on behalf of Toyota for $0.002/msg and then sell it Toyota for $0.003.
SO even though it looks VELT is a $120 million firm (straightline today's topline revenue: 4*31), it's actually a $36 million firm (4*9). Not taking into account seasonality which is a big factor for them.
Did you listen to the call ? Ross perfectly explained that discrepancy after an analyst ASKED THAT EXACT QUESTION . . Their original/core business was in Greece and MANY of these write downs go waaaaaaaaaaaay back. (In other words ..Ross is cleaning house!!!!!!) . . As a trader you're #$%$. As an investor you SHOULD BE encouraged.