My sources tell me that NQ may be getting ready to break the bank by paying at least $75mil for the 35% remaining equity in Showself it doesn't already own. To recap: NQ owns 65% of Showself at a cost of approximately $3 million for the first 20% investment made in Sept 2013 and $45 million for the second 45% investment made in May 2014, at a total cost of $48 million. Observation: There were only 8 months between the first and second investment, yet the buy-in cost basis went from $150,000 per 1% equity to $1 million per 1% equity ownership. What could Showself have done to deserve 6.6x more money in such short notice between Sept 2013-May 2014 besides lining the crooked pockets of NQ insiders? Showself has increased cost of sames at a faster rate than sales - with no profitability in sight. So what gives? As we already know, buying companies has been a perfect scheme to funnel money out of NQ - just like they did with the $80mil from the sale of NatSky. Money in = money out, while mgt doesn't seem to give a hoot to the impending $173mil bond default in 4 months.
There was no NQ seasonality weakness Q1 2015 over Q4 2014, none! Prove it to yourselves by simply looking up NQ's results YOY Q1 2015 over Q4 2014. Then, read the Q1 2016 ER CC transcript and see Matt BS'ing about seasonality. PRC cos do better Q1 due to ChineseNewYear, period..
(with the exception of one-time gain from NatSky last quarter). $NQ burns cash like a meth addict. And why does NQ continue to buy equity in gaming co's being consolidated into FL Mobile? Does anyone see a pattern?
US shareholders likely lose. Food for thought: NatSky $80mil cash is already gone! Another sure thing is MVAS will plunge 50% going forward ex-FL. Lose-lose deal for US holders.
With these downbeat revs, when will NQ mgt suspend $360m guidance?
from $51.4mil to $42.7mil! Mgt pumping YOY comp is laughable!
MVAS/advert growth vs MAUs is unsustainable. Is NQ buying their own revenue?
Vinnie will make sure US shareholders can't touch the cash - all part of the bigger picture.
GLTA NQ minions
As I predicted better than any WallSt minion, like Rosenblatt's Zhang (Matt's former Wedge colleague) and Topeka's Freddy), Q4 EPS came in within 2 cents of my call (46 cents vs 48 cents). Average analyst estimate for Q4 was 3 cents. So what to expect tonight?
First, NQ has nothing to boost Q1 EPS as the NationSky sale completed Dec 2015. So for starters EMM rev is cut 2/3 for Q1 and no padded EPS gains to look forward to. In addition, NQ likely dispensed more cash to continue funding egregious partial acquisitions, so expect another round of double digit cash burn and continuing negative OCF - plus negative MAU growth.
Secondly, NQ embarqed on a rebranding strategy under Showself. However, Showself is not the holy grail NQ pundits are led to believe. Chinese mom and pop investors lost USD$2 trillion to PRC failed market policies last year and it is impacting discretionary purchases on items such as Showself's USD$95 IAPs to watch dancing/singing little girls. Furthermore, Showself lost it's top grossing mojo, according to Appannie - through YE 2015, Congo was bragging non-stop about Showself's top 10 grossing iOs-iPad-Social-app at #2. Today, Showself is #44. Then, there's Showself music search, wallpapers, and launchers - all given away for free where NQ pays a fee per hardware install in the hopes to sell up adverts (PPCs, static, or interstitial) - which with lethargic 7% YOY growth and plunging margins from NQ's Q4 report and falling CPCs/increasing comp (ala CMCM's debacle last week) doesn't bode well. Perhaps the most incredible anomalic dichotomy is mgt's reported 55% QoQ hypergrowth for it's MVAS segment on the heels of zero (actually negative) MAU growth in Q4 (198.8mil reported Sept 30 qtr down to 198.2 reported in Q4). One would have you believe that NQ is buying it's own revenue or maybe back to it's old ways. I also expect mgt to pump more fluff into the FL divestment, which incidentally kills 70% of MVAS/advert revenue. You can't have it both ways.
Rebrand all MVAS (Doreso, vLiffe, NQLIve) under Showself. Showself was top10 grossing before PRC implosion - now not even in top50 grossing. Why? With China's failed market policy where moms and pops lost half trillion dollars last year in the casino exchange, who has USD$95 for IAPs?
Don't be fooled by NQ pundits like Surreanar (or whatever he's called) now posting about Showself as a top download only becaus he can't claim a spot on the top 50 GROSSING (where it counts, although grossing can also be bought). Furthermore, it's a one-two punch to think about top downloads as a plus when NQ pays hardware cos and sites a fee per download/install. Bang!
So Q1 ER should show EMM revenue slashed from ~$50mil to quasi zilch. Or perhaps NQ figured out how to assign Trustek revenue against free iPads given to needy Chinese children. All bets on singing & dancing Showself girls!
like buying obscure little game developers while engaged in a definitive binding agreement to sell FL Mobile. Huh?? Expect another double digit cash burn - plus negative OCF on next week's ER..