Can anybody explain this discrepancy? The issue is very important because of the revenue issue.
The short hypothesis would go as follows:
Market share is much lower than NQ has led the market place to believe (based on the survey reports and the low brand name recognition). As a result, the real revenues of the company are much lower than NQ has reported. To hide this discrepancy, the fake revenue has been booked and is sitting in A/R. Since the fake revenues would increase the DSO number over time, the company has to under-report the DSO number to hide the whole issue.
I am not saying this is true or not. But this issue is important and should be resolved. It would make a lot more investors comfortable with the revenue issue. At the same time, the company should provide a list with international clients. Some of this segment information should be disclosed to calm the market regarding the incredibly high international DSO number.
We can disagree then. Look for my DSO post. I can not reconcile their number to what the financial statement numbers say. The calculation per the financial statements say the DSOs are even higher than they report.
One thing I have not understood is why the DSO calculation the company publishes is inconsistent with their financial results. The DSO calculation is as follows:
(A/R divided by Credit Sales) multiplied by Period Days
So giving NQ the benefit of the doubt and using the entire revenue amount as "credit sales", the 2nd quarter DSOs should be as follows:
($70.85 million / $41.398 million) X 91 Days = 155.7 Days
So the DSOs per the calculation using the financial statements is really 156 days, which is 11 days higher than they reported. If you use the 6 month revenue numbers, the number is even higher = 173 Days. So I will give them the benefit of the doubt and say they are using the quarterly numbers.
Is hard to figure out what is going on with this issue. This goes to the root of the revenue issue.
I have been a CPA for 22 years. You are incorrect about the cash transfer clearing up the market share issue.
The cash transfer has nothing to do with YTD and the high DSO's. In theory, part of the revenue could be fake and that would explain the high DSOs. I am not saying it is fake or not, just correcting your accounting assumption that because some cash is being transfered, it means that they have the market share they believe they have, and that makes the revenue real.
Most of the cash could be sitting there, expect that it did not come from the revenues and profit on the business. But from their previous equity raises.
You have to admit, that a DSO of 145 days is extremely unusual. In fact, their DSO number is understated if you actually calculate it based on their balance sheet and income statement numbers.
My only concern with NQ is actually a significant one: why are the DSO's so out of the normal for the industry. I mean 200 days for international? What other company has anything like that?
This is why I am currently out of NQ. Just my opionion.
1. Being a CPA, is not enough to say bad debt has been manageable so the A/R quality must be high. You can play too much with bad debt reserves. I literally could not find another technology company, in any industry, that had DSO's that high. Also, their collections are inconsistent with industry practices.
2. I agree with you on point 2, but what concerns me is that they keep highlighting these reports with market share percentages that seem completely out of whack with general awareness of NQ.
3. How can you say not a big deal? there is no real evidence either way to suggest whether it is at arms length or not.
4. Being a numbers guy, I can tell you that the math does not add up. It is either incorrect, or they made a mistake when they named their number 2 & 3 customers in the conference call.
5. No idea what you meant.
1. Why are DSO's so high? I could not find another internet company that was being paid so late. Carriers and SP companies seem to pay everybody on monthly basis.
2. The market share seems out of whack. It seems NQ is not that well known, how could they possibly have 55% market share?
3. Why does Xu Rong's employment time with NQ keeps changing? And she obviously has a personal relationship with some of the founders, why not disclose everything?
4. If in 2012 carriers and SP companies make up 30% of total net revenues, how come adding YDT and customers 2 & 3 along with China Mobil adds up to 43%?
5. If YDT was booking net revenues and they only paid business tax on their net share of revenue, how come NQ did not pay more business tax for the other portion of revenue that they received?
Being a CPA, I know that MW was wrong with the following issues:
1. Cash level 2 issue was not a concern.
2. YDT was probably booking revenues on a net basis, not gross, so this they got wrong.
There are inconsistencies coming from both parties. I think I will keep on the sidelines until the dust clears.
So this is not unusual. So MW saying "they had never seen this" means they did not research it, or were outright lying.
According to the SEC filings of the companies mentioned above, it absolutely is. You can check their filings at sec.gov
Yes, just checked the 20-F, cyou is also 100% level 2.
The latest 20-F for SOHU and PerfectWorld:
SOHU: 100% Level 2
PWRU: 99.99% Level 2
Why is NQ being singled out? It seems this is a non-issue.