Member Info for DRB83

I think I only mentioned 2 concerns. One around cash collection and the other was around the term 'exclusive' and what peoples understanding of it was. Now someone like you clearly sees them as pathetic as they are challenges against the company. We can't have that now. In reality, they are reasonable questions from a potential investor. In the end I answered my own question in terms of exclusivity. The cash collection question was raised following your statement that trade receivables looked good. You made that assessment based on what? that trade receivables are higher than trade payables. Thats basic. You didn't even mention the significant increase in trade receivables and what that may indicate and did you calculate the debtor days (this should be close to 30 days in a perfect world). I'll leave that with you.

Share4, you're funny. I think you're arguing with yourself. I'll copy and paste one of my previous posts

Trying to understand the drivers of the top line here. I believe bids have:

1. There own portfolio of publishers and brands which they are progressively expanding and monetising directly themselves.
2. They have then signed a 2 year agreement with Azerion to give them exclusive access to this portfolio as our exclusive reseller.
3. We have then signed a 3 year enterprise software deal with effectively allows them to build their own portfolio using our model and systems.

Not sure if MMP World wide fits into 3 (licensing revenue) or whether it should have its own category.

I wasn't sure with me previous post but feels a lot safer being able to build the business outside of the Azerion deal.

This is me saying that bids does have diverse revenue streams. 1, 2 and 3. Maybe even a 4. I numbered them to make it easy to understand but you're reading what you want to read.

Initially, I read the exclusive part and thought that may be an issue but then realised that they still have direct revenue and licensing so bids are not solely dependant on Azerion.

Anyway, it's clear your one of those investors that gets too attached and treats the company like their own child and if anyone so much questions your child's ability you come out all guns blazing in their defence. I understand that approach for your actual child but good luck using it in investing.

You're welcome

Livestock, just listened again and Bill said the board own less than 0.5%. He never said he didn't own any. Not sure how you managed to distort that.

Bang, that was all rnsd on the 14th July.

Share4, I like bids. I like gaming and it's a huge opportunity for advertising. Bids brings together the creators/publishers and the brands so everyone wins. Similar to what BOOM does in podcasting.

I understand it can take small companies years to turn a profit and a jump from £2.6m revenue to potentially £8m in one year is a great stride. As investors you can't just focus solely on the top line and assume everything else must be working.

What about potential investors who are doing their research? Are they allowed to ask the questions that the current investors shy away from. Do you understand that approach.

I see a huge potential in the gaming advertising industry. It is in its infancy and Bids appear to be making strides so yes it's on my watchlist. Analysing accounts and asking what you call negative questions are just part and parcel of dyor.

Placing aren't necessarily a bad thing. If bids keep progressing then in 6 months time the SP may be 5p with a potential placing at 4p so a good 30% premium from where it is now. Who knows. That is what I'm trying to get a feel for.

Understanding what bids mean by the word exclusive is important in my research. I know more now about bids than I did when I woke this morning. Business looks sound but as with any business having a diverse number of revenue streams is one huge tick in the box in terms of risk mitigation.

You're free to ask the easy questions but you'll learn alot more about the company by asking the hard ones.

Trying to understand the drivers of the top line here. I believe bids have:

1. There own portfolio of publishers and brands which they are progressively expanding and monetising directly themselves.
2. They have then signed a 2 year agreement with Azerion to give them exclusive access to this portfolio as our exclusive reseller.
3. We have then signed a 3 year enterprise software deal with effectively allows them to build their own portfolio using our model and systems.

Not sure if MMP World wide fits into 3 (licensing revenue) or whether it should have its own category.

I wasn't sure with me previous post but feels a lot safer being able to build the business outside of the Azerion deal.

It's this paragraph I'm referring to.

The agreement, thought to be one of the industry's largest programmatic in-game advertising deals, will give Azerion's SSP and sales teams exclusive access to all of Bidstack's advertising formats and will see the company become Bidstack's sole external reseller.

It's funny you mention NCYT Johnny or whichever account your currently using. Those who know about NCYT will know that having 90% of your revenue with 1 customer has the potential to jump up on you and sock you right in the mouth.

I do have a similar reservation here. The Azerion deal is labelled exclusive. Does the exclusivity represent the entire bid service offering or just one aspect of it? Will there be significant revenue from other customers?

I forgot to add in R&D expenditure. GB said a part of the £4m loan would be to expand the business as you would expect so maybe a profit for 2022 is a little too ambitious.

Profit is one thing but we all know that cash is king and that is paramount for any small upcoming business. Cash looks stable.

We started the year with £1.8m and took £4m from the mezzanine loan. So £5.8m to play with.

I believe the business will be self funding in the FY22 accounts.

Assuming the £19m generates £11m gross deduct about £9m for admin expenses (exc D&A as non cash) and £0.6m in finance charges then we have £1.4m net cash generated within the year.

So that's £7.2m but we paid for Glanaco £0.5m. We'll also have to pay back £1m of the £4m this year so we end the year on £5.7m. We will need to pay back the other £3m of the loan by March 23 so that leaves us with £2.7m and hopefully we'll be self funding on a monthly basis by H1 2023.

This is obviously all dependant on how we can manage the working capital. Trade receivables increased massively in FY21 from £1m to £4.7m. You'd expect that as revenue grows but it's important the credit control team don't let that number become too big as a % of revenue. FY20 was 22% to FY21 52%. So with the right working capital management Dvrg may not need to dip into the mezzanine again and therefore save about £600k in finance charges.

It's looking good. Let's see what H2 has to offer.

Yoy we can see that revenues doubled from £4.5m to £9m. Admin costs (excluding D&A) also doubled from £2.7m to £5.4m which was primarily driven by an increase in headcount from 37 to 65. A key point is that gross margin went from 40% to 59%. That is a huge upside and one which could continue to grow as more orders come in allowing us to be more efficient with our cost of sales.

The big destroyer of the numbers for 2021 was the increase in amortization from £1.9 to £3.2m which appears to be due to the onboarding of Modern Water intangible assets. Unfortunately, this meant that rather than see a significant improvement in the bottom line yoy we came in flat.

Interestingly, the amortization was allocated to central in the segment analysis. Was this done to avoid showing Modern Water as loss making? Interesting.

It also should be noted that the doubling of revenue in 2021 was largely due to the full year effect of the acquisition of Modern Water. If you strip out the monitoring division then yoy revenue grew from £3.3m to £4.8m.

Moving in 2022, £19m revenue expected. Let's be conservative and assume the 57% gross margin is maintained (I believe it may be higher) giving a gross profit of £11m. Overheads are set to increase. I am assuming due to an increase in headcount again but also general price increases across the board and also the acquisition of Genaco that will increase depreciation charges and finally the increase in finance charges as a result of the mezzanine loan of £4m. I'd expect overheads to increase from £9m to £11m so hopefully with another R&D rebate Dvrg could be profitable in 2022.

Rorkes, the uplift in amortization appears to be as a result of the incorporation of almost £14m of non current assets from Modern Water. Therefore, I suspect this will continue going forward. It may reduce depending on if the reducing balance amortization method is primarily used but i wouldn't be treating it as a one off.

Yes, I was wondering what revenue would be required for breakeven.

If admin costs are say £12m in 2023
Op margin is maintained at 40%

Revenue required to breakeven would be £12/0.4 = £30m.

I believe expected revenue for 2023 is £24m (not sure) so this would stack up with what the board are saying. 2024 will be the first profit imo.

The question for me is, can the bod manage the business to 2024 with the £4-4.5m cash they had in July.

Juno, operating costs have halved? Can you elaborate please. Are you comparing 6 months to FY?

Also, the loss per share, you are comparing apples and oranges. 0.3p is 6 months 2022. 1.21p is 12 months 2021. Also, the weighted number of shares are significantly more in 2022 Vs 2021 due to the huge number of shares issued in July21.

Juno11,

Extract from today's RNS:

The interim results have been prepared on a going concern basis which assumes that the Group will be able to continue trading for the foreseeable future. Although an operating loss has been reported for the reporting period and an operating loss is expected to be incurred in the 12 months subsequent to the date of this report, the Directors believe, having considered all available information, including the cash resources currently available to the Group and the Company's proven ability to raise further equity funds from its supportive shareholder base, that the Group will have sufficient funds to meet its expected committed and contractual expenditure for the foreseeable future. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the interim financial report for the period ended 30 June 2022.

These are the directors words, not mine:
Although an operating loss has been reported for the reporting period and an operating loss is expected to be incurred in the 12 months subsequent to the date of this report,

The directors are expecting to report an operating loss 12 months out.

And this:
and the Company's proven ability to raise further equity funds from its supportive shareholder base, that the Group will have sufficient funds.

Basically, the directors are preparing shareholders that a placing may be required in the near future. Some on here are convinced that a placing will definitely not be required.

There is a risk and it's only fair to highlight it so investors can discuss and make informed decisions with their hard earned money. Rampers won't like it.

Surely if there'd been a leak of bad news there would be more than £90k worth of sells. Guess we'll find out soon.

Didn't take long for the deramper comment. I disagree, I believe the market is bothered about cash flow. Lots of questions around whether a raise will be needed here. I think the business looks good. A good fast growing industry to be in and great potential here. I saw an issue with cash collection and wondered if anyone else did or maybe some lth's could explain it. No one has yet. All I have received is 'dont worry it isn't a issue'.

If you're one of those investors that just ignores the bad and just focuses on the good then ALB

We appear to be paying our invoices within 30 days for the majority anyway. There may be agreements where certain suppliers don't invoice us for a month or so after the usual 30 days. This could explain the accruals and this would certainly help our cash flow. My main concern is not about payables, we are in control of when we pay money. My main concern is cash coming in. This is all about maintaining a healthy bank balance to avoid the need for a raise. If you are pinning all your hopes on Azerion revenue coming into the bank promptly then let's hope we haven't made any agreements with them that allow them to pay after 60 or 90 days because a raise would certainly be on the cards.

Share4, take a look at the cash flow. Receivables are increasing whilst payables staying flat. You say this is a good thing but this is not good for cash flow.

Anyone serious about their investment here should at least raise this as a question and not just assume everything is all rosey because sales have increased abit.

Cash is king and we need to see trade receivables alot lower than it is.

Accruals are pretty standard practice for any business. I never said there was anything odd about them. I haven't questioned the accruals.

Like I said, regardless of what system is used, if an invoice is due to paid in 30 days then I don't care if they pay Bacs, Chaps or even cheque as long as I receive the money.

If you believe the Bids system is responsible for the £3m debtors when they only have £2m sales then please elaborate.