The information contained herein includes certain estimated and unaudited financial information. Some of the information has been derived by the application of adjustments to our historical financial statements or to give effect to our recently completed
acquisitions. This unaudited information is presented for illustrative purposes only and may not be indicative of future results. The information is based upon available information and
certain assumptions that we believe are reasonable. This presentation contains
forward-looking information about the Company’s business and financial outlook. Forward-forward-looking information addresses matters that are subject to risks and uncertainties. In addition to the risks associated with developing complex technology, the Company’s future results will depend on a variety of factors, including global financial conditions and uncertainties; the ability to convert accounts receivable to cash; the ability to develop new customers; the ability to bring new products to market; technological advances and the ability to manage intellectual property and data rights in a rapidly changing environment; potential liability resulting from pending or future litigation; and other competitive factors. For further discussion of risks and uncertainties relating to the Company, please see the Company’s
The purpose of the material contained
herein is to provide greater details into
the composition of certain of our assets,
our DSO calculation, and to clarify
perceived misunderstandings about the
quality of our receivables and our ability
to convert revenue to cash.
Velti had great quarter and increased annual guidance
Velti reiterated the cash flow projections for this year and is
confident on its execution.
Velti is on the cutting edge of an exponentially growing industry
with top agencies and brands as our clients.
Velti is in a rapid growth phase that requires significant
investment and creates execution challenges that we recognize
and address.
Perspective from Q1 2012
Velti is selling to CMOs (longer cycles than CIOs), has
similar DSOs to other organizations that sell to CMOs,
and our comprehensive DSOs are at 272 days
CMOs to buy more tech than CIOs within 5 years
according to Gartner
For instance, according to Jefferies, companies with large
international operations have higher DSOs (WPP is at 229
days, IPG at 260 days, and Publicis at 388 days)
DSO in our market
Comprehensive DSO Trend
261 272 220 180 200 220 240 260 280 Q4 2011 Q1 2012 Q4 2012 (preliminary target)Q4 to Q1 trends
Comprehensive ARs consistently rise, even if sequential revenue goes down
Comprehensive DSO only increased by 4% QoQ
0 50 100 150 200 Q4 2010 Q1 2011 Q4 2011 Q1 2012 Comprehensive AR Revenues
Customer A Example
START March April May June July August September October
PROJECT EXECUTION Monthly Reconciliation Monthly Invoicing Collection after invoicing
Monthly Reconciliation, Invoicing and Collection
Revenue Recognition November December First Period Second Period Third Period First Period Second Period Third Period First Period Second Period Third Period
Low Range High Range Cash Conversion Cycle
$50k $50k $50k
November December January February
Reconciling: $50k Reconciling: $50k Reconciling: $50k Invoicing : $50k Invoicing: $50k Invoicing: $50k Collecting: $50k Collecting: $50k Collecting: $50k
Customer B Example
START December January February April May June July August September October November
Reconciliation at the end of the project
December January Total Period PROJECT EXECUTION Final Reconciliation Invoicing Collection after invoicing Revenue Recognition Total Period Total Period $50k $50k $50k $50k Reconciling: $200k $200k Total Revenue: $200k Invoicing: $200k Collect cash
Low Range High Range Cash Conversion Cycle
Revenue 50 50 50 50 0 0 0 0 0 0
Accrued Contract 50 100 150 200 200 0 0 0 0 0
Comprehensive Receivables Composition
• Trade Receivables: Revenue recognized and invoiced;
• Accrued Contract Receivables: Revenue recognized, but not yet invoiced; • Other receivables and current assets include the following:
a) Notes Receivable: Checks that are legally enforceable short term promissory notes under local laws; b) Factored Receivables: Receivables submitted for factoring
Quarter Ended March 31, 2012 Quarter Ended December 31, 2011 Actuals Adjustments Pro Forma Actuals Adjustments Pro Forma
Trade receivables $ 85 $ (17) $ 68 $ 71 $ (20) $ 51
Accrued contract receivables 103 (19) 84 98 (16) 83
Other receivables and current Assets 56 (18) 38 50 (11) 39
MIG Gross receivables vs. net revenue
•
In accordance with US GAAP, we recognize certain revenues net of 3rdparty costs; additionally, we are required to present the full amount of the related receivables and payables on our balance sheet. Most MIG revenue is booked on a net basis.
•
Accordingly, the adjustments to trade receivables and accrued contractreceivables eliminate amounts not recognized as revenue.
The adjustments to other receivables and current assets exclude the
following:
•
VAT receivables•
Government grant receivables•
Income tax receivables•
Deferred 3rd party costs•
Deferred tax assets and other current assetsComprehensive DSO Calculation
3/31/12
12/31/11
Comprehensive Receivables
$
190
$
172
÷ Trailing Twelve Months Revenue
(1)$
252
$
237
X Days in Period
360
360
= Comprehensive Days Sales Outstanding
272
261
For the Period Ending
(1) Includes revenue of acquired companies as though they had been
consolidated for the entire twelve month period.
Trade AR Aging breakdown
39% 21% 7% 15% 5% 3% 10% 1-30Our Comprehensive DSO is 272 days at March 31, 2012.
As revenue spikes in the fourth quarter, we expect most collections to
occur in third quarter.
On average, we are invoicing after 4 months and collecting cash 5
months later for a total of 9 months or 272 days
Based on our historic data Q1 Comprehensive DSO is higher than our
Q4 Comprehensive DSO due to seasonality.
Q2/Q3 Expectations
Projected Q2/Q3 cash balance range: $20-30 million
Cash balance expected to trough by the end of Q3
We are targeting Comprehensive DSO improvement of 50+ days within
the next 6 months, to around 220 days.
Greek Default Scenario
Scenario
Impact on Velti 2012
Greece Default
Revenue will be reduced
slightly
EBITDA
Greece is ejected from
the Euro
EBITDA will increase by more
than revenue decrease
Drachma
re-introduced with
devaluation of 40%
relative to the Euro
Net positive profitability
impact
Q1 2012
Summary
Our current cash balance is higher than our Q1 reported cash balance.
Re-iterating Free cash flow by Q4 and operating cash flow positive by Q3. We are very confident on our execution.
In the last 12 years we had less than $1 million of bad debt write-offs.
We have 77% revenue from existing customers and more than 90% customer retention rate. We are selling to the CMO and have DSO levels very similar to other companies that are selling to the same organizations, their DSO’s being to the 230-300 range.
