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Velti plunges to $1, delinquent payments may total $30M

  • VentureBeat has followed up on its Wednesday report about cash-strapped Velti's (VELT -9%) delinquent payments to app developers using its Mobclix mobile ad network with a column that notes a developer in touch with collection agencies thinks Velti owes ~$30M, and that he and his peers might try to collect via a class-action suit.
  • The developer: "Mobclix owes us pay from last October, and their last payment was in April."
  • Velti calls the $30M figure "completely inaccurate," but adds it can't provide more detail because its Q2 report is due later this month.
  • Velti's contracts with developers give it 90 days to make ad revenue-sharing payments. VentureBeat observes a Q1 6-K indicated Velti had accrued 3rd-party costs of $56.5M, much of which involves money owed by Mobclix.
Comments (9)
  • James Sands
    , contributor
    Comments (1947) | Send Message
     
    Based on that filing it is not clear as to what a "normal" accrued third-party cost will be, especially with the transition of Velti's business taking place.

     

    What is at question is Velti's ability to get through the next two quarters based on a maxed out debt obligation and negative free cash flow.

     

    If Velti continues to delay payments they may be able to pay during second half of the year once cash flows improve. Not much has changed from the Q4 report based on this information.

     

    Velti has been having these issues for over a year now.
    2 Aug 2013, 04:24 PM Reply Like
  • James Sands
    , contributor
    Comments (1947) | Send Message
     
    What is interesting is that fact that Velti's revenues have declined yet receivables remain constant, I think that the accrued contract receivables may be at risk based on the fact that these are tied to performance based contracts and have not been invoiced. In the event these relate to forgone business in eastern Europe, will they be collected?

     

    Second, Velti's DSO which are over 300, are significantly higher than peers, Millennial Media near 100 days and Augme Technologies (more closely) near 90 days. Even conventional advertising and marketing companies exposed to print, TV, billboards, public relations, digital and mobile combined are around 230 DSO.

     

    Something has to give soon whether it is the need to refile annual statements, write down collectible receivables, or possibly bankruptcy.

     

    Allowance for doubtful accounts have increased twice on the last two earnings calls.

     

    Mid-August is going to be interesting, it's a 50/50 coin flip from hereon out.
    2 Aug 2013, 04:34 PM Reply Like
  • buffett222
    , contributor
    Comments (789) | Send Message
     
    Hopefully MM can buy Velti on the cheap or merely cherry pick Velti's assets and employees after/ if Velti files for bankruptcy, then MM can continue on their path toward world dominance :)

     

    Long MM; interested in other emerging tech...
    2 Aug 2013, 11:23 PM Reply Like
  • LongStrider2915
    , contributor
    Comments (7) | Send Message
     
    Umm lots of quotes being bantered about but all with pre defining comments like "thinks", "may" etc I am long but bought way below $2 and will wait for guidance on Q2. The seasonal Q3 Q4 influx of revenues may well right the ship and the restructuring should start to show an impact. I expect Q2 resulst to be poor but show the first glimmers of turnround.
    3 Aug 2013, 04:14 AM Reply Like
  • James Sands
    , contributor
    Comments (1947) | Send Message
     
    LongStrider,

     

    How confident are you that after Velti had roughly just over $14 million in cash at Q1, and influx of $24 million from the equity offering, and not much more borrowing capacity, that the company has the ability to get through Q2?

     

    Running some simple numbers makes things interesting. We know Velti paid the $33 million acquisition related liabilities in Q2. Considering a cash amount of $38 million for Q2, this would translate to a $5 million cash balance afterward.

     

    Mr. Ross stated Velti is expecting cash flow around negative ($8-12) million for Q2, $10 million in Q3, and in the $40 millions for Q4. This provides an additional $38 million or so for the year to cover all operations.

     

    Q2 is going to be tight, but what happens if Velti has $3-7 million in operations or capex with no accounts to pay for it???

     

    From the filings the company has an additional $2.2 million remaining on its revolving credit facility with HSBC; and is currently in negotiations with the bank regarding debt covenant violations. Is HSBC going to give Velti another $5 million on the facility?? HSBC knows better than any of us the riskiness of Velti's situation, so if the bank establishes new covenants and/or provides more leverage, this would be a catalyst for the company.

     

    And Mr. Ross's guidance should be taken with a grain of salt. The company is having difficulties accurately measuring its growth at the moment. If the HSBC loan goes back to being mostly due in 2015, and Velti generates strong cash flows in the back half of the year, hopefully the late payment issue can get resolved.

     

    Velti is cutting it as close as a company can, maybe they are going to liquidate assets??

     

    The point is, this is a risky situation for any company to be in, and there is not good transparency right now.
    3 Aug 2013, 10:39 AM Reply Like
  • James Sands
    , contributor
    Comments (1947) | Send Message
     
    For anyone interested here are Velti's quarterly accrued third-party costs from December 2011.

     

    12/11 $35.1 million
    3/12 $50.1 million
    6/12 $54.6 million
    9/12 $42.9 million
    12/12 $58.3 million
    3/13 $56.5 million

     

    There isn't a breakout for earlier periods, however, interesting to note here's total accrued liabilities which include accrued third-party costs:

     

    12/9 $1.7 million
    12/10 $27.5 million
    3/11 $22.7 million
    6/11 $17.7 million
    9/11 $15.8 million

     

    Velti's highest cash balance was as of June 2011 at $159.4 million. The company is around $5 million now after the additional $24 million equity offering, so Velti has spent just under $180 million over the past two years to get to this point.
    3 Aug 2013, 11:06 AM Reply Like
  • invest2bfree
    , contributor
    Comments (369) | Send Message
     
    James very good analysis, Here is my take-

     

    List of mistakes committed just in 2013-
    1. Not raising enough capital in the 1st round. They should have raised 50million.

     

    2. Not laying enough people, looking at the revenues, GMs and opex, they still have 10million cash burn. They needed close to 40% layoffs but got only 20%.

     

    3. They should focus only select geographies which pay faster. They have too many offices and in too many places. Just focus on UK\US\Western Europe\India all other regions are just cash drain and difficult to manage. Less
    5 Aug 2013, 10:00 AM Reply Like
  • James Sands
    , contributor
    Comments (1947) | Send Message
     
    As we know now, Velti is losing money in the select geographies, their advertising business is gone and they are only doing mobile marketing campaigns. The company is a major fraud with respect to their investor marketing of the business model.

     

    The litigation will really devastate this company as they have clients and investors suing.

     

    I would caution anyone thinking an opportunity is here. Velti is positioning itself to pay HSBC's debt obligation and is not doing anything for investors. Any cash they raise is going to HSBC. After this occurs, there probably will be no assets left for the business to operate.

     

    Jeff Ross and Mari Baker will collect their $350k/year payouts and move on.
    28 Aug 2013, 10:45 AM Reply Like
  • exalite
    , contributor
    Comment (1) | Send Message
     
    I donno if there is a 30M $ scam or 1 $ scam... but is a Scam.

     

    Mobclix owe me more than 8000$, and i've talked with collection debt agents and they are assuring me that Mobclix is not cooperating, and starting legal suits against them got a very low success rate...

     

    Agents have assure that Mobclix is just trying to get sold desesperately to another entrerprise...

     

    If you got some pending money on Mobclix i'll recommend you to forget that amount... and change the service as soon as posible on your apps.

     

    So Mobclix its a Scam!

     

    They are not aware that developers incomes are just for services like Mobclix ... or they really don't mind...

     

    Thanks!
    28 Aug 2013, 05:18 AM Reply Like
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