Brightcom Group Limited (532368) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Kritika, moderator for the conference call. Welcome to Brightcom Group Limited Investor's Conference Call. The duration of the call will be for 1 hour. We have with us today Mr. Suresh Reddy and Mr. Y. Srinivasa Rao. [Operator Instructions] Please note, this conference is recorded. Before we go ahead with the conference. Brightcom Group would like to mention that during the conference call, certain statements in this call, reflecting Brightcom's future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause results to differ materially from those in such forward-looking statements. The company does not undertake to update any forward-looking statements that may be made from time to time or on behalf of the company. Now I hand over the call -- I forward this call to Mr. YSR who will update us on the financial aspect of the call. Thank you, and over to you, sir.

Thank you, ma'am. Thank you. Good afternoon, ladies and gentlemen. It is a pleasure to speak to you all. In Q2 of financial year '21-'22, I greatly give the financial data of the company. On a consolidated basis, revenue for quarter 2 of financial year '21-'22 was INR 1,104 crores, reaching a growth of 73% on year-on-year and 69% on quarter-on-quarter. The EBITDA for quarter 2 of financial year 2021 was INR 60 crores, reaching a growth of 71% on quarter-on-quarter and 76% on year-on-year. As for Q2 of financial year '21-'22 was INR 212 crores, reaching a growth of 106% on year-on-year and 101% on quarter-on-quarter. Revenue from Digital segment -- Digital Marketing segment for Q2 of financial year '21-'22 was INR 1,014 crores, reaching a growth of 79% on a quarter-on-quarter and 82% on year-on-year. Profit before tax from Digital Marketing segment for financial year '21-'22 was INR 290 crores, reaching a growth of 103% on quarter-quarter and 105% on year-on-year. Now revenue from Software Development segment for Q2 was INR 800 crores. This is a great picture of the number. We have received some percent through banks, out of that, 1 is regarding receivables. When we come to receivables, on consolidated basis, our total receivables as of 30th September, '21 was INR 1,411 crores. There is a slight increase in receivables. The reason is due to increase in volume of business, the revenue has gone up by more than 70% compared to the previous year. So proportionately, the AR is also increased. If you see the bottom receivables, out of the above INR 530 crores pertaining to the September sale since about September 3 and these verticals is pertaining to [indiscernible] INR 207 crores is pertaining to [indiscernible] is pertaining to the retail base, which is going to be realized in the next quarter. This is briefly about accounts. I hand over to Mr. Suresh Kumar Reddy, Chairman.

Thank you, sir. First of all, welcome to this quarterly call. It's a pleasure to invite you all today. I think we have over 300 people, probably one of the highest attended as far as I can understand. Hello? So now -- are you able to hear me? There is some -- one moment. Let me just check take that. One moment.

Ladies and gentlemen, please stay connected while we connect to the speaker. [Technical Difficulty] Welcome back, sir. Please go ahead.

Yes. Thank you. My apologies. There's a technical difficulty more on my side than the system. Some issue with my phone, I guess, today. Getting a lot of calls from Amazon delivery people. So anyway, coming back to the call, I'd like to invite everyone on to the call today. Appreciate all the support from investors for years. We've been doing this call every quarter. And it is a pleasure to announce that we've had one of the best quarters, strongest quarters ever in the history of the company last quarter. So we are very excited about where the company is growing, where the industry is and I'll talk more about different aspects of why we are seeing this kind of growth. For example, consolidated revenues for the quarter compared to last year, we did about 73%, and PAT is almost doubled -- more than doubled compared to last year. Another big parameter that we would like to watch is ROE. Return on equity on an annualized basis, we have reached 16.45% approximately. And we are tunnel focused, extremely important ratio, this would be going forward. We will completely focus on this to make sure that this is an indicator of improvement of our efficiencies. So this is something that we have taken it upon ourselves going forward to watch this carefully, and I will talk about how and what things will happen as we go. And then other big point that we need to bring forth is our tax rate, our consolidated tax rate because of our global presence across the world is approximately -- is about 27%. And compared to the leaders, I won't name names at this point, we're are definitely rightly positioned, and we should look at better improving of these -- the revenues in the right places to actually get this better as well. But that said, that's the approximate range in which the numbers are where they catch up today. Now coming to what happened, what are the different reasons of this growth in this particular quarter and going forward. Most important thing post the pandemic, if you look at 2020, what happened is more and more people have started to spend time with their digital devices, spending time on digital media, watching entertainment, doing things on digital and online. So this has actually changed the way the world is working in terms of your time spent during your free time. So we saw a huge -- while there was an initial hiccup in early 2020, but then it took off in a large way. And it has been extremely -- it has kind of taken over the entire industry in a very large way. And so the traffics went up. The traffic across the different network went up significantly, which is why we have seen -- we used to do about 30 billion impressions, 30 billion to 40 billion impressions a month. Now we're actually even getting close to 70 billion impressions in a good month. An ad impression is basically an opportunity to run an ad. So that gives so many places where we can find a slot for products and services to be sold. So it's a big opportunity for the space, so that has been one of the big driver. And post couple of waves of the pandemic, things have now started to improve, people have accumulated more money because they have not gone out, I guess. There's more sales that are happening. So that has also helped the entire industry in a large way. Another big driver has been filtering technology. If you -- I'll just touch on it, this is an important aspect of digital traffic and how it is monetized. Like any other industry, there has always been some spurious traffic, artificially created traffic called the bot traffic and the players in the space all teamed up to fight this. They came up with some of the best tech tools to filter out spurious traffic and actually come to the real people, real visitors and remove all the robotic-based -- bot-based package that is outside. So that has been cleaned up and that technology has reached a steady state. So now the CPMs are better off -- not better off because the ads are working a lot better because they are going to help people. So that has also helped a lot. So all these different market-based things have helped, plus from the company's side, we have been quite aggressive in actually going out with a lot of relationship building in terms of ad agency. We reached the number of 200 ad agencies, and in fact, we crossed it last quarter or so. And now we are continuously improving more on the demand side. In fact, one of the questions that came up where how are you doing the demand side, which is where we find the advertisers for our publishers. So there has been a very important contributor for the business to move to a different level of a steady state. Then other things that are -- like any other quarter, we've always been upgrading our tools. This specific time frame with the Compass and Brightcom tool improvements have brought in significant operating efficiencies. So it's almost like a lot of things came together, which really helped. And then most importantly, our epicenter of traffic management which was the Israeli entity, Brightcom Media as they come out themselves as a brand, but the legal entity name is OMS. It's a 100%-owned entity of Brightcom, the parent and it's currently audited by OMS, almost more than 40% of the revenue is coming through that. And it's -- we have efficiency and the way things have been put together that will help the entire company do much better. So this is broadly the driver side of the business. Then coming to the outlook itself, like I said, the ad tech itself, we are seeing much more stronger outlook coming out from various analysts across the world, but it remains to be strong for the next so many periods coming forward. And we will continue to focus on 2 things: technology and people. Those are the 2 things that we will focus on and the things we'll continue to build on. So on the technology side, we are always working on the bigger, better technologies, including some of the tools that we are coming out using artificial intelligence, AI, ML-based technologies that could take the entire ad tech solutions to another -- completely another orbit, which is we are very gung-ho on some of the products that are coming up. And please watch this space for some really cool stuff coming up going forward. And people-wise, we have been actively looking for senior leadership to get the company ready for the next level. So in this endeavor, we've already brought in some 2 strong leaders. Our Board Director, Peshwa Acharya, he has consented to come on Board now. He is heading Management Strategy, and we're working very closely winning a lot of new ideas into the business and bringing a lot of his experience into the play. Then also we announced Satish to help us on some of the new initiatives from the inorganic and the new area, which is audio advertising for Satish Cheeti, who was the CEO of Ramky Reclamation had come on Board as well. So very, very happy to bring these 2 leaders. And we will start looking globally also to start bringing more leaders to take on -- to increase the management bandwidth. We do have a very strong bandwidth, but we need to prepare for the next level of the business. And the technology-wise, like I just said, we will continue to start looking at what are the critical pain points in the ad tech industry, how do we address them. We have the best brains working on that. So we were quite excited about some of the ideas that we are going after. Now coming to the numbers. So we have started to put a lot of emphasis from 2 things, primarily 2 things. One is free cash flow, two is ROE, like I mentioned. Free cash flow is a clear indicator of a strong business. While we've not been great with that in the past due to lot of reasons, which we have explained in the past, but now is the time, and which I've always said, once we cross the INR 500 million annualized revenue spot that's when the free cash flow start to really pile up. And so we are very excited and we will watch this and we will report this. And we'll give you a sense on how it is going. In fact, I did -- we did have it in the MD&A part of our results publication this time. We are expecting a minimum of INR 250 crores. It is not -- that is the amount that the minimum of INR 250 cores in March 2022, and then an additional INR 250 crores, again, minimum of additional INR 250 crores in terms of collection and flow of cash the quarter after. So like I said, we are completely focused on bringing significant shareholder value by doing these 2 things: free cash flow generation and increasing ROE. ROE is again an indicator of how efficiently your system is working. It is basically a direct reflection of how well the management team is doing in terms of using the cash -- best use of -- capital efficiency of the company. That said, we will also be very, very -- there are a lot of areas of improvement we do realize that the company needs to focus on. We are working on improving -- we are looking -- taking a lens and looking at how the accounting policies are there. We are looking at how we can make things easier and more transparent, improve government so that the stakeholders have a better sense of where the company is and where it is going. So this is another big area that the corporate team is looking at for a while now. So these are some of the main points that I wanted to bring forth today. It's nothing different than what we've already talked about. But that said, these are important things for the company. There are a few questions that came. I'll try and see if we can address them and then we go to further questions into the receiving from the people who have dialed in. So that -- so let me see the question left here, please hold on. Yes, there has been a question about the guidance numbers we gave for the coming quarters. They're asking if there are any changes. As of now, we have not -- we don't foresee any changes. It looks very, very -- the outlook looks very strong and we will continue to keep the guidance numbers as they are. I think there was one question regarding, can you give guidance for quarter 1 of next financial year. I don't think we would want to do that yet. We will probably wait after the December quarter, then look at how things look in the next calendar year. This December, this quarter that's coming up, as it has always been, is the largest quarter in the cyclical nature of our business. So the team has been tunnel-focused on trying to get this done. So we'll have a much better sense on how -- which orbit we have landed in post the entire change in the mindset. There's a question regarding Google-MCM partnership has been fantastic for us. The question is regarding, has the new traffic factored in the MCM partnerships growth. No. I think that will start kicking in, in the coming quarters. We start seeing more business, more traffic flow into our system due to this partnership. Then coming to -- next one is a question regarding ad hoc figure. See, ad hoc figures, again, this is a third party that publishes on how many publishers are using our system, how many are on our system, how much strategy is flowing through. There has been a huge surge continuously for the last 1.5 years, and I think some of very active and smart shareholders have been monitoring this and putting some figures. It's hard to tie business as using ad hoc numbers, to be honest, because this is just -- it could be somebody with a very small traffic number or it could be some very large ones. The more important thing to watch is number of ad impressions that we have or ad serving opportunities that we have, which will help the business. So I would be more happy on looking at that as a parameter as opposed to ad hoc figure, but we just see the general health condition. Then coming to a couple of more questions. There is question regarding B-local, our product, this is related to newspapers in the U.S. It's been doing extremely well again. I did not mention it this time because there are so many things and we cannot come to it. So the question is, are you going to bring that into other countries, maybe in Europe or South America or an India for that matter? The team is working a lot of ideas. We watched this space. As any development evolves, you will be the first to know. Coming to the next question regarding what are the players, who are the players you're working with right now in terms of audio ads? So there's a lot of larger players that have evolved. For example, CAT is one out of the U.S. holds a lot of radio stations. They've been doing extremely well with the control of audio, digital audio and terrestrial audio and doing a very smart job of how they're handling it. We work closely with this team. Then there's [indiscernible] Media, which is again another evolving -- fast-evolving audio player. Of course, TradeX is another evolving player between the audio ad. Audio ad, overall, as the new kid on the block, lot of things that are very interesting there. I'd just like to share couple of them, something about audience measurement is an interesting angle there. So how do you actually ensure how many people have listened to a radio program that is running in a public place, which is digital. If it is a single individual who's listening to it, then you count as one, but if it's in a public space, how do you measure it? So for which that makes it an investing way to how do you get a sense of the reach of a certain ad. So that's an area that lot of people are working on, and we are working as well, and we hope to have some interesting developments in that space. Next question is regarding Indian acquisition that we had announced. The DD is complete, both the legal, financial and business DD is complete. We are doing extremely well. In fact, during the DD period, like I mentioned in the last call, their numbers have gone up. So we are working with them on getting all the papers ready, the legal papers ready, we're getting the SPA, all that cool stuff happening. These things sometimes do take time because of some nuances in terms of what goes into the agreement and which we understand and we should have an announcement for you as soon as we have that for signing. It will be a 2-stage process. We will sign first and then you will close after -- maybe a couple of months after that in terms of the final flows to ensure smooth transition. So that is work in progress. There is also a question regarding the attrition rate of IT industry, what -- how it is impacting us. Yes, the whole industry is impacted, but we position ourselves less as an IT company more as a digital marketing company and an Internet-based company. We have great platforms, and we have global workforce. And so it is okay, we are able to manage that very well, and we will start looking at hiring more going forward. We may bring in some fresh -- a lot of fresh minds out of college as well, this is something that has been discussed with operations in India. Next question is regarding NFT and other digital assets, how are we viewing that? It's a brilliant area, how it's evolving. Yes, like we always talked about even 5 years, 10 years ago about how cryptocurrency some things were early stage evolving. This is, again, something to watch closely. Are we going to get into it immediately? No. We're going to watch it very closely? Yes. Then there is a comparison with reference to ask me that they use cost per acquisition model and why are we using that or not? Let me give you a little sense on all of us use all models for revenue generation. In terms of how the pricing is done, there are 3 basic models, there is cost per impression which is CPM model; cost per click and cost per an acquisition or a need or however you want to call that. And if you want to compare an equivalent in terms of an automotive car or something, CPM is basically like Mercedes-Benz, okay, and CPC is like Toyota and CPA is like Maruti. And we drive all 3 based on the market conditions and what we can get our hands on. We are not close to any, but from a digital marketing agency or a network perspective, if you are able to get more CPM that is -- that shows that we are in the top layer of where the business is conducted. So that's the best way I can articulate that to you. And then there is a few more questions and I should be done. Pardon me, this has been a long list of questions, okay? There is a question regarding do we need to strengthen our demand side? Are we a DSP or an SSP? We have actually -- while we have a very strong SSP offering, which is supply side or where we get the publisher, and there is -- see, our core strengths from the beginning has been our strong relationships globally, not just the U.S. or Europe, globally on the demand side while we work very closely with ad agencies and direct advertising. So we try to grow both of them together because we would like to have a full solution as opposed to have something with one inter-nations or the other. That said, we are known in the market as somebody who brings global advertisers or publishers who have traffic coming from across the globe. So that is a very strong position we've had for years, and that continues as well. There are a couple of questions on privacy that iOS versus Android. What is Android, do you think Android will improve their restrictions on privacy? I think it will all -- it's all matter of time, it will all happen. And I don't think that will impact advertising by any way. It can just take different forms. And obviously, these are all permission-based, clean advertising solutions that we're all working with. There is a question regarding when is our AGM and when is our annual report coming out? I think we'll have answers for that fairly soon. We are -- maybe in a week or 2, we'll have those announcements coming out. Headwinds for ad tech has been extremely strong, and we will continue to ride this. And it is not a onetime blip. Let me be very clear. It is a complete change in consumer behavior. And it is a clear upgrade to the next orbit across the world, and we are all trying to keep up with the amount of business that's coming through that. So it is the best thing that a business can ask for and we are extremely happy while we are super busy. All of us have been super busy trying to take this on. Then there is a question regarding the Lycos settlement. Yes, it is -- like I've said for a while now, it has been settled. We just have to sign the paperwork. We have been talking with them. We should have that announcement maximum within 3 months, not beyond. It should be done. And there is a question regarding promoter pledges. I think it's the promoter's call to talk about it here as the manager of the business. So I'll leave it at that, but it has dropped significantly low. People have financial needs. So obviously, these are connected to that. And since the price has gone up, we won't need to pledge as much. So the pledge levels have gone down. Nothing much on that. And the question regarding free cash flow. Does this include the new acquisition? No. These are based on current number -- current business alone. So again, I'd like to close this by saying, if you want to take 2 points home; one is ROE, two is FCF. ROE, return on equity. FCF, free cash flow. We are tunnel-focused on this. We are working hard to make our company better, improve governance, obviously, in the way we are. Thank you, and I'll open up for questions.

[Operator Instructions] First question comes from Raymond [indiscernible], an individual investor.

Happiest congratulations to you and your team for the tremendous performance. I have a few questions. The first is that, it's more of a request. Can we have a higher level of granularity in terms of segmental reporting now that our turnover is crossing INR 1,000 crores? It would be nice to have some kind of a segmental reporting on the various aspects that we spoke about, for instance, from the supply side, from the ad exchange side, from the Google partnership. I'll leave it to you, but at least at one level below this.

Yes, yes, point taken, Ray. We will look at it. It may take us another quarter because we have to set systems across the Board. But point taken, good point. And we will -- in fact, with audio and other acquisitions coming in, it becomes inevitable that we have to do it. So we will surely start looking at doing that.

Sure. And recently, Google -- there was a news in the media that Google has decided to pay some of the publishers at least in some deals. Do you think this is a trend which we need to be worried about? Or it's a healthy trend? Or how is it going to impact us?

It is, like every other industry right now, consolidation is part of it. Just to give you my standard of auto industry. They say there was a point where there were 1,000 auto companies in Detroit area, maybe at least a few hundred if my numbers are right. And eventually, they all consolidated into 3 big entities. Similarly, it's going to happen with respect to publishers. You will have -- we used to have a lot of long-tail publishers. And now over the years, even for the user, people have started to pick and go for certain things to certain publishers. So that consolidation is inevitable. I think Google's move is completely justified, you can expect that thing. I won't say it is unhealthy or healthy. It is a natural progression of the -- how things are going forward.

Okay. And tremendous improvement on the cash flow front. It appears that we have come to the point of a J-curve actually. I don't know if you want to speak of that. But I have one question here. The question is, we need money for organic growth, and we also need money for inorganic growth wide acquisitions. So how do you plan to juggle these 2 going forward?

It's -- again, this is a very good question, something that I think most of management has to think through. Where our business can be -- business area can be built internally, organically and without loss of time, without loss of opportunity, that is the way to go. Places where time is of essence, where you have to take on a certain area, which is important for the overall business to remain a significant payer, then we start looking at inorganic solutions. And all these are areas that you don't have expertise and you would like to buy that, then you look at inorganic. So that's broadly said. Coming to the cash flow part of it, how do we actually? Organic side, we do have -- there is ahead, whether they call it intangible assets, product development, whatever you call it, every tech company has to spend money on working towards setting aside money for building products to stay ahead of the curve, beat the curve and continue to grow. So it's very important, which is what we are continuing to do. In spite of difficult periods in the past, we never lost -- took our eye off improving technologies and staying ahead of the saving, which is why today we are reaping the benefits while we were stuck during that period, the same mindset, the same way of doing stuff in demand. And then coming to the inorganic side, how are we going to fund it? So our first step is to -- we do not want to dilute too much. Yes, we had to do a little bit of that, one for value determination, making a point that this is a valuation that is in a sector come. In fact, we do not want to dilute much. And we would try to use as much internal cash as possible. We may take some sort of a short-term bridge. This will come in and will be cleared by cash flow going forward. This acquisition is large and important enough to be done. And the next stage, we look at dilution at the subsidiary level. We have -- all our subsidiaries today are 100% owned by the Indian parent. And like I've said in the past, we want to put these under one large subsidiary, and we might do some dilution at that level. maybe not immediately. We have been getting a lot of inbound calls, especially listing in different markets and may be looking at like SPAC, various different vehicles that are coming at us. And I think now more than ever because we have seen lot more interest that is evolved due to our company, it's all good signs, but we are not going to do anything in a hurry because it's important to ensure, like I said, coming to return on equity and those efficiency parameters and keeping the EPS at the level it should be, we are going to be really supercautious on any dilution attempt. So broadly, that is the strategy. And I -- we have a decent sense on when the money is coming and what steps should be taken, at what time. We will -- as they culminate into a concrete step, we will immediately inform the market.

Suresh, one final question which is, it was very heartening to know that revenues from the MCM side haven't really started trickling and we are already seeing a very good effect on the top line than the bottom line. So it's very hard. One humble request from my side is we being a 2-decade old company, it was also very heartening to hear from you on the demand side of the business that the number of ad agencies are going up. At some stage, I request you to come out, but I'm sure you must be working on the background on a wonderful demand solution. I'm sure, at some stage, we will be there and that is a request, and I can leave it at that.

Okay. Thank you, Ray. Point taken. Thank you.

Next question comes from [Indu Shekar,] an individual investor.

I am Indu Shekar. And I had to say congratulations for this tremendous period of the September quarter. One question I had is from an investor perspective, I know and I understand the company's financial standing is very important. But equally, the shareholding pattern has to be same. I felt there is a decline in the promoter shareholding by around 15% in the last quarter?

Perfect. Great question. This is a question that I was meaning to address. Let me be very clear, not 1 share has been sold. So there is nothing to do with promoters trying to sell or anything. Let's take a simple example, let's say, I have 100 shares for which promoters hold, say, 40 shares. Then I add another 100 shares. The promoter still hold 40 shares. On 200, they are 20, now they're gone from 40% to 20%. Their holding has not changed. It's just the percentage of the total. There has been confusion on this. So I thought it was important to clarify that. There is not any reduction in promoter holding. It's just that you add it, the other additional share is looking as a smaller percent.

Okay. Okay. One more question. Now that Brightcom Group been included in the NPSA Group for small cap businesses. What is the prospect for the company to get [indiscernible]?

We are working on that. But again, it has to -- the way to look at it is you -- we do have -- we are meeting with analysts of this FIIs. We do have FIIs who are coming in the next round, and there will be more FII going forward who will come forward. And we have been talking to some analysts with some very large bankers and who are working with these FIIs. So this is all work in progress. It will happen. I'm not -- I don't want to get too concerned about it. I think we need to stay focused. My approach has been we need to stay focused on the business, get things together, all the right people will come. There's nothing to be concerned about.

Yes. One last question. So checking the financial things of this company -- yes.

I couldn't hear you. Can you repeat?

There is a low dividend payout over the last few years.

Correct

Despite the company showing improvement in business and profit.

Correct. Correct.

What is the reason for this? Why dividends are not being announced?

There are small dividends. Like I said, our free cash flow was spiked and therefore, I've been hammering on in my entire call today.

Yes, yes, I understood that.

So that change is going to change a lot of things. And you do have to keep in mind, we are not a finance company that has stagnated all the additional cash, we don't have efficient way to improve. As a shareholder, you have to balance it. So you have to see from this perspective. Important is, yes, there should be dividend. Dividend versus improved value of the share price, what would you prefer? That's the question back to you. And that is a happy neutral as the management, we have to manage. So the question sometimes is if you're not giving dividend, do you have cash flow. So when there is cash flow and if you want to use the cash flow efficiently to improve the size of the business resulting in a bigger value of the share, I believe that is better for the shareholder. That said, there should be always some amount of dividends. So that trade-off is important in money. So again, in the past, we are very focused on getting rid of all the debt. We become a debt-free company March 1, 0 debt in the company, right now. Now we feel very strong. The timing was incredibly good for us because all markets came together, all parameters came together at the right time. So very glad about that. Had we continued to pay a dividend and continued to keep the debt, it would not have been smart for us. So I think that would be different going forward. That is just a thing of the past. Hello? Hello? Okay. Let's move to the next question.

Sure. Next question comes from Devin Babu from Cisco.

Well, first and foremost, thank you for giving a brief overview of the financial prospects. And I would also like to congratulate Brightcom Group management and all the investors while we have been performing exceptionally well for the past 1 year or plus. And I did have one important question here, Mr. Reddy. As you mentioned in your update on Brightcom acquisition, the work is ongoing, and we are currently in the process of signing the legal agreements, right?

Yes. Yes.

So the last time I remember, during the last conference, you did mention that we are almost done 65%. So can we consider this time that we are almost close to 95% because this will certainly make a huge difference to all the investors?

Yes, I see where you're coming. I understand, I take your point, no problem. It's all right. That's no problem. Yes, I did say 65%. I tried to be, what you call, as realistic as possible with a positive mindset. So things moved very well in the early stages. So we were actually 65% of the DD. DD is done, sir. DD is completed. That is 65% of the daily delivery. 100% of DD is done. Now we have entered a different space where we are negotiating what is called a share purchase agreement, SPA, that's a legal agreement for transfer of the shareholding of the acquired company. That is the acquisition document for -- the legal acquisition document. So once the lawyer from both sides come on to it, there is a time they take normally where they negotiate all the details, whether you should leave so much money in the bank, how many employees, how do you hold your employees in the future. There are a lot of nuances as a company that we have to take into account and not do it in a hurry. So that is the reason the process, it takes time, and we are okay with it. So that's the next stage. That's the point.

Excellent, sir. Excellent. I think that was the only question that I had. And again, I wish all the best to every one of us. And looking forward for more success to Brightcom Group and all the investors.

Next question comes from Ashok Agarwal from Technip.

There are some work in progress in acquisition of a digital audio company in U.S.A. So what is the sort of -- at what progress level you are there and then it could be sort of concluded maybe in 1 year like that? We don't know how long the process. So is there any litigation about that?

Yes. I'll give you -- I'll talk about that. So the digital audio, we announced that we want to get into it aggressively. We have started to do work there. In fact, doing some business there. It's a higher margin business compared to the rest of the business. So it's exciting for all of us. There are some -- like I said, time is very critical of essence. Hence, we decided to do an inorganic growth in this space. So we have gone through various strategies and what would be the right fit to start and what is it that we have to do going forward to make this a viable and strong division of backup. So this is how we are approaching it. Now coming to the acquisition itself is one of the points that need -- that is needed to make this a reality. Other point is you might have seen we announced the leader who is coming on Board to give more attention. So that management is very serious about making this happen. We are paying a clear leader to come on Board to handle that. And there are a bunch of things that we are looking at. We have a few potential companies, which are, again, we don't want to go with just one, we have to have multiple alternatives. And one of them, we will decide and as soon as we decide, we will let the market know. And then again at the process start, we have to delineate their claims of -- revenue claims of business, claims of visitation and all that good stuff. And then there would be a legal agreement and then the closure of that acquisition. So this is the process. Time line-wise, some of these are predictable. Some of these are not. How long it takes to find the right combination, we've been talking about it now for a good 4, 5 months, 6 months now. So again, part of it was -- in fact, I was meeting with my Chief Strategy Officer, Brad Cohen and Mr. Cheeti, we had a very long conversation on where we stand, what we need to do now, what are the next steps. And we had, again, this week, I had 3 calls trying to understand the status of where we stand with various potential targets that we are working on in this space. One of them will come up and we'll immediately let the markets know. So as soon as we sign a letter of intent to go forward with one of them, that will be important to market. So that time frame is very hard to realize. We do not want to do anything in a hurry. We want to take our time, make sure that it has done that. So we have announced that we are getting into the space. We are taking all the right steps. So that I cannot comment on. Once the LOA comes, it will take 3 months to 4 months for the due diligence, another month to 2 months for the share purchase agreement or the final agreement to close which is broadly the time line. The first part, I don't want to comment on because unless we have something concrete, I would -- it would not be proper for me to give you a number. I hope that gives a little more clarity why I might not have an exact answer for all your questions.

No, it has given a very good sense of what is the direction to work it.

Next question comes from Krishnan from Formula1 Management Consultants.

Thank you, Mr. Reddy, for wonderful Q2 results and also detailed information about a stage of [Technical Difficulty] under Daum placed settlement. Just to understand a few things, what would it mean for the company in the Daum space?

Can you repeat the question? What would it be?

What would it mean for the company when the Daum settlement happens in terms of the financials in terms of the prospects going ahead?

What would it mean when the Daum settlement happens? Okay. Like we announced when the Daum settlement -- when we had to separate Lycos from it, it was an impact of about 10% at that time. See, really what is important is once we get Lycos back, there is a lot of things that we can do. One is, of course, the brand itself, Lycos has a recognition, it is hard to put a value on it, but it would help -- we have actually derived some benefit out of that anyway. But that said, it is something that will close and wrong outstanding unnecessary legal dispute that needs to be closed and move out. So it is less of a burden or a headache that should come back in future. So we want to close it for that one reason. Secondly, yes, it is the publisher, there are ways that we can rebrand things. We launched Lycos Life, for example. There are ways we can use the brand recognition to bring out other products around that. I don't think we'll go deeper into search because it's a very -- it's a space that is occupied by the largest people -- largest companies in the world such as Google and others. So I don't think we'll try to go too much into that. It has a presence. It has an existence. That is fine. But we will try to leverage the Lycos brand we cost. As an example, like wherever you go across the world and especially when you're meeting people who are late -- early 40s to 50s, 60s, they have all heard of Lycos one time or another or they had e-mails with them, they all know. So it's a great door opener to do some new investment stuff. And plus also from a B2C consumer recognition perspective, it will to be a nice comeback. So we have some ideas there. We'll see -- once this is done, we'll have some a brainstorm on how to take that and leverage it. From the perspective of legal settlement, it is important to close what is outstanding. That is the first act why we feel it's important to get that settled.

The second question is the Q2 results, the auditor has stated out that almost a significant portion of the financials are coming out from overseas subsidiaries, and those are not audited and they have relied on the management representation. Now the question is why would it not be a better thing that you get those audited so that there is -- for a company that is now beginning to attract a significant investor interest and also, now that it has got into MSCI list, would it not be an ideal thing to get those audited and present the picture which will be more comfortable to the investors?

Okay. Good question. The audit happens only once a year. Okay. So I think there is some misunderstanding. Audit happens once a year across the world by auditors from that particular subsidiary or that nation where the subsidiary belong. The review is done in India. So this review is done by the Indian auditor. So this a limited review report. Obviously, they can't talk for other people. They are reviewing from Indian perspective. This review they're talking about is limited review for quarter 2, which we have reviewed mainly what is in the stand-alone and they have got -- rest has come from the management is what we are saying. So just for clarification on this. The audit happens in every subsidiary in that local geography annually, which is no different than what has happened and most companies follow the same process.

No, I see. But what I'm saying is can they also not do a limited review so that the auditor can present it back?

Usually, it's definitely reviewed by the -- but the instant review certificate are not been -- from a compliance perspective, we give for the parent, usually. Let me look at it. You have a point. Should we get limited review letter from all the auditors, we have 14 subsidiaries which will delay the whole process a lot. So it gets complicated. Let's see what we can do. We will discuss this point.

Number 3 question, which is very important. The company has been throwing up a very good cash flow over the last 3 years out of the operating profit itself. I believe that the loans have been repaid.

Hello? Hello?

Yes, you are audible, sir.

Mr. Krishnan?

Mr. Krishnan, please respond.

Yes, so I wanted to know what are the means to do a referential issue at this stage, at such a valuation which you...

Okay. Okay. Let me -- I think I understand the question. I'll try to address it the best I can. Looks like you're having a bad connection. I think the question is, in the past, you had such high cash flows, why did you have to do a preference ratio? I have said that in -- along my entire presentation, the cash flows were tight because the cycle -- receivable cycle between receivables and payables has been long and hence the growth has been stagnated. And hence, we decided to bring in additional capital to jump start and take advantage of a growing market, which is what you are seeing now. One of the results of what has been done is what you're seeing now. So hence, I think it's the right thing that we did, plus it also helped unleash the value of the entire business. So I don't think it's a bad decision from where we are seeing. Obviously, everybody has the perspective on how it should be. So with that, let's go to the next caller, please.

No. Can I have one last question?

No, no, no. Go ahead. I thought you are gone. Okay, continue. Sorry.

No, no. Just -- let's say, you see our website doesn't have any conference called script since 2016.

Correct.

Now it would be a better thing to have it posted instantaneously after the con call or maybe a couple of days after the con call. So that goes for those who are missed out for the previous years it is available?

Yes, sir. There are reasons why we could not do it in the past. Once the Daum settlement is done, it will be started and we'll post the past ones also there. Right now, I'm unable to do because of other challenges. And by the way, legally, it is not required for us to do a conference call, but we have been doing conference call quarter-on-quarter. And everybody who's been seriously interested, we have a very long-term investor following for years now who have always been coming on the call trying to understand. That said, we could not publish those because they will use -- some of the details on that call were used in situations which are not comfortable since we had some outstanding legal disputes. Now that, that is settled and closed, still there is time, we don't want to put it up. Once it is done, we will put up the entire -- all of them in one shot. So just expect to see that going forward.

Next question comes from [Milan Malhotra,] an individual investor. There seems to be no response. I am moving on to the next. Next question comes from [Muhammad], an individual investor.

Are they having any technical issues? Why are the calls not coming through? Could you please check?

No, sir. As of now, we don't have any technical issue from our side. We are checking this.

Okay.

Participants, that will be the last question for the day. I would now like to hand over the floor to Mr. Suresh Reddy for closing comments.

Great. Okay. Thank you very much. These were good questions. I hope that we were able to respond to all of them satisfactorily. And if there's anything outstanding, feel free to send us an e-mail. We will try and respond to your e-mail directly, plus we will also see the interesting things which are of larger interest. We'll put that together like a presentation and publish it in the coming weeks. Thanks again. I appreciate coming on the call on a Saturday, and have a great weekend. Thanks a lot.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.