11-07-2013, 12:41 AM
'dietberd' pid='31020' datel Wrote:I just want to add one point on the DSO debate: high DSO are not at all problematic if the Company has a strong track record of minimal bad debt expense. That to me is really the key point here - NQ has had several billing cycles with its partners and the bad debt resulting from those was minimal, so therefore I do not see an issue with the DSO because an earnings restatement would only be required if ultimately your customers do not pay you, but there is multi-year evidence that this is not the case. So even the concern on restatement is unwarranted, in my view.
I think its still possible, although remote and likely small. Doubtful accounts rose by 973k last quarter (4x the historical avg) and the elongagted DSO's from 1q and 2q still need to work through the payment channels. ~150 day avg of DSO's means theres AR that could theoreticaly still be on the books in 3q, waiting to never be collected.
Again, I dont think its really that much, which was the point of this analysis. I just wanted to allay that fear that was being brought up by the short thesis. Theres more analysis that can be run, eg cash conversion cycle, but I think thats overkill.