I don't think they've been buying back any shares despite announcing it, just given volumes, stock trading and the fact that they haven't filed.
But in all honesty, nothing's wrong with it, it's extremely cheap and likely to get taken out by either Fairfax or someone else. I just have too many opportunities with concrete catalysts I decided to invest into, and $BRMI.TO despite having significant value, is an uncertain timeline to realizing it.
Thanks for the writeup! I got a bit confused about how the accounting of its production segment works, maybe you could help me to better understand it?
Let's say BRMI signs a presale contract with Netflix today that Netflix will pay $XXX upon the delivery. Say BRMI finishes the production and delivers at the end of year N from today. Here is my understanding of how the accounting works for this contract: no revenue from this contract is recognized during this N years and all amount of XXX is recognized as revenue at the end of year N. In the mean time, all the costs incurred from the production are added to the Investment on Production entry on its balance sheet and is amortized during this N years. So at the end (ignoring other business) BRMI will have operating loss for N-1 years and then some profit at the end of year N.
They don't have the cleanest Adj. EBITDA but I don't find it's awful. Media companies in Canada have very strange accounting requirements with the whole "investment in content" line that gets amortized.
I'd probably take out the SBC off Adj. EBITDA if we really want to do things in a clean way.
Part of the finance expenses you could withdraw by saying it's the cost of doing business with the interim production financing but then you'd need to do that with every stock that has debt and working cap requirements so it's not very fair to do so.
I don't know that there's a clear answer because I don't find their adjustments shady, they're similar to what everybody else does and accounting rules, but Adj. EBITDA is fundamentally difficult because the D&A part is based on assumptions we can't make ourselves on the duration of the IP.
It's a long winded way to say I don't think they're shady, but I do agree that it's difficult to reconcile true FCF power or earnings power.
Cant we say that adjusted ebitda is for the most part a delusion ?
I called it shady because it doesnt really reflect the most simple thing which is how much money is left after cost of goods and g and a , which as you know is the traditional ebitda. To me this is a much better way to understand if there operating business is profitbale, which in fact, is not, its more or less breakeven.
Instead of doing M&A , they should massively try to bring about efficiency in there production, to be really unadjusted profitable, using the money of the TPG sale.
And btw I thank you very much for this post as it holds a lot of value, I noticed one thing, I know it is hard to value, but I am sure there 9700 hours of IP is also worth something....
In my opinion they should sell there remainco asap to someone who can make this more efficient and profitable and distribute everything
I mean you can call it a delusion but it's the best proxy we have to value it. You can try and look at FCF but it's difficult because if they stop investing that figure will go way up and timing plays a lot.
Totally agree that the best outcome is a sale.
At the end of the day this is an asset. If you're very pessimistic on their ability to generate positive cashflow on their content investments, the service profits and the existing IP library has decent value.
I posted the update on Twitter but I figured i'll do it here.
I got out of $BRMI.TO in the mid $0.90.
I don't think they've been buying back any shares despite announcing it, just given volumes, stock trading and the fact that they haven't filed.
But in all honesty, nothing's wrong with it, it's extremely cheap and likely to get taken out by either Fairfax or someone else. I just have too many opportunities with concrete catalysts I decided to invest into, and $BRMI.TO despite having significant value, is an uncertain timeline to realizing it.
Thanks for the writeup! I got a bit confused about how the accounting of its production segment works, maybe you could help me to better understand it?
Let's say BRMI signs a presale contract with Netflix today that Netflix will pay $XXX upon the delivery. Say BRMI finishes the production and delivers at the end of year N from today. Here is my understanding of how the accounting works for this contract: no revenue from this contract is recognized during this N years and all amount of XXX is recognized as revenue at the end of year N. In the mean time, all the costs incurred from the production are added to the Investment on Production entry on its balance sheet and is amortized during this N years. So at the end (ignoring other business) BRMI will have operating loss for N-1 years and then some profit at the end of year N.
Is my understanding correct? Thanks!
You've done a really nice job articulating this case. Thanks for posting this.
Great write-up!
How do you get the $36M cash as "available for use" from Q1?
How do you breakdown the previous year's EBITDA to know that they used to generate $15-23M EBITDA excluding the Representation segment?
How do you explain that there „positive adjusted EBITDA“ mostly comes from shaddy adjustments ?
They don't have the cleanest Adj. EBITDA but I don't find it's awful. Media companies in Canada have very strange accounting requirements with the whole "investment in content" line that gets amortized.
I'd probably take out the SBC off Adj. EBITDA if we really want to do things in a clean way.
Part of the finance expenses you could withdraw by saying it's the cost of doing business with the interim production financing but then you'd need to do that with every stock that has debt and working cap requirements so it's not very fair to do so.
I don't know that there's a clear answer because I don't find their adjustments shady, they're similar to what everybody else does and accounting rules, but Adj. EBITDA is fundamentally difficult because the D&A part is based on assumptions we can't make ourselves on the duration of the IP.
It's a long winded way to say I don't think they're shady, but I do agree that it's difficult to reconcile true FCF power or earnings power.
Cant we say that adjusted ebitda is for the most part a delusion ?
I called it shady because it doesnt really reflect the most simple thing which is how much money is left after cost of goods and g and a , which as you know is the traditional ebitda. To me this is a much better way to understand if there operating business is profitbale, which in fact, is not, its more or less breakeven.
Instead of doing M&A , they should massively try to bring about efficiency in there production, to be really unadjusted profitable, using the money of the TPG sale.
And btw I thank you very much for this post as it holds a lot of value, I noticed one thing, I know it is hard to value, but I am sure there 9700 hours of IP is also worth something....
In my opinion they should sell there remainco asap to someone who can make this more efficient and profitable and distribute everything
I mean you can call it a delusion but it's the best proxy we have to value it. You can try and look at FCF but it's difficult because if they stop investing that figure will go way up and timing plays a lot.
Totally agree that the best outcome is a sale.
At the end of the day this is an asset. If you're very pessimistic on their ability to generate positive cashflow on their content investments, the service profits and the existing IP library has decent value.