Brightcom Group Ltd

NSE:BCG

Earnings Call Transcript 2022-Q4

[Operator]

Good evening, ladies and gentlemen. I'm Moumita, moderator for the conference call. Welcome to Brightcom Group Limited Investor Conference Call. The duration of the call will be for 1 hour. We have with us today Mr. Suresh Reddy, Chairman and Managing Director; Mr. Peshwa Acharya, President - Group Strategy; and Mr. Satish Cheeti, President and Division Chief, Brightcom Audio.

[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 and such forward-looking statements. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Now I hand over the floor to Mr. Peshwa Acharya who will update us on the financial aspects of the call. Thank you and over to you, sir.

[Peshwa Acharya, executive]

Thank you, Moumita. Thank you very much, and good day and good afternoon to everyone whoever is attending this call and our special gratitude to all of you who are here, taken time from their schedule to attend this call. So thank you once again.

So before I get into the financial highlights and commentary, I thought, let me talk of -- I'm actually standing in for our company's, CFO. And in my long organizational career, you always used a joke, CFO equals Can Figure Out, CFO stands for that. He's someone who can figure out everything. So that is on a lighter note. But I have an easy task here because of the stellar performance I think of our company this year and excellent effort and results of the team -- excellent efforts of the team and the results therefore. So without much ado, I will get into sharing with you the financial highlights of our group for the quarter as well as for the financial year ended 31st March 2022.

Our company has reported a robust strong year with consolidated revenues of INR 5,019 crores and a PAT of INR 912.2 crores for the full year. The fourth quarter revenues were INR 1,240 crores and a PAT of INR 223 crores. This essentially the consolidated revenues rose at 75.8% year on year and the PAT rose at 88.86% year on year. Notably, the EBITDA also rose 69.78% year on year.

Next point is the companies return on equity on an annualized basis has reached 17.23% kind of approximately. And this is one key ratio which I think the whole company and management is focusing on to improve it substantially. We have achieved an operating FCF, free cash flow, of INR 287 crores for the year '22. And we are looking to meet the INR 500 crores FCF mark guidance by the end of June quarter.

I would also like to state Board has decided to pay out a significant amount of INR 60.54 crores as dividend to reward our shareholders. This represents a dividend payout ratio of around 7%, which compares extremely favorably with various global tech companies across the world. For example, NVidia, the payout ratio was something like 4.5% and I think Apple was around 14%. So this compares quite favorably.

Then let me share with you a little bit of the segment wise numbers. Revenue from our digital marketing segment for the year was INR 4,657.13 crores, which was an increase of 86.67% year on year basis. And revenue from the software segment for the year -- this year '21-'22 was INR 362.46 crore, which was also a slight 0.42% increase year on year. Other point which I would want to state is the accounts receivables. So when we come to the receivables, on a consolidated basis, our total receivables actually decreased from 143 days last year to 137 days this year. And if you also look at receivables in a segment wise basis, for the digital marketing segment decreased from 137 days to 133 days.

Out of the total receivables of INR 1,881.38 crores, digital was INR 1,701.60 crores, and the software was INR 179.78 crores. And the receivables in the software was 181 days. And I would also like to bring to your notice, the standalone figures were -- this year our turnover on standalone basis was INR 366.81 crores, a slight increase from last year's INR 365.98 crores. EBITDA was at INR 4.27 crores versus INR 12.51 crores, and PAT at INR 1.72 crores versus INR 8.22 crores. So this is what I would wanted to bring to you all.

And with this, it would be my pleasure to hand over to our Chairman and MD and CEO, Mr. Suresh Reddy, to tell you more about the company. Thank you.

[Muthukuru Reddy, executive]

Thank you, Peshwa. You did a great job standing in for the CFO. Thanks a lot. I think it's fairly clear. Like you mentioned, I want to reemphasize, things that we were watching during the course of this year were return on equity, which is now 17.23%; in operating cash flow we are looking for more cash flows to start coming in, given the business has crossed the INR 500 million revenue mark, which is what I used to -- I always used to point out time again that we should [indiscernible] cash flows will start to improve in the company. And we're just seeing the early-stage benefits of this state.

And so we -- as a Board, we represented to the Board and the Board has agreed to give out INR 60 crores as a dividend, INR 60.54 crores. It's about compared -- on a ratio, that is the payout ratio, which [indiscernible] is supposed to be taken over the PAT of INR 912 crores, approximately a little less than 7%.

Anyway that aside, let me first thank you all for being on the call today. We see that, again, we probably crossed 1,000 people calling in today. The company's number of shareholders have also now almost getting close to 3 lakh shareholders. We have -- what we have done in this 1 year in terms of business, in terms of [ leap ], in terms of a lot of -- what you call, a lot of talk in the company, good, bad, ugly and I'll talk about that as well. So it's all part of the game.

I would like to first point out that when there is uneven growth in the business and its valuation over a period of 12 months, it is expected to see all these things. While I won't say I expected it, but we are taking it head on. That is the way we are looking at it as of today.

So we'll get into other aspects of it. Let me come to the good part. This has been a banner year for us. This kind of a growth we have never seen in the history of the company, and we have been in business for close to 24 years. And a few things contributed. I would like to first bring out the main drivers which contributed for the revenue growth. First, of course, the overall digital spend, which is the obvious one across the globe, thanks to a few catalysts that happened along the way, including the COVID. Just to give you some perspective. Ad agencies -- digital ad agencies saw almost 54% year on year growth. And compare that against what we have done, we are very proud to say we're ahead of the market this year. And we are -- in the next year, again, we are expecting a 68% average growth in 2022 as well.

That said, there are a few new things that have come into play, including the war, including results of somebody like Gap who've had issues, I think, but that again can be argued that there is a market share loss as well to [ Instagram ]. So these are some of the things that on the other side. So we are relooking at the projections and guidance we wanted to come out with. So we will send that out very soon just to make sure that it's more realistic. We don't want to send something which we may not be able to achieve. So we're just looking at that. That aside, we are very, very positive and optimistic about this year as well.

Other things that contributed where improved eCPM. Basically, they continue to help the contribution in terms of budget. Then other things in 2021 is client acquisition rate and the retention rate has been kind of better in the last 4, 5 years. Of course, definitely better than 2020. These are some of the key drivers, which actually helped the business really make a significant impact. And end of last financial year, as I mentioned, we became a debt-free company. So that gave us a lot more freedom to go out and [indiscernible] use the funds to grow the business. So that is -- these were some of the things that contributed.

Coming to the general update. In January, we launched 'Blocal' exchange. It's a news exchange where publishers and advertisers come together to be able to run ads to local news readers across the U.S. market. So we have some of the largest newspapers now in our exchange, including New York Times, including in Boston Globe, [indiscernible] all over the country. And that is -- that continues to grow. It has been a very interesting angle that we experimented and has really taken off very well. So we're really proud of Blocal itself. Now we've made that into an exchange where others who want to come and participate like a stock exchange and buy and sell media through the system.

And then in January we also became a member of this pre-bid initiative. Basically, they're trying to unify open-source solution for publishers and SSPs. I don't want to get too technical, but the point being it's the clean way to bring credibility to media, which is enhancing more spending. So it is all from a larger good of the industry itself, and we feel proud to be part of this initiative. And it's important from a reputation perspective and from a brand perspective as well in the [ operating world of price wars ].

Then in February, we launched a video player. This is an interesting solution. I did mention I think previously also. It's an interesting solution that is gaining good traction to the revenues. Typically, what a publisher does, let's say, there's a website and they want to run a video on, they would get a video player -- third-party video player and run it on the systems. The difference between that and the Brightcom Video Player is this has got an embedded advertising system as part of it. So you can go and run your content and then the ads would be placed within the system for you. And as a publisher, it makes it much easier. You don't have to go looking for somebody else to represent as the usage starts to go up. So that solution is pretty powerful. It's an innovative smart way to boost publisher's revenue.

Then in February, again, another variant of Blocal, we launched called B-Finance is focus around financial news, portfolio [ industry wise ]. So basically, to people like you, equivalent of you working in the U.S. where these are guys who are looking at financial news to invest and to understand companies [ on that ]. So this is generally high-income attentive audience [indiscernible] to system. So that is a good product variance within the product portfolio that we have.

And then in April, I just want to get through this so that you all understand where we're making money, where we are actually getting traction. In April, we launched a new variation, new version of platform, Compass, which is one of our core product and platform that we have, both for audio as well as display advertising. It's an end-to-end solution for our publishers to maximize what they call yield; for the same traffic, if you're able to get a higher revenue, then obviously you're getting better yield. So this does the optimization. And this particular launch includes updates from AI and ML. So it is slightly bigger, better format. And we are beginning to see some change. I will hopefully report in my next call as we have enough numbers to tell you what is the difference it has brought in terms of yield to the publishers.

Also in April, we launched -- we actually announced a partnership with a company called Intent IQ, which is a bid enhancement service, primarily in the ecosystem where it becomes difficult to have a cookie. Typical situations are when your, let's say, IPTV, it's hard to write a cookie in most cases on to an IPTV video stream through Internet Protocol. And also, some of the larger players are now trying to push for low cookie environment going forward. So this is a very, very good partnership for us. And within that ecosystem, by using intense patent-pending technology, we are seeing that traffic is going up by 25%, 30% -- I mean revenues are going up by 25%, 30% because we're able to better target the [ traffic ]. This is another very important partnership, more from the future perspective, and we start seeing the yield as the ecosystem starts to change.

Also in April, we opened a new office in Berlin. I did -- we did have a disclosure to the market on this. So, we basically looked at Berlin with a different view. It's a very important strategic location. Yes, we've [ done ] various offices, but this office is different, mainly because it gives a focus into a new region with a different mindset. Berlin has now become a hotspot where some best technology companies, the best ideas are incubated there, a lot of interesting companies are going to be coming out of there. So we wanted to be part of that ecosystem and understand the new developments that are happening in the world. So this is basically our 25th office, and this office will be led by Daria who is currently VP of Publisher Solutions. This is a general update on the various things that have happened during the course of the last quarter and just wanted to give you an [ update on it ].

In terms of the outlook, like I said, we predict a very strong growth from coming future. We see that social media [indiscernible] continue to play an important role. And also, we have positioned ourselves very strongly in the market this year. We feel that things will slowly start to roll, again, coming from the perspective of crossing the INR 500 million revenue mark was important. And then in terms of challenges, like every other year, it is important to continue with the client acquisitions [indiscernible]. We need to get the right people and then make sure we retain the right clients. This is broadly the outlook. And I want to kind of focus on a few outstanding issues today and talk about future in a later call, I may do another conference call just to talk about future. I just wanted to focus on addressing some of outstanding points today. But I do have a slight change in format today.

After my -- I'll talk about a lot of questions that have been sent primarily to address the concerns a lot of shareholders have. After that I requested Satish to be on the call, Satish Cheeti, who is our President of audio advertising group that he is now working on an acquisition, and I wanted him to give an update to all of us. So that would happen after my presentation and then after the Q&A session, and Satish would give us a final update on [indiscernible].

So that said, I will go through some of the questions that I have, please hold on. Yes, there is a question regarding impact of war on Q4, I think I covered it. We are also trying to understand how it will play out. As of now, we do see the business continues to be steady. Obviously, Q3 is always our best quarter. I just want to reemphasize the seasonality of our business. Q1, Q2, Q3, Q4, Q3 is the tough all the time because that is the year -- that is the quarter which is between October to December is when most of the e-commerce activity buy-sell happens primarily driven by a lot of festivals like Christmas and others globally. And so coming from a global market perspective, that's a very important quarter. Immediately after that, there is always a Q4, which is smaller. And then Q1 is better and Q2, again, is slightly smaller. So it's like a wave for us. And actually, I have shared this with the market before. I will try to put [indiscernible] in our next presentation. So we'll see how this plays out going forward.

There was an interesting question about last time we were very thrilled that we touched the 90 billion impressions a month mark in December. So there's a question when are we going to reach 100 billion. Internally also we've been talking about it. We will see. We are hoping next quarter we will see increased traffic flowing through our network. And when that happens, I will report [indiscernible].

Then there is a question regarding MediaMint. The Mint update is fairly brief. At this point, the deal is [indiscernible] has not been closed yet, and we'll give update -- I'm hoping to give an update on that fairly soon, and we will inform the market on that. There's a question which is an age-old question regarding Daum and when we are going to settle with Daum and close it out. Like I said in the past, we have reached a point where things are all ready for a settlement. And we just have to sign the dotted line and close it out. We will work on it partly because we had multiple battles to fight, we didn't put time into that. So we have put that on the side burner for now, but it will happen in the next 2 quarters for sure [indiscernible].

And there is a question regarding appointment of CFO and Company Secretary, yes, very valid questions. We've had our CFO leave in end of March. Basically he took superannuation and retired. And we had a couple of alternatives that we wanted to bring in. However, things didn't work out these 2 candidates. So we have opened up for a larger group of candidates, and we are making good progress. I will quickly close something and let the market know. And so I know it is very important and it is important from market perspective, but more important from the company's running perspective as well. It could take a lot of load from the senior management that's kind of handling the role through various handholding [ processes ]. We have to absolutely do that in [ time ] and I do realize that. It's a good point some of the questions that have brought it out.

Same is the case with Company Secretary. We've had help from Manohar who had moved on, on a part-time basis, but I think it's important to bring somebody on. And we have Practicing Company Secretary helping on a few things for us from the outside. But I think it's important to get that as well. So we will do that. These are some of the definitely important questions. We'll get that sorted out.

There is a question regarding [indiscernible] product that was brought out by SEBI. We are making progress on this. We have been cooperating with the authorities. And things are moving smoothly. What I can tell is we have to wait for the final report to come out. I know a lot of people want to get a date. Obviously, the authorities have to be satisfied and then take a report out. So I really have no control over when that would come out. So that's the status really. There's not much we can do about it. It's a process, and we have to go through it.

Then regarding audio acquisition, I'll not take the fire away from Satish. I'll let him give the update. I know a lot of people are interested. They're saying is it really there, what is this audio company you're talking about and all those. So I think Satish will have some interesting stuff to tell us there. And hopefully, we'll have something to announce on that in the coming few months.

The global slowdown, yes, that is something like I said in the beginning of the call. Is there going to be a global slowdown? Are the valuations of the large tech companies have gone up and down? That's right. But I think from where we stand, from our size and from what we are seeing, we are seeing a lot more business coming our way. And we are poised to take on the business as well. So from operations and business perspective, things are hunky-dory. I'm very positive and happy about that.

Other questions, let me just look into here. Yes, free cash flow, there are some questions there. Yes, a couple more slides. Yes, there's a question regarding receivables. Yes, the overall revenue has gone up. So, obviously, receivable size would go up. But what you need to compare there is the days. So in that sense, the days have gone down slightly, which is good. I think that's a positive sign that the collection engine has been doing a good job.

And in terms of guidance numbers, yes, so we had the guidance numbers ready to roll, but I just want to bounce it off the entire team one more round, given where all these new news is coming out into the market and just temper it a bit, and then we will publish that along with our presentation as well for the year.

And what else is there? Yes. There was a question regarding, yes, accounting policy of the company, there was supposed to be an update. It's still on our cards. We have not moved forward on that. And since there's new auditor change and things that are coming up, we will bring it up in the next financial year. So I will talk about it when we are ready to make the policy change. It's a significant new way to look at how the revenues are booked and how product expenses are booked. So that's something that they will do it in due course.

That's broadly my presentation. Then I'll open up for any questions right now. We will have -- I request that there is no follow-on question. There will be question, ask all your stuff, and then I would answer it, and then we move to the next caller. Otherwise it becomes difficult to give others a chance. So whatever you have to ask, kindly ask in one shot, and then we'll go to the next call.

With that, I'm opening for questions.

[Operator]

[Operator Instructions] Our first question is from [ Ian Baidia ], Individual Investor.

[Unknown Attendee]

Congrats on the lovely numbers posted, Suresh, by your company. And I wish to thank the entire team for efforts put in. Suresh I've got 2 questions. One is there's a latest news that Google is to purchase licensing deals with Indian publishers or something of that sort. Since we have a partnership already ongoing with Google, can we expect some additional business from this latest development? And are we planning, in the same question, are we planning an Indian Blocal type of setup to tap to this partnership? Okay, that's my first question.

And the second question is, there are many ads that can be -- not many, but there are ads that can be run on the lockscreen. Are we planning to tap into this segment or are we already active here? That's all.

[Muthukuru Reddy, executive]

Sorry, I didn't catch the -- ads that can run on?

[Unknown Attendee]

See on the lockscreen. When your screen is locked, you're sitting with a friend and your screen is locked. Okay. You can go ahead, Suresh. You can answer.

[Muthukuru Reddy, executive]

Okay. Thanks, Ian. Like I said, we're always looking for ways to enhance our footprint. So all these aspects -- and we have not been proactive on the Indian market as much as we've been in U.S., European, and South American markets. I think this is -- these are things that the team which is going to be driving the Indian market for us will start looking at it as we go. And your second point regarding ads running on locked screen, I mean it doesn't matter to you. But what we provide is, what you call, a script that they can put it into any media format. So once it is there, it can run inside, they call it, in-video ad, it can be in the mobile, in an app, in a game, on a regular screen. There are 100 ways in which we can run this particular script.

So all these formats are absolutely important and some areas we are always working with and these are things that are changing on a daily basis, which is why we do have a standard investment into product just to keep up with the changes in the market. It is important to ensure that we are deliverables in all these different formats. Next question please.

[Operator]

Sir, our next question is from [ Mr. Patrick ], Individual Investor.

[Unknown Attendee]

My question is, what are the top 3 strategic initiatives that can help our company to grow to a USD 2 billion organization over the next 3 years? I have only one question.

[Muthukuru Reddy, executive]

It's a fantastic question. It's my favorite. The way you have to look at first and foremost is the 3 parts when you look at the market. One is you look at the immediate demand. Is it going up? Is it coming down? What are the immediate parameters on that. Second is you have to see where is the technology going? Where exactly are the investments happening today by the big PEs, the big VCs, where is it actually moving. And that gives you -- yes, I can dream up and say, this is going to be the next big thing as opposed to see what is the market actually going to support. And we as advertising company, have to figure out a format to be within that system and actually monetize and actually generate more business for us. So that is -- these are things that are very critical. That said, my belief today is we will go to a world where -- from we are to where we -- let's say, if you take 10 years or 15 years ago and say this new way of work would be, nobody would believe that. And for us to even predict where it could have grown would just look like talking like a futurist, we can only speculate.

But from a strategic and what should be your strategy to take on a market that evolve also quickly, A, you have to look at which direction will the technology eventually evolve. I'll give you one example. For example, you look at advertising-based content versus paid content, right. When you see somebody like a Netflix who's got paid content and somebody like go to YouTube and others who are completely advertising-based content that they provide. You have to compare these 2 and say, now should I go the paid way, should I go the advertising way. And these are calls that will define companies. And we as a company always believe that advertising format based content delivery would absolutely thrive or grow, not to say there would be no paid content. People will pay to go to a movie or see a movie on whatever the Netflix or wherever, any OTT [indiscernible]. But you cannot say this will survive, that will go away, and that will survive, this will go away.

So you need to have a happy medium. But if I have to split up between the 2, I would punt more on the advertising-based model. So I think that is critical. So like that, there are a lot of things that you have to watch closely, use all your experience within the company, and your discussions with various large players who are actually formulating this new direction for the world, you need to understand, read about it. So it's all part of that. So from that perspective, I know it's a very long drawn-out answer. From that perspective, I believe that these are few things that will absolutely, absolutely change the world. One is artificial intelligence, which I've been talking about, the machine learning, obviously, part of that, where you have smarter environment taking work away, meaning the menial work away from humans and make it a new opportunity for humans to do the more fun and creative part. So that is -- I think at this point, almost everybody agrees that that is going to happen. So with that in mind, what do we need to do? We are working on that. That is one large initiative that we have.

Second is we'll have smart environment. The entire environment would be -- if we learn -- as you walk into an airport, all those lines, all those crowds, so many things in bus stands in railway stations. Just to get into a train, why all this. If there is a smart environment that identifies who you are and it already take the payments from you, you just were sitting in your seat, whether it's a train -- I'm just giving you one example, train, plane or a bus. That is 100% going to happen. No 2 thoughts. It is just going to take its own [ dirty ] steps to get there, but it is absolutely going to happen. And some countries like UAE are actually very, very quick immigrations. People are walking through -- I've seen that. And some of the European countries are also doing that.

So it is hard to say that only west is doing it. China is also making tremendous progress on some of these things. So IoT, as the word used to be, but I think it's more smart environment. That is another major area, I believe, we'll do very well. And then, of course, the immersive media over the last year has been getting a lot of attention. Companies like Facebook has changed their name towards Meta, which is basically equivalent of metaverse. So these are some of the interesting areas that are picking interest for us. And we are actively working on the teams that work on really futuristic stuff, continue to dabble on those areas to be prepared when that actually happens.

So essentially this is broadly what I would look at. But [indiscernible] we will always keep an eye out and navigate as [indiscernible].

[Operator]

We'll move on with the next question. It comes from [ Dr. Supreet Prabhu ], individual investor.

[Unknown Attendee]

Glad to be part of the Brightcom Group since last 2 years and see the transformation of the company by leaps and bounds. My question is regarding 2 things that I've heard a lot of negativity about the -- I being the a shareholder, I'm definitely interested in the price and its multiplication. But 2 things that are negative -- created a negative publicity, one is the shareholding pattern where it has been shown that the promoters have decreased their shareholding. And in your capacity as a promoter and individual investor, the shareholding has gone down significantly. So we have not received any clarification regarding that.

And second is the Daum thing has been lingering on since last about 6 months -- 2 or 3 con calls. I think we should put it -- we should get it done with so that at least that negativity that overhang is not there anymore on the company. Okay?

[Muthukuru Reddy, executive]

You said Daum? Are you talking about Daum?

[Unknown Attendee]

Yes. Daum and the shareholding pattern of the promoter.

[Muthukuru Reddy, executive]

Okay. Yes, okay. It's a very good question. Thank you for bringing it up. I've been waiting for answering this question. I will answer this question once and for all. That is important. My answer to this is there have been a lot of false and malicious rumors on social media that promoters sold 19 crores share and took thousands of crores of rupees home. This is absolutely, completely contrary to what happened in reality. And I can state very publicly that Promoter One, which is Suresh Reddy, which is me, we had -- I had not even one sale in the last 12 months. And then Mr. Vijay Kancharla had some miniscule amount of shares sold in the last 12 months, 5,000, 10,000 shares is nothing compared to what the numbers people are talking about. So this is completely untrue. This is my answer to the question. And other part, we will address as we go. Kindly bear with me because that is the best I can give at this point.

Okay. So next question that you brought out on Daum, yes, I do agree with you. We just want to close it. We have a clear understanding. We will just get that sorted out because, again, like I said, just to add a little more on what happened in this whole 1-year time, if you really break it down, I think the share price went up from, say, April, May, whenever, when -- after we completely paid our debt off and we became a debt-free company and then slowly value recognition started to happen and slowly we did a few corporate actions to help people who have been with us on the long term and completely with a really good intent. And as the share price started to pick up, we were -- please remember, the share was trading at half multiple at that time. And then we started to get the value.

And if you look at April to March last year, we were -- I think we brought in the last -- the highest return in the market. And this was, for whatever reason, not well digested by a lot of people in the marketplace. And so that probably created all these malicious rumors on social media because there are definitely some guys who have a full-time job of continuously talking damaging stuff about us. And I don't like to talk negative things, hence I didn't harp on that. But that said, this is part of the growth journey. It's growing pains companies will have. So I urge the long-term shareholders to hang on and see better times to some because I believe fundamentals are the ones that will make companies grow. And in terms of our commitment, our promoters, it has never even dropped 1%. We're 150%, 200% committed to this company, and we will make this happen. That's all I want to say.

[Unknown Attendee]

Yes. We have stood by you, and we will stand by you. And I understand that there's a lot of left out feeling among lots of people who are spreading these rumors. Thank you so much for the clarification that you have not sold a single share.

[Operator]

The next question comes from Mr. [ Rahul Patidar from SU Capital ].

[Unknown Attendee]

I have 2 questions. One, I think you partly answered, it's about promoter holding. Sir, you did mention that some of the shares were sold by Mr. Kancharla. I'm wondering why hasn't this been disclosed to the exchanges because even if one single share has been sold by a promoter, it must be disclosed to the exchanges? That's my first question. And continuing with the first question, we expect a bit of more clarity on the shareholding pattern because none of the explanation given by the company has explained anything about the changes in the shareholding pattern? That's first.

And the second question is about the cash flow generation that the company is reporting. In the media release, company has mentioned that [indiscernible] INR 287 crores of cash flow. Now if I try to get that number from the balance sheet, I do see that number in the cash flow from operating activities, which is exactly same as INR 287 crores that was mentioned in the media release. Now if I try to compare that number with the previous year, that is FY '21, the number is INR 459 crores. So I'm trying to understand the difference between the free cash flow that you always talk about when you do not [indiscernible] working capital? Is it different than the one number you are talking about? Or is it just the cash flow from operation that the balance sheet is disclosing because then if that's the same, then last year we should have had INR 459 crores of cash flow?

[Muthukuru Reddy, executive]

Exactly. Good point. I ask the same question. So what we'll do is a very good point. And I have no accounting for this. So I will please make a note of this. We will send a written explanation of exactly how we arrived at that. So neither me, nor Peshwa can get into exactly how it was arrived at. Yes, I know what you're talking about exactly. This is in the cash flow statement where operating numbers are put together and how much cash came, how much cash was spent, what is left behind. If you compare this year's INR 287 crores to last year's INR 485 crores, are you saying INR 485 crores was the last year's free cash. No, that's not what we're saying. So I'll get this exact accounting answer for you. So don't worry on that part.

And your other part, Mr. Patidar, this is all I can tell you right now. I already answered this question to Dr. Prabhu. And yes, you do have a point. Yes, there was a disclosure thing. We are directly dealing with the regulator on that.

[Unknown Attendee]

Alright, sir. I have been with the company for quite long and I expect just the corporate governance to be improved.

[Muthukuru Reddy, executive]

Yes, this will never happen going forward. This was an oversight. This will never happen going forward.

[Unknown Attendee]

Yes. And I just want to thank you, sir. If you remember, I have actually contacted you on LinkedIn and asked for Mr. Peshwa and Mr. Satish to be present on the call. So thanks for taking my suggestion and really happy to see that in practice. And thanks Mr. Peshwa for assuring the shareholders. That would be all.

[Operator]

I would now like to hand over the floor to Mr. Satish Cheeti. Satish sir?

[Satish Cheeti, executive]

Yes. Thank you, Suresh. Again, good evening to all. I'm pleased to update on the status of our digital audio company acquisition and also some background on why we feel that this is such an exciting space for us to be in. As most of you are aware, we had earlier announced the signing of a letter of intent to acquire all the assets of a U.S. digital-based audio firm for a total consideration of USD 102.5 million. The target company, as we mentioned before, is an integrated digital platform that offers several program radio stations, various digital brands, and digital marketing services in several markets in the U.S. And when this acquisition goes through, it will add about USD 45 million to our top line and about USD 15 million to our EBITDA.

Again, like I mentioned, this move will mark a significant step for us -- for Brightcom Group entering into the digital audio advertising segment. Just to define it, digital audio advertising includes all ad revenues that are generated through pre and in-stream audio ads that appear in news, music, various radio services, podcast streaming service, et cetera. It also includes ad-supported free versions of premium subscriptions and services. Just to talk about the space that we are targeting. Just to give you some background on the space. Digital audio is the second most popular activity next only to video. It has about -- in U.S. alone, it has about over 200 million listeners. That's roughly about 2/3 of the U.S. population. The worldwide user count of audio listeners is expected to go past 1.5 billion by 2026. All these are significant numbers, and they seem to be all trending upward.

Now just from an audio itself, as a medium, it lends to multitasking, and hence it's ideal for advertising. So people can stream audio from anywhere when they're like they're, let's say, working in the garden or walking on the sidewalk, they can still be listening to audio which has -- whereas with video it probably doesn't work as well. And also it's very easily accessible, the audio advertising, so that adds to a lot of listeners. In addition to that, some of the technology advances that are adding power to this medium are smart speakers. According to Edison Research 1/3 or 33% of Americans over 12 years, that is about 94 million people, now own a smart speaker. That's an increase of 22% from the year before and nearly 5x that of 2017.

Now this opens up such exciting possibilities [ for what to search ]. So essentially people are listening to content that they like, right ad finds them, and using smart speakers they can actually take an action for the purchase as well. So that makes it for a very effective advertising medium. And research shows that almost 6 in 10 people say that audio ads are more likely to make them buying a brand or a specific product.

Just to add some more statistics here, especially with respect to the U.S. market, over total USD 16.8 billion spent in ad spending in 2021, about approximately USD 5.5 billion, USD 5.6 billion went to digital audio and the digital audio share is expected to continue to increase significantly in the upcoming years. And just specific from a radio and broadcasting industry itself, when you look at the numbers, we saw the local digital revenue has increased by more than 50% to prior to pre-pandemic levels, and it's expected to grow 20% in 2022.

Again, didn't want to throw so many numbers, but that's meant what you see -- what we see is a significant opportunity in digital audio as a medium for serving advertisements. And the digital audio advertising is working towards offering more in-depth targeting data, so there is -- and there's plenty of good information that can be utilized to create audience segments. And this is where we think Brightcom can help with the -- we can help our target firm, for example, the acquisition to gain a better understanding of their own audience and find ways to package their inventory but rather attractive to their advertisers.

So we can leverage our technology, some of the platforms. Suresh talked about earlier, Compass technology tools or know-how, our resources, we can put to bear. And we believe that we can significantly -- we can increase the top line of these companies and then significantly increase the bottom line because we'll be pretty much serving these ads to much more of a global and a targeted audience.

So that's kind of on the background. So let me come to the current status on where we are with respect to the acquisition. Over the last 3 to 4 months, we have completed its financial due diligence. We've used Ernst & Young as our audit partner. So the report indicates a very healthy company with a significant upside, especially with the pandemic subsiding. The growing digital business that I talked about earlier, that experience across the radio industry, we saw that was also reflected in our target company's financials as well. That's very good to see for us because that seems like a good foundation to build on. And this company also holds a significant market shares on large affluent markets in the U.S. And at the current point, it is ahead of its 2022 calendar year financial forecast, both in revenue and profitability. So that gives us a lot of comfort to move forward.

In parallel, we also completed the legal due diligence. We used 2 law firms, one Indian firm called Tempus and another U.S. firm Lerman Senter that's based out of Washington, D.C. in the U.S. Again, the report is to our satisfaction. Consequently, we are now negotiating a definitive agreement with the digital audio company. We'll be incorporating, obviously, the financial and the legal due diligence findings. We are also in the process of conducting our operational due diligence as well. So we hope to complete this in the coming weeks, a couple of months, and we'll make an announcement as soon as we sign the definitive agreement.

Now, once we've signed the definitive agreement, we'll be applying for a FCC approval process. The FCC stands for the Federal Communication Commission of U.S. It is a standard U.S. process to get approval for owning any streaming audio stations. To draw a parallel, we have a similar process in India, if somebody were to acquire radio stations in India, we have government approvals that are required as well. But once the definite agreement is signed and the announcement is made, we will start with the process. So we are hoping to come back to you soon and then update you. That's all I had. Thank you.

[Operator]

Thank you, sir. Ladies and gentlemen, with this, we conclude our conference call for today. Thank you for your participation. Thanks for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you and have a good evening, everyone.