Focus Media Fast Growth But What About The Cash

Focus Media (FMCN) who brands itself as China's leading multi-platform digital media company reported Q1 2008 operating cash flow at $7.6 million. Day sales outstanding ("DSO") was 127 days in the first quarter mainly due to the consolidation of $40.7 million accounts receivables from CGEN at the end of Q1 2008 and longer receivable cycles of our Internet advertising business. As of March 31, 2008, the Company had cash and cash equivalents of $283.0 million.

The company is clearly growing at exponential rates but an Achilles heel may be developing with the accounts receivable list growing and days sales outstanding heading the wrong way. A quarter is 90 days. So basically on March 31 they still had not been paid for sales from the last week of November 07.

I don’t care what you may say about cultural differences of operating in PR China all business cultures understand cash. This company may have a big problem.