1) Augme reported results for its fiscal second quarter ended August
31, 2012 in early-October. The Company reported sales of $6.2 million
in Q2/13, a 21.9% sequential increase from sales of $5.1 million in
Q1/13. Gross profit increased from $1.9 million in Q1/13 to $2.5
million in Q2/13, as gross margins narrowed from 61.0% to 60.0%
over the same time period. Operating losses narrowed from $7.6
million in Q1/13 to $7.2 million in Q2/13, as selling, general, and
administrative expenses fell slightly from Q1/13 to Q2/13. Excluding
non-recurring items, Augme reported a net loss of $7.2 million, in
Q2/13, or ($0.07) per share, compared to a net loss of $7.6 million in
Q1/13, or ($0.08) per share. Augme’s results were ahead of our
expectations for sales of $5.8 million and a loss per share of ($0.07).
Following the end of the quarter, Augme announced a restructuring
plan and replaced former CEO Paul Arena with interim CEO Robert
Hussey. The restructuring plan includes a shift in strategic focus
towards the core mobile marketing business, a $6 million annual cost
reduction in the core business, and a reduction in spending towards
development and monetization of the intellectual property portfolio.
Additionally, the Company has outlined a strategy for short-term
monetization of the intellectual property portfolio including outright sale,
partnerships, and/or licensing. Shortly following the announcement of the
restructuring plan, Augme announced the closing of a $6.8 million equity
financing of 8.5 million shares priced at $0.80. In conjunction with cost
reduction measures, we believe that the equity raise will provide Augme
with sufficient runway to reach cash-flow breakeven.
Augme is one of the only pure-play publicly traded providers of a complete end-to-end mobile marketing platform. Additionally, the market for mobile advertising is growing rapidly and is expected to exceed $20 billion by 2015 driven by the increased penetration of smartphones such as the iPhone, Blackberry, and numerous Android devices1. The Company is deserving of a premium valuation as one of the only public companies in a highly desirable industry. Shares of AUGT have sold off following the litigation loss to Yahoo! at the district court level in August and the subsequent equity offering at a discount to the market in late-September. However, sequential quarter-over-quarter growth rebounded strongly in Q2/13 at 21.9% compared to a disappointing 0.9% in Q1/13. Additionally, Augme’s management reaffirmed guidance for sequential quarter-over-quarter revenue growth of 15-20% and cash-flow breakeven by Q2/14.
We have valued Augme on a sum-of-the-parts basis, as detailed below:
Core Business – 4.9X FY2014E sales of $40.3 million, discounted to present value at 25% - $1.41/share in value
We believe that potential upside catalysts include continued growth in the core business, successful short-term monetization of the intellectual property portfolio through an asset sale, and new mobile advertising contracts with marquee clients. Thus, we are maintaining our BUY rating on shares of AUGT.
"through an asset sale". gotta be the GEOS patents. I would say a lot less than 100,000,000 Paul floated.. as long as it is more than 4,000,000. :):). 8 figures would be wonderful. maybe that's why Husseys not buying.
"Core Business – 4.9X FY2014E sales of $40.3 million, discounted to present value at 25% - $1.41/share in value"
In line with what I've said but he uses an ultra conservative multiple and discount rate. MM is still at 9X's and is the best and most appropriate comp. I still firmly believe the core mobile business is worth at minimum $2. Like I posted before, at least one major marketing company is already known to have verbally expressed interest at $120 million for just HC and that was prior to last Q numbers being filed.
"Yeah guys, you better go out and buy now before its too late. This is the buy of the century!! I have never before seen such a compelling opportunity to buy at such a distressed price. If people only really knew all that is going on you would be buyers." These are the lines that are coming and going to be repeated again and again. Open your eyes guys and don't get pumped.