CrowdGather sees Year-over-Year Growth

Zacks Small Cap Research

 By Ken Nagy, CFA

On September 10, 2012, CrowdGather, Inc. (OTC Markets:CRWG), with its networks of forum communities on the Internet, reported financial results for its results for the second quarter and six months, ended October 31, 2012.

The Woodland Hills, California based Company reported slightly lower year over year revenues of $423,732 during the three months ended October 31, 2012 compared to revenues of $468,296 for the comparable quarter of 2011.

The year over year decrease in revenue was primarily due to the timing of certain advertising campaigns that occurred in the three months ended October 31, 2011.

Still, during the second quarter of fiscal 2013, the Company’s main focus was on the release of its forum advertising marketplace, Adisn.com.

As a result of the marketplace release in late October, it did not have any impact on revenue for this reported fiscal period.

However, management expects to realize an initial benefit from utilizing this technology in its current fiscal third quarter 2013, and anticipate that the primary push on the new marketplace will accelerate in calendar 2013 as the Company ramps up efforts to increase engagement from both advertisers and publishers.

Net loss for the quarter fell by $35,665, year over year, to a net loss of $793,398 for the three months ended October 31, 2012. This compares to a net loss of $757,733 for the second quarter of fiscal 2012.

The decrease in net loss for the second quarter of fiscal 2013 was primarily due to the slightly lower year over year revenue.

Based on a weighted average number of basic and diluted common shares of 58.272 million shares, basic and diluted net loss per share for the second quarter resulted in net loss of $0.01 per basic and diluted share during the three months ended October 31, 2012.  This compared to a basic and diluted net loss per share of $0.01 on a weighted average number of basic and diluted shares of 58.735 million shares during the three months ended October 31, 2011.

Still, CrowdGather reported a 26.5 percent jump in year over year revenues for the six months ended October 31, 2012 with revenues of $1.014 million during the six months ended October 31, 2012. This compares to revenues of $802,332 for the comparable six months of 2011.

The year over year increase in revenue for the six months was primarily due to acquisitions and improved monetization of the Company’s existing ad inventory.

Recent acquisitions included Pbnation.com and Yuku.com, the Company’s largest network platform.

Gross profit for the first six months of fiscal 2013 increased nearly 44 percent year over year to $995,718, from the $693,592 reported for the same period in fiscal 2012.

This resulted in gross margin jumping to 98.1 percent for the six months ended October 31, 2012 compared to 86.5 percent for comparable quarter of fiscal 2012.

Net loss for the six months improved by $158,542 year over year, to a net loss of $1.470 for the six months ended October 31, 2012. This compares to a net loss of $1.628 million for the first six months of fiscal 2012.

Furthermore, since the first half of the Company’s fiscal year tends to be weaker cyclically, management anticipates that CrowdGather’s revenues will improve in the fiscal third quarter of 2013.

Based on a weighted average number of basic and diluted common shares of 58.261 million shares, basic and diluted net loss per share for the six months resulted in net loss of $0.03 per basic and diluted share during the six months ended October 31, 2012.  This compared to a basic and diluted net loss per share of $0.03 on a weighted average number of basic and diluted shares of 58.484 million shares during the six months ended October 31, 2011.

For the period ended October 31, 2012, CrowdGather reported cash of $1.161 million, working capital of $1.124 million and stockholders’ equity of $15.098 million.

Furthermore, it should be mentioned that during October 2012, the Company reached over 175 million monthly page views across all properties and had over 14 million monthly unique visitors according to Google Analytics.

While a sequential decline, the numbers were nearly in line with the previously disclosed estimated range of 180 to 190 million monthly page views for fiscal 2013 based on the Company’s efforts to prune non-monetizable content that also conflicts with the Company’s terms of service.

The decline in monthly page views is greater than expected in part due to pruning but also because of multiple unexpected outages the Company experienced from hosting portions of its network on Amazon’s Web Services (AWS).

Likewise, going forward, AWS outage risk is significantly mitigated since CrowdGather has already moved the majority of its data to a Company maintained network operating center in Los Angeles. Similarly, while the monthly page view traffic is slightly lower than anticipated, the decline will not significantly impact revenue since the reduction is due in part to pruning non-monetizable content.

Still, it should be noted that mobile traffic accounts for about 15% of CrowdGather’s monthly network traffic and is increasing. This compares to less than 10% during the comparable period of 2011.

Furthermore, as previously reported, while the Company anticipates that increasing mobile traffic may reduce total monthly page views for fiscal 2013 to a range of 160 to 170 million, it does not expect these reported fluctuations in total traffic, or the ultimate level of traffic after pruning, to negatively impact revenues.

Last, CrowdGather reported that it received a Notice of Allowance from the United States Patent and Trademark Office for a patent application for systems and methods of targeted advertising. The claims underlying this patent relate to a system for generating targeted advertisement recommendations based upon the social momentum between associated keywords.

 

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