Rainmaker Systems continues to Realign

Zacks Small Cap Research

By Ken Nagy, CFA

On May 13, 2013, Rainmaker Systems, Inc. (RMKR), the Campbell, California based provider of business-to- business (B2B) e-commerce solutions, reported financial results for its first quarter, ended March 31, 2013.

The Company reported first quarter revenues declined $1.745 million year over year to revenues of $4.656 million which compares to revenues of $6.401 million for the three months ended March 31, 2012.

Still, first quarter revenues were slightly higher than management projected as Rainmaker continued to realign its customer base and jettison non-strategic customers with low margins, no margins or that represented a financial risk to the company.

The realignment is complete, and management believes it has a solid base of customers upon which it can build and expects to see the initial financial impact of the restructuring efforts in the second half of this year. 

Gross margin, for the three months ended March 31, 2013, fell to 34.8 percent from 43.4 percent during the first quarter of 2012.

Net loss for the quarter increased to $3.294 million from a net loss of $1.474 million during the three months ended March 31, 2012.

Based on a weighted average number of basic and diluted common shares of 28.994 million shares, basic and diluted net loss per share resulted in net loss of $0.11 during the three months ended March 31, 2013. This compared to a basic and diluted net loss per share of $0.05 on a weighted average number of basic and diluted shares of 26.808 million shares during the three months ended March 31, 2012.

Non-GAAP net loss for the first quarter of 2013 increased $1.706 million year over year to a non-GAAP net loss of $2.696 million while non-GAAP loss per diluted share was $0.09 compared to a loss of $0.04 per diluted share from the three months ended March 31, 2012.

Rainmaker’s cash and equivalents for the period ended March 31, 2013, totaled $5.076 million while its working capital deficit equaled $8.828 million.

In April, Rainmaker completed the sale of approximately 13 million shares of common stock in a registered direct offering resulting in gross cash proceeds of approximately $5.8 million, and net proceeds totaling approximately $5.5 million.

Additionally, during the fourth quarter management completed a top to bottom review of the entire Company and started an extensive restructuring of the business beginning with consolidated all the call centers.

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