AUGT - Augme Technologies Emphasizes its Core
By Ken Nagy, CFA
On October 10, 2012,
Augme Technologies, Inc. (
the provider of strategic services and mobile marketing technology
to leading consumer and healthcare brands, reported financial
results for its fiscal 2013 second quarter and six months, ended
August 31, 2012. New Interim Chief Executive Officer Robert
Hussey wasted no time in laying out a plan to ramp up the top-line
and cash flow while partnering or potentially selling part of its
A concrete first quarter resulted in a $4.902 million year over
year and $1.110 million sequential increase in sales, with revenues
expanding to a record $6.189 million for the three months ended
August 31, 2012. Augme's strength in its second quarter revenues
was primarily driven by the addition of the Hipcricket operations
in August 2011 and the JAGTAG operations in July 2011.
Likewise, the Company saw higher demand for its AD LIFE Platform
with more campaigns than any previous quarter while Hipcricket's
operations continued to grow through the acquisition of new
customers as well as increased spending by existing customers on
mobile marketing and advertising campaigns.
It should be noted that Hipcricket has an established leadership
position in the nascent mobile marketing advertising industry which
is a $1.2 billion market that is forecast to grow over fivefold to
nearly $7 billion in the next three or four years.
Augme's net loss gained ground, improving to a net loss of $2.299
million for the second quarter of fiscal 2013, with net loss
falling $3.703 million year over year and $5.261 million
sequentially. Still, the majority of improvement to net loss was a
result of a $4.860 million adjustment to the acquisition related
contingent consideration at the measurement date as well as
decreased general and administrative expenses and increased sales
volume related to the expansion of the Company both organically and
Gross margin for the quarter fell to 60 percent from 68 percent for
the three months ended August 31, 2011. The decrease in gross
margin was primarily due to the Company's shift in business towards
mobile ad network sales.
During the second quarter, Augme's new business momentum and
customer retention rate resulted in new order bookings (the dollar
value of contracts signed during the second quarter) totaling $7.9
million, of which approximately 71 percent were received from
existing customers and 29 percent from new customers.
Furthermore, Augme reported a record quarter end backlog (the
dollar value of signed contracts including deferred revenue and
unbilled revenue) of $18.9 million as of August 31, 2012, up 9
percent sequentially from $17.4 million for the three months ended
May 31, 2012.
Along the same lines, Augme added approximately 30 new customers
during the second quarter.
Even with the expanding customer base, Augme was able to maintain
an over 95 percent retention rate per client basis.
Similarly, Augme completed over 29,000 campaigns in the second
quarter, which was a record quarterly amount for the Company.
Likewise, nearly half of the brands that completed campaigns with
the Company in the first quarter increased the number of campaigns
that completed in the second quarter.
Based on a weighted average number of basic and diluted common
shares of 96.317 million shares, basic and diluted net loss per
share resulted in a net loss of $0.02 per basic and diluted share
during the second quarter of fiscal 2013. This compared to a
basic and diluted net loss per share of $0.08 on a weighted average
number of basic and diluted shares of 71.189 million shares during
the three months ended August 31, 2011.
Revenues for the six months ended August 31, 2012, resulted in an
$8.774 million year over year increase in sales, with revenue
improving to $11.267 million.
Net loss for the first half of fiscal 2013 was $9.860 million
compared to a net loss of $10.020 million for the six months ended
August 31, 2011.
Based on a weighted average number of basic and diluted common
shares of 95.403 million shares, basic and diluted net loss per
share resulted in a net loss of $0.10 per basic and diluted share
during the first half of fiscal 2013. This compared to a
basic and diluted net loss per share of $0.14 on a weighted average
number of basic and diluted shares of 70.001 million shares during
the six months ended August 31, 2011.
As of August 31, 2012, Augme had $475,784 in cash and equivalents
and a working capital deficit of $12.525 million. This
compares to $3.242 million in cash and equivalents and a working
capital deficit of $22.248 million as of May 31, 2012.
Still, it should be noted that the Company recently implemented its
previously announced restructuring plan in which Augme intends to
remove approximately $6.0 million of annualized operating expenses
in the areas of corporate staffing and other non-revenue generating
The Company has also implemented a 20% senior management pay cut,
which is not a deferral. Likewise, management intends to continue
to scrutinize expenses, identify additional savings and carefully
control expenses going forward.
Regarding non-core business, the Company have taken steps to
slow down on its the pace of investments in its IP portfolio and
expects to reduce capitalized IP costs from approximately $1.5
million per quarter to less than $500,000 per quarter by the end of
the current quarter.
Still, the Company's IP portfolio now numbers 13 patents with 80
pending patents applications and over 2000 claims in the telecom
Along the same lines, Management continues to consider all its
options including selling the portfolio, entering into strategic
partnerships with regards to the IP portfolio and continuing to
pursue licensing opportunities that offer a lower cost structure
and lower legal fees.
However, the Company continues to expand its sales team and
recently hired two new senior sales executives to manage sales
activities on the east and west coast.
Nevertheless, as a result of the its growth in its AD LIFE Platform
and Hipcricket operations , combined with the cost actions taken,
the Company now expects to reach operating cash flow breakeven in
the second quarter of fiscal 2014, ending August 31, 2013, on
quarterly revenue of $10.0 million, for a $40.0 million annualized
Here again, management continues to expect to generate sequential
revenue growth on average between 15% and 20% to reach its
anticipated $10.0 million in quarterly revenue.
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