Wireless Ronin cuts operating expenses in half, but still loses $10M in 2009

As required by regulators, Minneapolis-based Wireless Ronin lifted the veil on its activities yesterday, releasing its Q4 and year-end numbers, as well as having an earnings conference call. You can read the transcript here.

Briefly, ouch. Actually, OUCH!

Very few companies shot the lights out in 2009, but I doubt very few companies specifically in this sector had an operating loss of $10.2 million.

Reports the company: The net loss in 2009 was $10.2 million, compared to $20.7 million in the prior year. “The improvement in the company’s net loss from 2008 to 2009 was primarily the result of the company’s cost saving initiatives which started during the fourth quarter of 2008 and continued to be implemented through the first half of 2009.

President and CEO James Granger told people on the call:

As we look back over the past year, 2009 was a significant challenge as most of our customers were dealing with the very constrained capital budgets during the economic downturn.

As an example, according to the National Restaurant Association, capital expenditure for the U.S. restaurant industry continued to drop during 2009. Only 31% of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months of 2009, making this the lowest level on record. As a result, our customers were unwilling to commit capital dollars to large-scale digital signage deployments during that time.

The lack of customer adoption of digital signage is an industry-wide issue and not just specific to Wireless Ronin. We see companies across many vertical markets holding off on committing capital dollars to equipment, expansion or remodeling and this affects our entire industry.

While there are signs that the economic slide may have reached a bottom, it is uncertain when we will start to feel the effects of the potential turnaround. We are certain, however, that we are prepared as a company for the eventual turnaround. There is real growth potential for Wireless Ronin, as well as the digital signage industry and we believe that we are well positioned for this growth.

We used 2009 to work on elements within the company which we feel we could control because the poor economic climate and its effects on WRT were, in many respects, out of our control. We knew we had to focus on operational execution to position ourselves for 2010 and beyond. And so in 2009, we laid the groundwork by one, significantly reducing our operating costs and quarterly cash burn, which we cut in half from 2008 to 2009. We engaged new clients and expanded our customer base. We shifted our sales strategy to concentrate on selling higher-margin offerings to improve our gross margin percentage, which in fact rose from 12% in the fourth quarter of 2008 to over 37% in the fourth quarter of 2009.

We greatly increased our recovering revenue base, which actually grew fivefold from January to December of 2009. And most importantly, we strengthened our balance sheet by raising $6.9 million in a registered, direct stock offering. And now in March, we secured the availability of a $2.5 million line of credit with Silicon Valley Bank, giving us $12.7 million of cash and zero debt at the end of 2009.

Couple of interesting things in the transcript.

I have read these before and the analysts who in past ones were lobbing big softballs were throwing inside fastballs on this one. They seemed cranky, and expose Ronin’s deal with KFC, which is good to have in some respects but means they need to win most of the menu board business franchise by franchise by franchise, with no corporate edict.

There’s a question from analysts about the Ronin and NEC VUKUNET connection, which a Ronin guy responds to by saying his company doesn’t know that much about it. But Ronin has a great relationship with NEC, he adds. A couple of my industry blogging friends jumped on that perceived relationship and joked about being known by the company you keep.

But having dug into it, there isn’t really a relationship. VUKUNET was developed by a contracted software engineering shop called Project Leadership Associates. The NEC guys I asked say Ronin had nothing to do with VUKUNET and they buy displays from NEC, like a lot of DS companies.