Latest Ronin financials show company finally cash-flow positive, BUT …
November 4, 2011 by Dave Haynes
The latest financials from Wireless Ronin Technologies are a seriously mixed bag. Revenue hit a company record, and after many years the company finally had a cash-flow positive quarter. But sales also dropped by 25% this quarter, and the company also lost yet more money. Working capital is getting down to a relatively small number.
The financials running to the end of September 2011 showed, according to a company news release:
Revenue in the third quarter of 2011 decreased 25% sequentially to $2.3 million from $3.1 million in the prior quarter, and decreased 14% from $2.7 million in the same year-ago period. Revenue for the nine months ended September 30, 2011, increased 37% to a record $7.8 million from $5.7 million in the same year-ago period.
The quarterly decrease was primarily attributable to lower dealership deployments of Chrysler’s iShowroom-branded tower application into Chrysler dealerships. The quarterly decrease was partly offset by additional orders for 20 Fiat dealership installations for the iShowroom application, which is being featured in the Fiat Style Center of the new Fiat Studio Facilities.
Recurring revenue in the third quarter of 2011 from the company’s hosting and support services was approximately $400,000, or 17% of total revenue. As of September 30, 2011, the company had received purchase orders totaling approximately $1.4 million for which it had not recognized revenue.
Gross margin in the third quarter of 2011 was 49%, as compared to 46% in the previous quarter and 50% in the third quarter of 2010.
Net loss totaled $1.4 million or $(0.07) per basic and diluted share, as compared to a net loss of $1.4 million or $(0.07) per basic and diluted share in the previous quarter, and a net loss of $1.4 million or $(0.08) per basic and diluted share in the same year-ago period. Net loss for the third quarter of 2011 included $169,000 of non-cash stock compensation expense.
At September 30, 2011, the company’s net working capital position was $3.5 million, as compared to $4.6 million at June 30, 2011. The accumulated deficit for the company is in excess of $70 million, and with this, still piling up.
“The third quarter marked the first cash flow positive quarter in our company’s history,” said Scott Koller, president and CEO of Wireless Ronin. “Despite lower than expected revenue on a quarterly basis, revenue for the first nine months of 2011 increased 37% to a record $7.8 million. Further, our services revenue sequentially improved as a result of further enhancements to the iShowroom application which include content updates and e-learning programs.
“We continue to push ourselves to optimize our organization, improve our processes and reduce expenses. During the quarter, we made key additions to our board of directors with Kent Lillemoe and Howard Liszt. Kent and Howard bring the experience, knowledge and enthusiasm we need to support Wireless Ronin’s continued success.
“A key element to our success is winning major clients and teaming with their trusted vendors. We are excited about our new joint marketing agreement with Keyser Industries, a provider of menu boards to McDonald’s in the U.S. and a number of other important accounts. By combining Keyser’s expertise and relationships with Wireless Ronin’s marketing technologies, we can provide QSRs the ability to effectively control messaging and communication with their customers. We believe this can provide a superior ROI for QSRs by driving sales through marketing strategy and technology.
So a really big chunk of the increased revenue is actually hardware-based. Since Ronin is not a hardware manufacturer that means the real revenue is whatever margin they can slap on the gear, which is usually not all that good (though they do talk about gross margins approaching 50 points).
The conference call transcript is pretty interesting in that the executive team has to open up pretty broadly about where things are at, and who they are speaking with. They have some nice clients and prospects, focus a lot on the high-volume, high-potential QSR, and therefore some reasons to believe better times are ahead.
One of the analysts pointedly asked about dwindling cash on hand.
Q from Arthur Freedman – Freedman Asset Management
On the cash position under current assets, where December 31 you had a little over $7 million and now you had $4.25 million by September 30th, is there any concern on your part about that number getting lower?
Yes, I don’t think concern is the right word. In 2011 we spoke about this many times as we are focused on execution with the working capital we need it to move forward. Moving back a little on history, when I became President in May of last year and Jim Granger was still here, the first thing Darin and I and the team did was work on controlling our costs and getting costs down and we continue to do that today.
And then we put a strategic plan in with the help of Michael Howe at the end of the year and the beginning of the year that we think is very, very solid. I think Steve Birke has done a fantastic job of retooling of the Board to provide us with really an extension to our executive management team and a Board that is secured to help us grow the company. We have now a very key relationship with Keyser which we think can accelerate our ability to a better value proposition and accelerating some of this business we’ve been laid forward these pilots.
And I think it’s going to be important that our customers and target customers look at us with confidence that we have the technology, infrastructure, team, and financial resources to support their needs not only today but in the future, they are making a very big financial decisions. So as we get closer to realizing what we’ve been waiting for specifically in QSR, we need to make sure that we continue to invest in our software and infrastructure and network operation center.
So we have to make sure that company (inaudible) properly funded and but we’re still focused 100% on execution but at the same time giving our clients the confidence that we’re going to be here for the long-term.
So you are not concerned about the $4.2 million that it’s getting too low at this point?
Concerns is not – we are very happy coming through Q3 with a positive cash flow. We’ll continue to look at cash very, very closely and make sure that we have the resources to support the company. But the concern is not the right word, I think it’s a key thing we look at and we need to make sure that we’re financed. So concern is not the right word.