Augme Technologies Inc. (AUGT.OB) F3Q13 Earnings Call January 9, 2013 11:00 AM ET
Welcome to the Augme Technologies Third Quarter Fiscal 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. Following management’s prepared remarks, we’ll hold a Q&A session. (Operator Instructions) As a reminder, this conference is being recorded today October 10, 2012.
I’d now like to turn the conference over to Ms. Stephanie Prince of LHA. Please go ahead ma’am.
Thank you, Regina, and welcome everyone to the Augme Technologies’ Third Quarter Fiscal 2013 Earnings Conference call for the third quarter ended November 30, 2012. With me today are Bob Hussey, Chief Executive Officer; Ivan Braiker, President; and Tom Virgin, Chief Financial Officer.
After management’s comments we will open the call up to your questions. In order to allow everyone the opportunity to ask a question, we’re asking that follow-up be limited to two. To access the webcast please visit our website at www.augme.com.
Please note that the information presented and discussed today includes forward-looking statements which are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance, or achievements.
Risks and uncertainties that could cause our actual results to differ from those expressed or implied by forward-looking statements include those set forth in the risk factor section of the Annual Report on Form 10-K that we filed with the SEC on May 8, 2012.
I’d now like to turn the call over to Bob Hussey. Bob?
Thank you, Stephanie and good morning everyone. I’m going to open my remarks with an overview of our third quarter performance and progress against the strategic objectives I outlined in our last call. After that, Ivan will take you through the third quarter operational highlights, followed by Tom who will review our financial results. Then we’ll open the call to your questions.
However, before I open my remarks, I’d like to restate for this audience the Augme/Hipcricket mission statement because I personally believe it properly defines the company’s competitive advantage and it’s a key element in our success to date. Our mission statement is as follows. To empower brands, agencies, and media properties, to engage customers, drive loyalty and increase sales through mobile products and services and you’ll hear many of these same words and claims throughout my remarks today.
So now turning to third quarter highlights. Much of our time and energy during the third quarter was devoted to both implementing the cost reduction plan we announced last September and we’re moving approximately $6 million of annualized cash operating expenses from Hipcricket’s business, while not losing sight of the fact that we cannot cost cut our way to profitability. We must deliver topline growth. Our restructuring is almost complete. We know everyone on the Hipcricket team has worked to strengthen our operation in support of our rapidly growing base on our sources. We have pushed forward with virtually all our early business growth initiatives at Hipcricket and have executed well.
As an enterprise, we have moved past the inevitable disruptions of any restructuring. In large measure, we have met many of the restructuring goals we set for ourselves in the Q2 conference call and we continue to drive sales and fiercely reduce costs. I can report here today that we delivered on that effort. Recording sequential quarterly growth of 19%, resulting in revenue of $7.4 million for the quarter. Tom will cover all of the key metrics related to that revenue in a few minutes.
On our second quarter call I outlined our strategic priorities for the company going forward. To recap again, they are to drive revenue, to exercise fierce cost control, to begin to harvest our IP investments, and to start to realize Hipcricket’s brand potential in an ever greater manner. It’s through these collective commitments to these priorities that we will achieve our near-term goal of reaching operational profitability and our long term goal of fulfilling Hipcricket’s growth potential and maximizing shareholder value.
The number one strategic objective again was to drive revenue. We sharpened our sales processes and procedures and made selective sales executive hires to manage sales activity in the East and West Coast and in the Midwest too. We have hired two new senior sales executives that have brought more intense regional hands-on approach in supporting our growing sales team, and they are focused on targeted gross profit margin delivery and greater sales team productivity. These efforts have freed up Doug Stovall, our Head of Sales, to concentrate on our largest customer accounts. With this sales structure in place, we are equipped to efficiently serve our customers’ expanding needs, to protect our 95% customer retention rate, and to promote increased usage of our AD LIFE platform.
Going forward, we will continue to expand our sales team and equally important, we will build their knowledge as mobile sales executives who can help their clients engage their customers and grow sales. Our number two strategic objective was to exercise fierce cost control. We have institutionalized cost control and cost reduction principles throughout the company. We continue to scrutinize expansions in each office, each functional area to identify more savings to add to the $6 million in annualized cash operating expense reductions we are realizing through our restructuring plan.
Our third strategic objective is to harvest our IP investments. During the quarter, the Augme IP team and I spent a great deal of time pursuing various paths to monetize IP assets. As a reminder, we are considering all options, including numerous ways and partners that might help Augme accelerate the monetization in the right areas with strategic partnerships or license opportunities, all with a view towards lowering our IP development cost structure and our legal fees. What I can report at this time is that we have made a great deal of progress in a number of areas covering core and non-core patents alike, and have held meetings with several parties interested in helping Augme achieve this objective on or our timetable.
Until we have studied all our options, assessed the risk and benefits of each option and we have agreements in place, it would be inappropriate for me to make any promises about potential transactions. At the appropriate time, we will share the terms of any such agreements with our different constituencies.
Our fourth objective is to fully realize Hipcricket’s brand potential. Hipcricket has established a leadership position in a rapidly expanding mobile industry. We have the longest track record of any mobile company out there, having completed over 250,000 campaigns in our eight-year history. And we are building -- we are continuing to build momentum in that area. It took Hipcricket over six years until mid-2011 to complete just a 100,000 campaigns. Then, in just 12 months in calendar 2012, we completed the same number of campaigns. Another 100,000. This acceleration in the number of campaigns we are supporting for our customers, demonstrates not only our maturing mobile marketplace -- excuse me, mobile marketing and advertising. But importantly, our experience and capabilities.
It is this experience that we bring to market and it underscores our determination to enable those companies that are still testing the concept and those that are expanding their budgets from all the marketing and advertising campaigns. With this track record and our blue chip customer base, we intend to build on our leadership position.
The progress we have made towards delivering on our strategic objectives over the past 90 days, gives us confidence that we are on track to reach operating cash flow breakeven in the second quarter of fiscal 2014 at a quarterly revenue rate of approximately $10 million. We expect to continue to increase revenue by 15% plus quarter over quarter on average. Given our customers calendar year-end budgeting process, we’re likely to see different sequential revenue growth above and below that range in some quarters. Achieving some near-term IP litigation results, reaching cash flow break even, and continuing to become self-funding enterprise is our highest priority. However, with $1.8 million in cash on the balance at the end of the third quarter, it is no secret that we’ll need to meet our short term cash needs to support our operations and growth initiatives.
In addition to all of our IP monetization efforts, we have retained Roth Capital to assist in exploring avenues to raise capital. I want to assure you that we are intensely focused on strengthening our balance sheet with the best terms available to us.
To summarize, the restructuring plan and organizational changes that we’ve made have taken hold. Our business fundamentals remain strong and we are continuing to drive revenue on a promising growth trajectory. If we deliver on all these targets, fiscal 2014 should be another very successful year for Hipcricket.
I’d like to now turn the call over to Ivan. Ivan?
Good morning. Thank you, Bob. Turning now to the operational highlights of the third quarter. We signed $5.5 million of new bookings, which equates to 234 new contracts. These bookings, combined with our strong revenue, resulted in a quarter end backlog of $16.3 million, compared to the second quarter end level of $18.9. However, as the mobile advertising revenue continues to increase, there are some things to keep in mind. Contracts in mobile advertising are shorter in duration and therefore aren’t often captured in the period end numbers and right now adoption of mobile advertising is occurring more rapidly than mobile marketing.
We’re educating our customers on the value proposition of our unique post click engagement capabilities which enable customers to capture users information for reengagement and analysis. These capabilities are a key differentiator in the marketplace for us. Hipcricket is the only company to deliver the full mobile marketing and mobile advertising life cycle solution with a single platform. So while mobile marketing is still the brass ring for us, we’re likely to see a flattening of backlog numbers at least for the short term.
We completed 24,000 campaigns during the third quarter, bringing our total to more than 250,000 as of the end of the third quarter. Our AD LIFE platform is known for speeding clients’ time to market and its high scalability. During the quarter, we added to these capabilities by announcing an enhanced rules engine that enable advertisers and marketers to easily configure customized high engagement instant win Sweepstake programs from a single, scalable user interface integrated with Hipcricket’s AD LIFE mobile advertising and marketing platform.
The new capability shortens the time to market and reduces the client cost for what was previously customized work. Because Sweepstake campaigns have become – have proven to be generating much higher engagement rates compared to classic awareness campaigns, brands are turning to Sweepstakes programs across the mobile advertising and marketing efforts in increasing numbers. Hipcricket instant win Sweepstake technology complex rules engine can be used with both mobile advertising and marketing campaigns such as such as banner ads or mobile landing pages as well as Hipcricket’s first to market and unique scratch ticket product that replicates a lottery scratch ticket experience on a mobile phone to increase customer engagement.
For example, in the third quarter, a custom mobile contest solution for Hipcricket helped a television show with a top five market receive its highest ratings in seven year run and generated additional advertising revenue. Customers are also drawn to Hipcricket because of our extensive slate of patented mobile offerings. For example, SouthStar Communities, a residential real estate development company, is integrating mobile web, QR Codes and SMS into a re-marketable database that will seamlessly tie into the CRM system and lead generation program. SouthStar sought a solution that would deliver visually appealing and device agnostic creative content.
Hipcricket’s mobile site builder solution with patented device detection technology that can recognize any mobile device, ensures that sites render properly and deliver visually appealing and device agnostic creative content. SouthStar also said Hipcricket’s delivery within a single platform and SouthStar’s capability is additional reason for choosing to work with us.
Nissan Automotive and its advertising agency, Team Ignition also recently partnered with us to power a Spanish language national mobile advertising campaign that utilizes mobile banner ads, mobile video ads, rich media, plus tablet specific ads to reach this key audience, driving them to Nissan mobile website custom built by Hipcricket.
In addition to employing multiple mobile touch points, the campaign is also integrated with social media channels, including Facebook, Twitter and Pinterest to maximize consumer engagement. By coupling media with a custom built landing page all served by one technology, Hipcricket and Team Ignition, have been instant in optimization capabilities farming on the click into the actual customer interaction with the site. This campaign was run across Hipcricket’s auto, news, sports, beauty, fashion, lifestyle, and social channels. Most recently, a global consumer food products manufacturer ran three mobile ad campaigns over the holidays and just agreed to have Hipcricket develop another text to donate with them following a similar program in the fall that resulted in double the anticipated responses.
In the coming weeks, we will also conduct a kick-off meeting to develop the mobile strategy for major new product introduction with this client. We also up sold mobile donations with a large radio corporation that has been a long time client and that previously only did SMS with us. And one of the oldest clients, a quick serve restaurant, has just signed on to the mobile web service with us. They also previously only used our SMS services. We continue to cross-sell products and services between AD LIFE and AD SERVE, deepening our relationships with long-standing clients.
One example includes a radio station group that added mobile web and MMS, multimedia messaging, to the SMS that they had previously done with us. Lastly, we have been very effective with raising the response rates from targeted advertising and direct response campaigns. For example, our work for a fast growing company in the field service industry increased interactions by 5% to 10% per market, month over month, through a highly targeted advertising and rich media campaign. Similarly, in our work with a major consumer packaged goods company, Hipcricket was able to increase page views to their mobile site 9x in just 30 days through a highly targeted and effective ad campaign.
That completes my prepared remarks and now I would like to turn the call over to Tom. Tom?
Thank you, Ivan. Hi, everyone. For the third quarter ended November 30, 2012, Augme reported revenue of $7.4 million, an increase of 19% versus revenue of $6.2 million reported in the second quarter which ended August 31, 2012. And an increase of 68% when compared with revenue of $4.4 million for the third quarter last year. The revenue increase of 19% is based on rounded numbers. The revenue mix with third quarter was 60% for mobile marketing and 40% for mobile advertising. Mobile marketing revenues are platform revenues including messaging and mobile web, 68% of these marketing revenues were SaaS based licenses.
The revenue mix for the second quarter was 69% from mobile marketing and 31% for mobile advertising. 70% of mobile marketing revenues were SaaS based licenses. Bookings, or the dollar value of contracts signed, which includes new orders and renewals, totaled $5.5 million for the third quarter. For the quarter, 17% of our bookings were to new customers, 65% were new sales to existing customers, and 18% were license renewals.
As we said in the past, bookings fluctuate from quarter-to-quarter, the renewals will vary primarily due to the timing of contract renewal dates. We ended the quarter with a backlog of signed contracts totaling $16.3 million.
For the third quarter, we generated a gross profit of $4.4 million, an increase of 19% compared to second quarter, and up 45% compared to third quarter last year. The gross margin for the quarter was 59% of revenue, down from 60% from second quarter, and down from 68% for the third quarter last year. The decrease in the gross margin when compared to both prior periods reflects the company's shifting mix of business towards mobile ad revenues.
The percentage of business from the mobile ad network accounted for 40% in the third quarter compared to 31% of revenue for second quarter, and 20% of revenue for the third quarter of last year. As a reminder, in the cost of revenues may include short code related cost, hosting of our cloud-based platform, and certain third-party cost primarily mobile ad deliveries.
Looking at operating expenses. For the third quarter, operating expenses net of a non-cash impairment charge of $5.8 million decreased slightly to $10.8 million from $10.9 million for the second quarter, and decreased 19% from third quarter last year. The non-cash impairment charge results from efforts undertaken in the third quarter, to monetize the non-core patents. As a result of these efforts, we concluded that for accounting purposes, a triggering event had occurred requiring us to assess the carrying value of these non-core patents. We estimate the fair value of the patents by calculating the expected proceeds from the sale, exclusive license agreement and royalties that would have been paid to a third party had the company not owned the patents.
As a result of this analysis, we took a write-down of $5.8 million. The estimate is made of future value through sale, did not include an estimate of contingent fees to be received by the company related to participating in future licensing fees received by a purchaser. Such fees are considered contingent gains and are recognized when earned. Excluding non-cash charges for stock options and warrants, depreciation and amortization and restructuring costs, operating expenses for third quarter were $6.7 million. Third quarter also included approximately $350,000 operating expenses related to IP.
Operating expenses excluding these same non-cash charges were $7.1 million for second quarter of fiscal 2012 and $7.7 million for third quarter of last year. As Bob discussed, we have executed our restructuring plan and are seeing decreases to expenses in our results. Some of the impact of these reductions was realized in Q3, though we expect to see the majority of these reductions in Q4. We are also working diligently on reducing IP related costs and certain other delivery related expenses and the impact of this work will be realized in future periods.
We recorded a net loss of $5 million or $0.05 per share for the third quarter of fiscal 2013. The net loss includes the acquisition, related contingent expense positive adjustment of $7.3 million. This adjustment was primarily a result of the difference between calculating the earn-out based on $2 per share and issuing shares at $0.65. The net loss of $5 million compares to the net loss of $2.3 million or $0.02 per share in the second quarter of fiscal 2013 and $11.4 million or $0.13 per share for the third quarter fiscal 2012. The second quarter net loss includes a contingent expense positive adjustment of $1.9 million.
Looking at the net loss, excluding non-cash charges, included in the net loss for third quarter fiscal 2013 is a non-cash impairment charge of $5.8 million, non-cash stock option and warrant expense of $1.4 million, depreciation and amortization expense of $1.6 million and the non-cash credit adjustment of the acquisition related contingent expense of $7.4 million. Included in the net loss for second quarter fiscal 2013 are non-cash stock option and warrant expense of $1.5 million, depreciation and amortization expense of $1.6 million and the non-cash positive adjustment of the acquisition related contingent expense of $4.9 million.
The net loss in third quarter of last year included non-cash stock option and warrant expense of $3.5 million, plus depreciation and amortization expense of $1.2 million and the non-cash expense adjustment of the acquisition related contingent expense which was an expense of $1 million. After adjusting each period for the non-cash items, the net losses were $3.5 million for third quarter, $4.1 million for second quarter and $5.7 million for third quarter last year.
Day Sales Outstanding was 75 days compared to 71 days for second quarter. We think this number will stay around this range and that it reflects our tight monthly billing practices.
During the quarter, we raised $6.2 million on common stock offering. Net cash used in operations was $3.3 million, including approximately $350,000 related to IP. We also spent approximately $600,000 on patent related activities and paid $1.3 million of payroll taxes related to the employee portion of Hipcricket earn-out. We ended the quarter with $1.8 million in cash.
I will now turn the call back over to Bob.
Thank you very much Ivan and Tom. We’d like to open the call at this time to any questions that might arise. We can go right now to Q&A.
(Operator instructions). Our first question will come from the line of Darren Aftahi with Northland Securities. Please go ahead.
Darren Aftahi - Northland Securities
Good morning. Thanks for taking my questions. First, I guess Bob, in terms of the restructuring, it looks like excluding some of these non-cash charges, your OpEx was down just slightly. Should we assume there will be a big step down in OpEx P&L in the current quarter? And related to that, what’s your current monthly cash burn and other additional restructuring steps you think you can take beyond the $6 million?
It’s a good question, Darren. Thank you. From an OpEx standpoint, it’s a moving target in terms of our operating expenses because we find ourselves in a very good position of having significant topline growth and as we witness that topline growth, we’re constantly adjusting what our operating expense needs are and the variable expense of the P&L. So it’s a combination of growing the business and being fiercely disciplined in controlling operating expenses. You have a lot of pressure from certainly all the disciplines within the company to continue to expand to meet the needs of our clients. So it’s a real fine balancing act. I wouldn’t give you an exact number right now. I can just say that our gross profit margins are being protected. We see no erosion, to speak of no significant erosion right now beyond where we are in our gross profit margins. So just constant attention to our variable expenses I think will allow us to deliver on our forecasted Q2 of ’14 operational profitability.
Darren Aftahi - Northland Securities
And then if I could ask two follow-ups. First on the (inaudible) IP. It looks like in your 10-Q you have said you put the assets up for sale and the board has approved that. Two questions on that. One, the 3.5 million, is that IP assessment the internal or is that an external analysis. And then where are you with that process? I guess a lot of investors would like to know on this call. I mean is there a light at the end of the tunnel as it relates to this specific process and then I have one last question for Ivan.
Okay. Let me turn that over to Tom.
Yeah. Thanks for your question. I will take the first part of that which is the question on the valuation. So it’s a combination of external factors and internal factors. And as I mentioned in my remarks, part of the value that may come through a transaction would be based on future revenues and that is not something we get to recognize currently on our fair value of the intangibles. Bob, you might -- you asked about progress on that.
You know, Darren, we just were constantly evaluating all of the proposals that we see with regards to some type of economic transaction, monetization vis-à-vis the core patents and non-core patents. It’s an active space. And as I said in my remarks we are going to look at all of the risks involved in those transactions and the benefits in those transactions. As we migrate our business to being, as you can see by our top line results, a much more focused mobile media and mobile advertising company. So it’s really, from the standpoint of delivering shareholder value, which is our primary objective, it’s how do we balance the timing of these opportunities and the risks and rewards associated with those.
Both the upfront valuation, and as Tom correctly remarked, the contingency payouts related to those offerings. Both core and non-core. So it’s certainly a -- it’s a challenge and there is some science involved and some just business acumen that we rely on our advisors to execute on.
Darren Aftahi - Northland Securities
Fair enough. And then the last one and then I will jump back in the queue. But on the backlog and bookings, it seems like those numbers came down pretty materially sequentially. I guess there was some seasonality but Ivan had mentioned some commentary about short term contracts on the mobile ad side of the business. So if you could help kind of frame what portion of that seasonality -- what portion of that is mobile ad and maybe give a breakdown of those 234 contracts that comprise of 5.5 million of bookings. Thanks.
I will turn that question over to Ivan and I certainly have a point of view on it. But, Ivan, why don’t you jump in here?
Yeah, sure, and, Bob, jump in any time too. Thanks for the question, Darren. As we said, the way that we account for the -- when we get ad business then when things hit the ad network, you don’t have that long term tail on it like you do on the SaaS side of the business. So when those things come up, it they are booked and they are realized, all relatively rapidly so that you won't see backlogs in bookings. And as we said, the advertising business right now is growing very rapidly. We still are seeing some very good and good strong growth across what we are doing on our SaaS in mobile marketing side of things. But it isn’t the rapidity that’s falling on right now with our advertising side of the business. Bob, would you like to add into that?
Well, it’s a very important, Darren, and it touches really on some strategic issues regarding our company and tactical issues regarding our company but also the industry too. Everyone in all of the reading and published remarks is that this is certainly a nascent space but it’s rapidly maturing. And as the industry, the mobile marketing and advertising space matures, you’re going to see, as Ivan just spoke, you’re going to see more and more hard dollars being spent, planned dollars by the brands and their agencies and that’s exactly Ivan’s point. Those dollars are going to flow in quickly as the marketing components have proven themselves, Brands and their agencies will deploy more dollars against that and that’s what we’re seeing and in traditional advertising across all media, I think mobile media will begin more and more despite the targeted and backend analytical efficiency of it. You’ll see more and more of that experience in mobile media. So we’re preparing ourselves. As I said in my remarks, we’ve got very smart ad sales people, very smart mobile marketing solutions people and those people are attuned to what the brands are looking for and what the agencies are trying to accomplish on behalf of their brands.
Your next question will come from the line of Todd Mitchell with Brean Murray Carret & Co.
Yung Kim – Brean Murray Carret & Co.
Hi. This is Yung Kim for Todd. Quick question in terms of the $10 million quarterly run rate that you’re shooting for. Is there anything industry wide that needs to happen as far as mobile advertising in the big picture? Is there anything that needs to happen for you to reach that? Is there any like particular mile markers or goals, smaller goals that need to take place first? And also, in order to reach that $10 million, what kind of growth are you expecting from your ad platform? That seems to have a lot of potential and we’re wondering where you see that going. Thanks.
I’ll take part of that and then Ivan can take the second part. There’s nothing that we see that needs to happen from an industry milestone standpoint or timeline standpoint or product development standpoint or technological standpoint. Most of what is in place for these numbers to be realized by both the industry from a spend standpoint and ourselves, we believe we have in place -- that largely in place. Ivan, I don’t know if you want to comment beyond that?
I think when you look at what’s going on right now in the industry where Smartphone adoption has become well over 50% now and mobile is still in a nation state. When you look at the differential with time spent on media, the one that’s the furthest from a parity is mobile. You have less than – around 1% of the ad dollars, I guess 11% to 12% of your media time. That data represents billions and billions of dollars. So I think all of us in the mobile space that that is going to be an inflection point and that inflection point is yet to even become close to being hit. So the ad dollars are still there. They’re growing. We don’t see anything slowing that down. I think if anything we’re very optimistic that we’re approaching this from a very conservative aspect and believe that these numbers have a good capability of growing even faster than we’re calculating.
Yeah and it’s a good question related to, as Ivan just spoke, in terms of the dollars that are deployed in the mobile space. The numbers you hear today are like $2.5 billion. But just in the next three years, they’re projecting various industry monitors of the spend in the space, are projecting that the $2.5 billion could go to north of $25 billion. So no one has a crystal ball on it. Again we don’t see any roadblocks to the growth of mobile media. It’s an adoption as Ivan just stated. It’s an adoption consideration and we just have to be prepared to take advantage of that expanding adoption.
Yung Kim – Brean Murray Carret & Co.
Great. Thank you.
The next question will come from the line of Gerard Hallaren with Janco Partners.
Gerard Hallaren - Janco Partners, Inc.
Hi and I’m sure you had a lot of work this quarter and the numbers look quite good. I’ve got a couple of number kinds of questions for you. I noticed that receivables at 75 days and know that the business activity is pretty high going into the fourth calendar quarter which doesn’t line up particularly well with your third quarter. Can you give us a feel for where you expect to see receivables going forward? You said you expect a similar level, but help me understand that.
Gerard, thank you very much for the question and it’s good to hear your voice. Number one, our receivables continue to expand along the lines of our sales and historically -- I’ll let Tom comment further, but historically we’ve had an extremely strong collection rate. Our day sales outstanding, a little bit of reflection increase maybe in the seasonality, but we are…
Gerard Hallaren - Janco Partners, Inc.
That’s really what I was getting after.
Yeah. We’re extremely focused -- Gerald, we’re extremely focused on our cash collection on our working capital. We talk about it every day at the company. Myself, Tom and anyone else who is involved. Alan Levy, our new VP of Finance. So we are very, very attentive to it. We don’t see any problem with our receivables whatsoever. We do expect them to expand along the proportionality to our sales increases. But these are clients as we have said in our remarks, we have a 95% retention rate. The clients know us. We know them and we know who to call to make the collections.
Gerard Hallaren - Janco Partners, Inc.
Okay. And can you talk a little bit about your capital raising aspirations?
Yeah. We were very focused as I said on working capital. We have a plan. We are going to try to -- we are attentive to what our needs are. We are very conscious of what our balance sheet looks like and just as I said, in the IP area there is a lot going on. There is a lot going on in our -- as we need to attend to our balance sheet. It’s something we talk about at the board level and on an operating basis, on a regular basis. But we feel like our working capital is sufficient right now to get us to where we need to get.
Gerard Hallaren - Janco Partners, Inc.
Okay. So what you mentioned earlier was not imminent today or tomorrow type of raise?
No. I mean you know -- I just want to kind of repeat myself, Gerard. We are really on top of it and we are dealing with it. You know again our working capital needs are adequate because we have a very aggressive accounts receivable effort. And we are monitoring the situation very closely and we are going to adjust our working capital needs based on our growth opportunities. And every indication we have got, Gerard, is we are going to continue to grow robustly and we need to feed that need.
Gerard Hallaren - Janco Partners, Inc.
Yeah, absolutely. You had just mentioned something early on in your comments that kind of caught my ear. And it seems like you might be raising money sooner than later which surprised me. Last and final question is, have you settled with Goodwin and Procter?
I am sorry, we what?
Gerard Hallaren - Janco Partners, Inc.
Have you settled with or settled up with Goodwin and Procter?
We are in active conversations with Goodwin and Procter all the time. We have a mutually respectful and very productive operating relationship right now. And a significant portion of our last raise was utilized to better manage our AP with Goodwin and Procter. And we have -- the relationship is very strong and very positive. There is no issue there.
(Operator Instructions) Your next question will come from the line of Patrick Retzer with RCM.
Patrick Retzer - RCM Technologies
I just want to compliment you on executing your restructuring plan. It looks like you have chopped a lot of wood in a pretty short period of time. So congratulations there. And I also want to clarify a couple of things. It sounds like the IP, as far as dealing with monetizing the patents or whatever you end up doing with that, isn’t due to the delay in that or the time at stake hasn’t to do to a lack of interest but just due to making sure you make the best deal for shareholders. Is that correct?
That’s 100% correct, Pat. It’s really -- there is a -- as you know from your remarks, it’s a very complex area. And the complexity needs the attention of the experts we have got involved. We have a board member who is an extremely experienced and a competent patent attorney. We don’t look left or right without seeking his advice. And then on top of that there is the ongoing Goodwin Proctor work on behalf of all these different opportunities. And then we are constantly reviewing what's essentially a lot of variables on the economics of those opportunities. So we have to be smart about it and that’s what we are trying to do to deliver on shareholder value.
Patrick Retzer - RCM Technologies
Okay. And speaking of the board, have you given any consideration to adding some or some additional tech savvy type board members?
We are. We had one board member step down on 12-31. So we do have one or two openings on the board. We have an active list of candidates that have been proposed by the board members that we have got and as I mentioned some of them are steeped in their respective disciplines that can help us from an advisory standpoint. And so we have a number of resumes under consideration and candidates and obviously their resumes. And we expect to make an announcement in that area in the near term.
Patrick Retzer - RCM Technologies
Okay. And then you spoke about this earlier to a degree but just in general how would you characterize the trend of the business in the U.S.? Is it accelerating and ramping up? Is the growth rate sort of plateauing? What are your comments along those lines?
Thanks, Pat. It is a very, very dynamic space right now. Brands and their agencies are exploring all the opportunities in mobile media as Ivan just commented. You not only have an expanding platform of devices but applications on those devices and not only do you have the device expansion and the content that’s delivered across those devices and the time spent by individuals on those devices, but you also have population growth in the mobile space. You have got certainly migration of the desktops on to mobile. But underneath that, from a core standpoint, you have got an expanding domestic adoption of smartphones and tablets related to mobile use, but it’s worldwide.
So you have got the core -- the already existing user of mobile and then you have got the new entry mobile user.
Bob, If I could just jump in here for a second. Pat, I think one of the things that all of us listening on this call would agree, that there is probably nothing that you have that’s within three feet of you every single minute of the day in your mobile. Marketers are just now starting to understand and embrace what that means. And the capabilities of what that means are expanding literally by the day. I think that we are just scratching the surface on what the important of mobiles were to do and what the opportunities that mobile will be. And with that, I think that you can assure that the industry itself -- I happen to be at the CES Show right now and I will tell you that mobile’s front standard. You know Ford this year were presenting with all their activity that they are doing within their cars. In my opinion, it’s not going to do anything but continue to accelerate at a faster and faster pace.
Our next question will come from the line of Alejandro Lavin with Plough Penny Partners.
Alejandro Lavin – Plough Penny Partners
I just would like to clarify on the expense side. So basically you say that you are -- you are cutting expenses in terms of [JL] and administrative going forward. But on the side of sales and marketing and also the technology and development expenses, would you expect those to also keep declining going forward?
I will take that. Thanks for the question, Alejandro. We are really -- I think Bob has talked, we are focusing on, besides cutting expenses, trying to increase our revenues and invest in the areas of revenue growth, and have discussed some of the efforts we have made to do sales. And there are probably other, you know I have mentioned we are looking at couple of other areas to do some more expense cuts. But I think if you look, you will see, we will provide some more detail in the Q, but we are looking at most of the cuts having come out of the overhead areas. So we will probably see more efficiencies coming out of those areas but probably not lower spending in those areas.
(Operator Instructions) There are no further questions at this time. Please proceed with your presentation or any closing remarks.
Okay. Well, I guess that’s the questions of the day. Thank you much everyone for joining us today and we look forward to talking to you in the future. Stephanie, do you have any closing comments? Okay. We will sign off. Thank you, everybody.
Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your line.
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