Wireless Ronin Technologies, Inc.(RNIN) Q4 2012 Results Earnings Call February 26, 2013 4:30 PM ET
Scott Koller - President and CEO
Darin McAreavey - Senior Vice President and CFO
Erin Haugerud - Manager, Communications and IR
Good afternoon. Welcome to Wireless Ronin Technologies' Fourth Quarter and Fiscal 2012 Earnings Call. My name is Tracy, and I will be your conference operator this afternoon.
Before we begin today's call, I'd like to remind everyone that this call will be available for replay starting later this evening. A webcast replay will also be available via the link provided in today's press release as well as available on the Company's website at wirelessronin.com.
I'd now like to turn the call over to Erin Haugerud, Wireless Ronin's, Manager of Communications and Investor Relations. Please go ahead.
Thank you and welcome to Wireless Ronin's fourth quarter and fiscal 2012 earnings call. With me today are Scott Koller, President and CEO and Darin McAreavey, Senior Vice President and CFO. Following Scott's opening remarks, Darin will review our financial performance for the quarter and year and turn the call back over to Scott for an operational update and business outlook. Then we will open up the call to your questions. To access today's webcast, please go to the Investor Section of the corporate website at wirelessronin.com.
Please note that the information presented and discussed today includes forward-looking statements made under the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Our actual results in future periods may differ materially and you should not attribute undue certainties to our forward-looking statements. Risk and uncertainties that could cause our actual results to differ from those expressed or implied by forward-looking statements, including those set forth in the cautionary statements and the Company's current report on Form 8-K filed with Securities and Exchange Commission on January 4, 2013.
In addition, our comments may contain certain non-GAAP financial measures including non-GAAP operating loss and non-GAAP operating loss per share. For additional information, including reconciliation from GAAP results to non-GAAP measures, how the non-GAAP measures provides useful information and why we use non-GAAP measures, please see the reconciliation section of our press release, which appears on our corporate website.
Now, I'd like to turn the call over to President and CEO, Scott Koller. Scott?
Thank you, Erin. Good afternoon, everyone, and thank you for joining us on today's call. In 2012 Wireless Ronin's made significant progress. We continued growing and diversifying our sales pipeline in our primary verticals of food service, retail and automotive. We advanced our RoninCast software platform throughout the year and with the recent release of RoninCast 4.0, we have now completed the strategic plan we announced in 2011 to transition Wireless Ronin from a digital science company to a true omni-channel marketing technologies company.
Our financials also reflect our continuous focus on cost control and operational scalability. This is evident from the several milestones we achieved for the year including record recurring revenue and gross margin, as well as the lowest level of operating expenses as a public company. These milestones demonstrate our [session] transition from a hardware centric company to a marketing technology solutions company, which includes the adoption of higher margin software and services business model.
I will be back to talk more about our operational highlights and business outlook, but first I would like Darin to walk through our financial performance for the quarter and full year 2012. Darin?
Thanks, Scott, and good afternoon everyone. Now to our financial results, revenue in Q4 of 2012 increased 5% to $1.6 million from the same year ago period. For the full year revenue was $6.7 million compared to $9.3 million in 2011. The annual decrease was primarily attributable to fewer hardware orders offset by an increase in sales of our marketing technology solutions and services.
Recurring revenue in Q4 of 2012 in the Company's hosting and support service was $491,000 or 31% of total revenue. This compares to $422,000 or 28% of total revenue in Q4 of 2011. For 2012 recurring revenue increased 22% to a record $2 million or 30% of total revenue, compared to $1.6 million or 17% of total revenue in 2011. The increase was driven by a continued expansion of support services through our network operation center.
Gross margin in Q4 of 2012 was $885,000 or 55% of total revenue compared to $446,000 or 29% of total revenue in Q4 of 2011. The 2012 gross margin was $3.7 million or 55% of total revenue compared to $4.1 million or 44% of total revenue in 2011. The gross margin percentage improvement was due to a higher proportion of marketing and technology solutions and services versus hardware sales.
Our ability to maintain these levels of gross margin on a percentage basis can be impacted by shifts in our sales mix. However, we believe that over the long-term our gross margin on a percentage basis will continue to increase as our recurring revenue grows.
Total operating expenses in Q4 of 2012 was down 1% to $2.1 million in the same year ago period. For the full year total operating expenses decreased 16% to $9.1 million. As Scott mentioned in 2012 we experienced the lowest quarterly operating expense level since the Company went public. The decreases were driven by costs controls including significant reductions of sales and marketing expenses as well as G&A expenses.
Net loss in Q4 of 2012 totaled $1.2 million at $0.24 per share. This is an improvement from the net loss of $1.7 million or $0.41 per share in Q4 of 2011. Net loss for the fourth quarter of 2012 included $80,000 of non-cash stock compensation expense versus $48,000 in Q4 of 2011. Net loss for 2012 totaled $5.4 million or $1.14 per share. This was an improvement from the net loss of $6.7 million or $1.72 per share in the prior year. Net loss for 2012 included $484,000 with non-cash stock compensation expense versus $740,000 in 2011.
Non-GAAP operating loss in Q4 of 2012 totaled $1 million or $0.21 per share. This was an improvement from a non-GAAP operating loss of $1.5 million or $0.37 per share in Q4 of 2011.
Now turning to the balance sheet, at December 31, 2012 we had $2.3 million in cash and cash equivalents compared to $3.5 million at the end of the prior quarter. Despite the robust pipeline and without a significant increase in short-term revenues we require additional capital resources to fund our operations beyond May of 2013. The Company filed a shelf registration statement with the SEC, which became effective on January 31, 2013. However, at present we have no commitments for any additional financing.
In addition the management has been aggressively working with the team of Rock Capital Partners on initiatives designed to address the liquidity needs of our Company including consulting on financing options, identifying opportunities to license RoninCast software and considering other strategic alternatives.
This completes my financial summary. For a more detailed and complete analysis for these results, see our Form 10-K, which we expect to file on or about March 1, 2013.
Now I would like to turn the call back over to Scott to provide an overview of our operational activities and outlook. Scott?
Thanks, Darin. As I mentioned in my opening comments we made significant progress on our strategic goals in 2012. In addition to achieving record recurring revenue and gross margin as well as optimizing our expense structure we also launched several major deployments. These included implementing digital marketing solutions for Buffalo Wild Wings, Boston University, Villanova University, Burgerville and ECOtality among others. We also released several RoninCast software upgrades that enhanced our proprietary software platform as well as developed strategic industry relationships to help us further penetrate our key verticals.
Now I would like to talk about some of these events in more detail. In our automotive vertical we received $773,000 in orders from Chrysler last October. The order runs for annual hosting, maintenance and support as well as $125,000 for additional integration and content work. This renewed contract demonstrates Chryslers continued confidence in our additional marketing solutions and that our products and services bring value to consumer experience ultimately driving sales for our customers and providing recurring revenue for Wireless Ronin.
The iShowroom program for Chrysler serves as a prime example of our integrated marketing technologies platform. iShowroom has evolved to meet the needs of Chrysler and its dealers for more than 10 years, which is why Chrysler continues to invest in the future of this valuable sales tool. We continue to work closely with Chrysler to rollout new marketing capabilities to enhance consumer interaction. We anticipate that similar programs will create even greater value for other existing customers as well as a more attractive value proposition for prospective customers as they evaluate and pilot our products.
During 2012, we continued to grow our customer base end products with wins in the QSR and food service verticals. As I mentioned these include Buffalo Wild Wings, Boston University, Villanova University and Burgerville. However our recently filed 8-K we were selected by International Food Service provider to deploy digital signage solutions to new franchise locations. This client will also actually market our digital signage solutions to more than 2000 existing franchise locations. This customer plans to open approximately 300 new franchise locations during 2013.
A key driver in securing this major win was our recently released RoninCast 4.0 software platform, which ensures consistent messaging, brand positioning and advertising clients across the network of diversified locations. We are eager to share more details about this client and project in the future as we continue to deploy our interactive media technology, we are highly confident in our ability to enhance the customer experience increase loyalty and drive new business for this new client.
In the fourth quarter of 2012, we recognized $225,000 of revenues from Buffalo Wild Wings as we rolled out our digital marketing solution, (Inaudible) of more than 800 nationwide locations. They engaged us to enhance the national trans-neighborhood atmosphere and based on our (Inaudible) provide customized restaurant experiences including [NGO] promotions that increase consumer engagements.
We continue to work close with buffalo Wild Wings, to create unique content that captivates consumers through seasonal themes timely events promotions and interactive constant applications. Before I reference the food service update, I think it's important to note that ARAMARK placed a $270,000 renewal orders for annual hosting an ongoing services to support the solutions we have deployed in 273 locations in the U.S. and Canada. Like, Chrysler, this renewal reflects ARAMARK's confidence in our products and services to continue to support and grow its network.
Now turning to the retail vertical. In the third quarter customer orders sales, account management team began actively selling a new digital signage solution called Thomson Reuters Knowledge Direct Digital Signage to retail financial services locations worldwide. Our end to end solution is currently deployed at more than 440 Thomson Reuters locations in over 50 countries. Since the deployment we are seeing significant traction in this important vertical and we look forward to continue working with Thomson Reuters sales team to further penetrate this 300,000 location market opportunity.
Altogether, these deployments validate Wireless Ronin's capabilities beyond traditional and digital menu boards and so how we can get valuable partners for organizations looking to enhance their customers' experience, increase customer loyalty and drive new business.
In 2012 we entered into a strategic partnership with SmartReceipt and more recently customer channels allowing us to offer new and existing customers' unique customized in-store guest experiences. In September of last year we partnered with SmartReceipt to provide dynamic involving coupon offers and other valuable information to consumers at the point of sale. This partnerships allows us to offer the SmartReceipt platform as an enhancement to our dynamic digital menu boards, interactive social media and promotional displays powered by RoninCast.
In January of this year we partnered with Custom Channels, a leading business music service provider to offer a new customized digital music solution that integrates with Wireless Ronin's market leading RoninCast software platform. We worked closely with Custom Channel's to develop 30 unique music channels for a broad range of atmospheres. They include a variety of (Inaudible) music genres from classical to blues to jazz and modern rock.
As with RoninCast visual capabilities the integrated solution offers [audio Dave Harkins] playlist, thus set the appropriate mood for the time of day. The results are unique and unified experience across multiple locations. Integrating Custom Channels music service with our RoninCast software platform allows companies to share either uniform or more demographically relevant visual and audio content across multiple locations thereby ensuring a consistent guest experience across the concept.
During 2012 we made major upgrades to our flagship marketing technologies platform RoninCast, designed to increase functionality while reducing the cost of inflation and operation. As we announced last week RoninCast 4.0 software leverages html5 capabilities to more cost effectively deliver robust digital content to current, and emerging marketing technology platforms, including digital signage, interactive kiosks, mobile, social and web.
The new browser based functionality also drives ROI, with the ability to use lower cost players along with decreased network demand and server requirements RoninCast 4.0 also enables further integration of mobile devices with in-store digital technologies giving customers the opportunity to engage with the brand using their own smart device, example applications include, filtering of fast food menus for [allergies], playing an interactive game while waiting for services at the store, or downloading dynamic coupons from a digital display.
This allows customers to improve the customer experience drive purchase decisions, and deliver more relevant offers which ultimately increase loyalty and drive sales. RoninCast 4.0 software demonstrates our commitment to continued technology investments to bring our customers unmatched digital marketing functionality, given a lighter hardware and bandwidth requirements we estimate that RoninCast 4.0 software platform can substantially reduce the initial investment and improve the typical payback period. We believe that RoninCast 4.0 software platform will continue to set our digital marketing solutions platform apart from the competition paving the way for a broader adoption for existing customers and generating new customer wins.
RoninCast 4.0 is officially scheduled to released next month. Additionally we are debuting RoninCast 4.0 at this year's Digital Signage Expo, starting today through Thursday in Las Vegas. At DSE, RoninCast 4.0 software will also be on display in Samsung's booth. Samsung is showcasing it's nee smartphones platform an open-source digital signage platform designed to facilitate the growth of new applications ecosystem with leading software developers and content providers like Wireless Ronin.
In addition to our continued investment and RoninCast software integrating third party products like the aforementioned, SmartRecepits, and Custom Channels also reflects our commitment to making RoninCast a true omni-channel platform.
In closing, I would like to make a few key points. I am not only the President of Wireless Ronin, I am also a concurrent fellow shareholder, our executive team, employees and Board of Directors are working very hard to make Ronin Successful. And I believe that beyond our short-term financial results we have come a long way. With perfect hindsight we would do some things differently than we did several years ago. The current management has acted diligently and (Inaudible) to transform the company making it more viable and competitive.
We are all working hard to [manage] projects, grow revenue and get Ronin to a profitability as fast as we can. And to be transparent as we can in giving relevant information into our investor's hands. We continue to work with our clients to exterminate information about our projects with those clients. In addition, the company continues to work diligently on cost control and operating efficiencies which help turn an additional $700,000 from annual expenses out of the company by the end of 2012, primarily through automation and scalability initiatives. These cost reductions have decreased our quarterly breakeven to less than $3.5 million.
Our expectations for 2013 remained strong as we build on the operational financial momentum we achieved in 2012. This outlook is based on our growing sales pipeline in all three of our key verticals, automotive, food service, and retail. And as you can see by a recent activity our efforts continue to produce results. We believe this traction will accelerate our company's growth in 2013.
With that said it's imperative that we make sure that we can service our key clients, grow our revenues and invest in our technology and have the financial runway required to get this company to profitability and beyond. Once again I would like to thank our investors for their continued support and patience as we focus on growing Wireless Ronin.
Now, with that we're ready to open the call to your question. Operator? Please provide the appropriate instructions.
Thank you, sir. (Operator Instructions) Thank you, ladies and gentlemen as there are no questions at this time, this concludes our question-and-answer session. Thank you for joining us for our presentation today. This concludes the call. You may now disconnect.
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