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Summary

  • Voltari Corporation released its Q1 2014 results on May 15, 2014, which saw revenue grow by 29 percent to $2.63 million. $2.03 million was reported in Q1 2013.
  • The company’s capital expenditure in developing software for real-time analytics increased to $1 million in Q1 2014, which will enable the company to build a strong pipeline of products.
  • The company has no debt.
  • Voltari, through its predictive analytic platform based solutions, can expect to benefit from the overall industry growth.

Voltari Corporation (NASDAQ:VLTC) is a New York based mobile marketing and advertising solutions provider. The company focuses on providing efficient relevancy based mobile ads for its customers. It has proprietary platforms which use real-time predictive analytics on user actions to enable businesses reach the right target audience.

Voltari Corporation was founded in 2012 as a business vertical of Motricity. After reorganization in April 2013, Motricity became a wholly owned subsidiary of Voltari Corporation.

Significant Cost Cuts

Voltari Corporation released its Q1 2014 results on May 15, 2014, which saw revenue grow by 29 percent to $2.63 million. $2.03 million was reported in Q1 2013. Also of note is that the company closed its mobile hosting services to wireless carriers in October 2013. Therefore, the additional $0.6 million in revenue in the current quarter was from mobile marketing services only. Operating expenses reduced by 13 percent primarily due to the reduction in administrative expenses from $4.5 million in Q1 2013 to $1.6 million.

Administrative expenses in Q1 2013 were high due to SEC filing expenses for its stock split. Third party expenses, which includes fees paid to app developers and publishers for using their spaces for advertising, increased 30 percent in Q1 2014.

Expenses related to data centers for previous carrier service business of $1 million is included in current quarter expenses, excluding which the IT asset related expenses was only $0.3 million.

The company's capital expenditure in developing software for real-time analytics increased to $1 million in Q1 2014, which will enable the company to build a strong pipeline of products to improve efficiency of predictive marketing.

Fundamentally Speaking

The company has no debt on its books. The company financed most of its investments using cash generated from equity capital raises. The company raised $27 million by a rights issue in October 2013 and will look forward to raising capital from equity market to fund its operations in 2014.

The company's loss per share based on continuing operations decreased to $1.35 per share compared to $1.83 reported in Q1 2013. According to analysts, Voltari has the potential to begin locking in profits by 2016.

General Outlook

Mobile marketing and advertising is a high growth segment with a potential market size of $42 billion by 2017, according to a report by Gartner. Mobile ad spending in 2014 was $18 billion with maximum share of spending in North America, which is Voltari's primary market.

Voltari, through its predictive analytic platform based solutions, can expect to benefit from the overall industry growth. The market also has numerous competitors, which makes the next two years very important for the company to gain some share of the market.

Voltari captured five high value clients in Q1 2014 contributing 92 percent of the booked revenue. New client additions and revenue growth will have to be tracked closely for positive signs in 2014.

Conclusion

Voltari closed June 3, 2014 at $2.45. The stock had been trading in the range of $3.5-$4 until release of results on May 15, 2014, after which the price fell to a low of $1.60. However, the stock soon recovered in the last couple of sessions to rise to $2.45.

Based on 2013 revenue, the stock had been trading at a price to sales (P/S) multiple of 1.7x. At the same valuation multiple and the Q1 2014 revenue gives a price estimate of $4.5, which indicates the price will recover further if Voltari shows consistent revenue growth and operating margin improvement in upcoming quarters.

Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Source: Voltari Corporation Recovering After Recent Plunge