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Executives

Todd Wilson - Chairman & CEO

Doug Stovall – President & COO

Analysts

Jon Hickman - Ladenburg

David Wilmerding - Red Comb Investments

John Baker – JCB LLC

Bill Musser - New Frontier Capital

Hipcricket, Inc. (OTCQB:HIPP) Q1 2015 Results Earnings Conference Call July 9, 2014 4:30 PM ET

Operator

Good afternoon. Welcome to Hipcricket's Fiscal First Quarter 2015 Results Conference Call. My name is Yolanda and I will be your operator today.

Joining us for today's presentation is Hipcricket's Chairman and CEO, Todd Wilson and President and COO, Doug Stovall. Following their remarks, we will open up the call for your questions.

Then before we conclude today's call, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call, as well as information about use of the company's use non-GAAP financial information.

I'd like to remind everyone that this call will be recorded and made available for replay via the link in the investor section of the company's website.

Now, I'd like to turn the call over to Hipcricket's, Chairman and CEO, Mr. Todd Wilson. Sir, please proceed.

Todd Wilson

Thank you, Yolanda, and welcome everyone.

As many of you know the Board of Directors recently asked me to accept the role of CEO of Hipcricket. Before I begin talking about Q1 results, I want to comment briefly on where we are today, what attracted me to this position and what I've learned in my first month at the helm.

During the second half of last fiscal year, the company's revenue fell significantly below its forecast and expenses became out of balance. This resulted in the company burning more cash than expected, as such despite a solid Q1, the Board of Directors recently asked me to increase my involvement and assume the role of CEO of Hipcricket.

I first joined the Board of the company in 2010 and since that time, the company has realized phenomenal growth, transforming from a small company, trying to build an operating business into what we are today a nearly $30 million mobile engagement and analytics company with a customer base of industry-leading brands.

While our progress has not been perfectly linear, over time we've been able to establish an enduring and growing company despite the many external and internal challenges we faced. Our team has persevered and adapted into what I believe is now a much stronger, more nimble and more focused organization.

The three colors of our success have been and will continue to be our strong technology platform, our stable and growing blue chip customer base, and perhaps most importantly of all, our world class team of employees.

I believe that now more than ever before we are well positioned to capitalize on the multi-billion dollar mobile marketing and advertising market, a market that continues to evolve and expand.

Given this tremendous market opportunity coupled with our focus and leaner highly capable team, I believe Hipcricket will be able to deliver long term revenue growth of more than 20% annually. Now, I'd like to shift to the results of the first quarter of fiscal 2015.

In Q1 revenue grew to $7.3 million an increase of 25% over Q1 last year. This was in line with the preliminary results that we issued in June and represents the highest revenue for any Q1 in our company's history.

This increase is driven by new customer acquisitions, as well as the extensions of existing customer activity. The strong revenue growth reflects the strategic decision the company made late last year to strengthen its sales team and further enhance its product offering.

As we previously mentioned, we anticipate a shift in our sales mix towards mobile advertising which has been a rapidly growing part of our business. Q1 was consistent with this trend.

Mobile advertising revenues accounted for 58% of total revenue. This compares to 36% in Q1 last year and represents a 100% growth. Mobile marketing revenues for messaging, mobile web, mobile applications and licensing accounted for 42% of total revenue in Q1 compared to 64% in Q1 last year. 83% of these mobile marketing revenues were platform based SaaS revenues.

Our first quarter bookings which we define as a dollar volume of contract signed including new orders and renewals increased 38% year-over-year to $8.8 million in Q1. Approximately 73% of bookings were new sales to new and existing customers with the balance representing license renewals.

At quarter end our backlog of science contracts totaled $20.4 million which was up 7% from Q1 of last year.

Gross profit in Q1 was $3.7 million or 50% of revenue. This is up on a nominal basis from $3.3 million in Q1 last year. However, our gross profit margin was down from 56% last year due to a larger percentage of sales for mobile advertising. Doug will talk later about several initiatives that are underway that we believe will help grow our gross profit margin over the next several quarters.

Our GAAP operating expenses in Q1 decreased to 2% to $9.1 million and we continue to remain focused on effectively managing costs and reducing overhead. To provide greater insight into our operating expenses, we report non-GAAP operating expense metric. We define this metric generally as total operating expenses less non-cash operating expenses in severance accruals.

On this basis our non-GAAP operating expenses in the first quarter were $6.7 million. We believe that as we continue to execute our operating plan, our cash operating expense will decrease substantially in the third quarter.

Our net loss in Q1 improved to $5.4 million or $0.04 per share with a net loss -- from a net loss of $6 million or $0.05 per share in Q1 2014.

In terms of improving our bottom line since being appointed CEO, my first initiative was implement some tactical changes to our operating plans. These changes included optimizing our expense structure and accelerating our target for EBITDA positive operations while continuing to foster profitable revenue growth.

We plan to achieve this by focusing our sales effort on higher value customers and products, leveraging our technology staff to maintain and enhance our product offering and consolidating certain non-core personnel positions. We are aggressively implementing these changes and expect to begin seeing the full affect on a quarterly basis in our fiscal third quarter.

Now, turning to the balance sheet. At quarter end we had $1.6 million of cash and cash equivalents and approximately $1.8 million drawn on our Silicon Valley Bank credit line.

Subsequent to the quarter end on June 2nd we entered into a financing arrangement with FastPay. This new credit line will allow -- has allowed us to repay our outstanding balance due to Silicon Valley Bank. It will also help support our operations and growth plans going forward.

Regarding liquidity, we continue to manage our existing capital in line of credit diligently. I'm working hard with the entire management team to drive sales and manage the expenses so that the company can reach cash flow profitability with the availability we currently have.

Although we remain committed to achieving cash flow breakeven in the second half of the year, we will continue to evaluate select opportunities to access additional capital. Now before I turn the call over to Doug, I would like to address a few additional topics.

First, I'd like to update you on our ongoing strategic process with Canaccord Genuity. In February we announced the engagement of Canaccord to explore and evaluate strategic alternatives with a view to enhancing shareholder value. We continue to work closely with them and we'll keep you apprised when there is a meaningful update.

With respect to intellectual property, last month the Federal circuit issued its opinion which affirmed the District Court's decision that Yahoo! did not infringe on selected patents.

We currently do not have plans to file a petition for our panel rehearing. Although Federal Court's decision was disappointing, it does not impact our operating business or plans to build a growing and profitable company, and to be sure it does not affect our technology platform or the increasing demand we're seeing from customers and prospective customers.

While we currently do not have plans to pursue further patent litigation, in the coming months we do plan to evaluate opportunities to monetize our patent portfolio.

Lastly, Tom Virgin our CFO since 2007 officially left Hipcricket at the end of last week. I'd like to thank him for his dedication and contributions to Hipcricket over the years, for the near term, we plan to fulfill the CFO duties and responsibilities with our internal resources and highly capable finance team.

Now with that, I'd like to invite our President and COO, Doug Stovall to provide an update on our technology and product initiatives. Afterwards, I'll talk more about our business outlook and objectives for fiscal 2015. Doug?

Doug Stovall

Thank you, Todd. For last year we've worked very hard to optimize our operating efficiency and enhance the feature, features of the AD LIFE platform. We are very excited about our opportunities as we sit at the epicenter of three of the most game-changing technical advancements in recent history: mobile, cloud computing and big data.

Recently Hipcricket was highlighted in the Frost & Sullivan industry report related to the mobile consumer lifecycle and ROI. It stated, Hipcricket appears to be on the forefront of this approach by delivering a holistic view of all mobile interactions, the brands can make better data driven decision that ultimately drive better results.

This is a testament to the direction of our platforms going and the work our team has done to put us in this leadership position. This report is available for download on our website.

Our technology vision has not changed. It is to be a mobile engagement and analytics company that provides proprietary first party data along with third party data from the key strategic partners to provide more informed mobile marketing and advertising campaigns for our customers and I am happy to say we're here.

Our ability to generate record revenue in fiscal Q1 was due to our sales team's ability to secure new customer wins, expand and expand activities with existing customers. A key contributor to our success during the quarter as well as going forward is the emerging analytics features of our AD LIFE platform.

Our continued success this year will be driven by our ability to effectively sell our three core product lines, mobile marketing, mobile advertising and analytics. Our sales team is fully focused on expanding our customer base and upselling these products to our existing customers.

This is keeping with our strategy of focusing our products toward higher growth opportunities, while deemphasizing slower growing, lower contribution product lines. Meanwhile our product management and development teams are working to introduce new innovative solutions and enhancements to the AD LIFE platform. These are designed to draw incremental revenue this year.

Another key to our success this year will be our ability to develop strategic partnerships that open up new sales channels and opportunities for the company. Along these lines we recently launched a new partnership with AT&T that enables advertisers and publishers to increase customer engagement and conversion by covering the mobile data fees, customers accrue when downloading branded content.

Our mobile marketing and advertising leadership along with our longstanding brand and agency clients made us an ideal partner for AT&T. Mobile as a marketing channel will continue to grow with the proliferation of connected devices and the narrowing of the massive delta between media consumption and ad dollars.

The recent IDC report finds that 79% of U.S. smartphone users have their devices with them 22 hours a day which highlights a larger trend that smartphones have become an integral part of the daily lives of many consumers.

This intimacy and immediacy we have with our connected devices enables us much more fluid interactions whether they are short snacking sessions, for example getting news and alerts, or interacting with brands.

This level of connectedness enables consumers to engage and discover and interact in wholly new ways. You can expect to see more innovation out of Hipcricket in this area over the next several months.

In addition to the opportunity we have to grow revenue, I’d like to hit briefly on a few operational initiatives which run our way. The goals of these initiatives are to improve our margins starting in Q2.

Over the last several quarters we've seen an increasing role of exchanges in real time bidding platforms in the distribution of mobile advertising inventory, as such we have continued to evolve our AD LIFE platform to tie directly into these supply side vendors.

These direct connections when combined with the strength of our analytics platform and our existing [inaudible] relationships allows us to source inventories more efficiently and focus on targeting the right audience at the right time on the right device and throw out the results our advertisers seek.

The integration of our proprietary data with our AD LIFE platform allows us to connect our advertisers with our target audiences at appropriate times. The strengths of our 10 years of experience and 400,000 campaigns is one of our greatest assets.

Also we've augmented our data collection suite of service. This includes enhances around scalability, supportability, and improved accuracy of our tagging solutions. We've added a mobile in app STK solution, which provides valuable user interaction data to our clients. Our leveraging the device data users can gain key insights to help drive more effective campaign engagements.

Finally, we are actively talking to our customers and prospects about our powerful analytics platform. We receive strong feedback thus far, for example the platform has already been an important factor in winning new business.

One example of this is the six figure mobile advertising bill. As a result of these operational initiatives will allow us to reduce the cost and openly increase the performance of our AD LIFE platform.

Now, I'd like to turn the call back over to Todd.

Todd Wilson

Thanks Doug.

Before I begin the outlook for Q2 and the balance of the year, I'd like briefly talk about another one my key objectives as CEO to improve shareholder communication and increase transparency.

I'm keenly aware that regular and consistent communication were critical component to the creation of sustainable shareholder value. So I firmly believe this is an area we're going to improve on and we show.

For competitive reasons or current confidentiality unfortunately we can't reveal everything we're doing or planning. However I'm committed to keeping our shareholders up-to date on our progress and developments in our industry to proactive investor related communication program we recently launched.

As part of this program we plan to increase the frequency of press release industry white papers as well as highlight mentions of Hipcricket in the media.

We're not already on this distribution list, I encourage you to sign up today. You can do so in multiple ways using the mobile device you can simply text the words news, to 24474 to receive news via emails you can send an email to Hip at Liolios, liolios.com with the subject line opt in, or go to the Hipcricket, log on our website and subscribe. You can also follow us on Twitter and like us on Facebook.

Now, for our outlook for fiscal Q2 and the full year. The operating plan we're executing in Q2 has three key elements. Greater focus on product ones to produce profitable revenue, use of technology to drive down our product delivery costs and last but not least improve operating efficiencies.

This plan will be substantially rolled out by the end of Q2 and as such we believe Q2 will be a transition quarter operationally.

Given the seasonality's of mobile advertising business in the work we're doing in Q2, we expect revenues for Q2 to be roughly flat this Q1 of this year. Like many companies in our industry we do not intend to provide annual guidance. We can say though that we expect fiscal 2015 to be a year of double digit revenue growth driven by industry expansion, new customer acquisitions and increased equity within our existing customer base of global companies and brands.

We believe the changes we are implementing will allow us to drive revenue growth in 2015 as we realized operational efficiencies and achieve positive EBITDA from operations for Q3 and the second half of the fiscal year.

Consistent with our objective both Doug and I are only eligible for our annual bonuses if we're able to achieve this goal.

Additionally to assist the company and managing short term liquidity, I'd like to differ half of my salary during our second fiscal quarter and the Board has agreed to differ all of its compensation for two quarters.

In summary, I'm only a few weeks into the CEO role. I'm incredibly impressed by our entire organization from top to bottom and how they have committed to achieve our near term and longer term objectives.

I'm encouraged by our initial progress but understand we have our work cut out for us. We realize it's important that we act quickly and execute flawlessly in order to capitalize in the attractive opportunities on the horizon.

Hipcricket is transitioned is fundamental of capturing the next phase of growth in mobile marketing spend. I'm confident that we will successfully execute on our plans and emerge as a growing and profitable industry leader.

Now with that, we're ready to open the call for your questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) We'll hear first from Jon Hickman with Ladenburg. Please go ahead.

Jon Hickman - Ladenburg

Hi. I have a couple of questions. Can you hear me okay?

Todd Wilson

Yeah Jon, hi, how're you?

Jon Hickman - Ladenburg

So if you’re going be cash flow breakeven in third quarter, that’s your November quarter, right?

Todd Wilson

Correct.

Jon Hickman - Ladenburg

Like what's the target revenue to get there, is it $9 million, is it $10 million? $9.5 million, $8.5 million…

Todd Wilson

Jon, we have taken operating expenses down [two step] [ph], and the first comment is we're going to work to get there regardless exactly where revenue is based on our current expense base it is about $8.5 million is where we get to our breakeven.

Jon Hickman – Ladenburg

Okay. So can we talk about your expense base for a minute, so expenses actually went up about $1 million and I understand there is severance there, but I was kind of modeling for expenses to be, well not accounting the severance expense, but to be flat with last quarter. Can you elaborate on where the – with your intent to reduce expenses particularly why in the SG&A line were they higher, or the G&A line?

Todd Wilson

Sequential quarters or year-over-year, Jon, I'm sorry.

Jon Hickman – Ladenburg

Sequential.

Todd Wilson

Yeah, sequential, I'm looking year-over-year here.

Jon Hickman - Ladenburg

It was 2 million last year and 2.9 this quarter.

Todd Wilson

On our SG&A.

Jon Hickman – Ladenburg

On your G&A line.

Todd Wilson

Yes, a lot of the G&A when we look at that kind of our internal operating expenses, there is a couple of different lawsuits that are underway currently, and I know that our legal expenses – I’m pulling up the sequential quarter right now, I have the year-over-year in front of me.

The legal expenses were an increase year-over-year and this is non IP related legal expenses, Jon, it’s just a couple of existing lawsuits that are out there. And then the other big one was some severance cost obviously.

Jon Hickman - Ladenburg

Okay. That was for your former CEO right.

Todd Wilson

Yes. We include all of that severance cost in Q1.

Jon Hickman - Ladenburg

Okay. So going forward you plan on having an expense structure by Q3 that with $8.5 million revenue line you can breakeven?

Todd Wilson

Correct. And that will around 5 million – would be around $5 million a quarter of operating expenses, Jon.

Jon Hickman - Ladenburg

Okay. So now with the guidance you just gave us for roughly flat this quarter so that there is essentially no growth from last year?

Todd Wilson

We guided flat in Q2 with Q1 which would be a slight decrease year-over-year on revenue.

Jon Hickman - Ladenburg

So I guess that’s a little puzzling to me, given the growth in ad revenues et cetera, et cetera. Can you explain why it's flat or why you're expecting that because I think there was a Mondelēz contract last year?

Todd Wilson

Yes, it really has to do with the comp issue year-over-year. We had two big customers one of which was Google Mondelēz which is a big Q2 customer for us last year and so it was more a comp issue year-over-year last year our Q2 was strong on a couple of big customer wins and this year I think it's going to be okay, but doesn't have big customer wins in it.

Jon Hickman - Ladenburg

So you said you're expecting double-digit growth in 2015 now?

Todd Wilson

For the year, correct.

Jon Hickman - Ladenburg

For the year, so that means above 10 but you're not going to elaborate it any further.

Todd Wilson

Correct, correct.

Jon Hickman - Ladenburg

Okay. So, could you talk a little bit about competition. I mean there is a lot of different ad networks, there is a lot of real time bidding engines, you know mobile is really hot, everybody is trying to get into it; could you just talk a little bit about when you go in front of a brand how do you get their business versus someone else?

Doug Stovall

Yeah, Jon, first of all nice to speak with you. And this is Doug speaking. So the competition obviously is one of the key challenges we faced on a daily basis and when we're in front of brands what we talk a lot about is our core offerings, the mobile advertising coupled with the mobile marketing and specifically within that it's our SMS component coupled with analytics.

And the fact that we are end to end solution for our brand customers and our advertising agency customers, is one of the key points that makes us stand out in the power and value of our first party data and the ability to optimize those campaigns across all of these, each of those mobile channels is what sets us apart and helps us win deals.

But you're right, there are a lot of folks out there in the mobile ecosystem from a competitive perspective and you named a few there.

Jon Hickman - Ladenburg

Okay. Then I'm going to try and get just a little more information out of you on the back half of the year. So, you did 7.3 this quarter essentially the same for the August quarter. You expect some acceleration in the back half of the year in revenues?

Todd Wilson

We do.

Jon Hickman - Ladenburg

We do, okay.

Todd Wilson

Yes, we absolutely do.

Jon Hickman - Ladenburg

And is that based on the current pipeline or can you elaborate on that?

Doug Stovall

Yeah, we can. Yes, it is based on our current - a number of criteria going into that. A number of reps that are - and the size of those reps pipelines, the overall size of our pipeline, but also the type of deals that fall into that and meaning mobile marketing deals versus mobile advertising deals and how you recognize revenue differently on those, and you take all of that into consideration. That's where we come up with our position that we'll be growing third quarter and fourth quarter this year.

Jon Hickman - Ladenburg

And then your backlog, is that a number that's going to be recognized in the next 12 months or the next, is that the three year…?

Doug Stovall

No, that actually spans a few year – I think it’s three years I believe…

Todd Wilson

We have some contracts that are as long as three years. We don't talk about an average life of the backlog but there may be some that go out two plus years, mostly probably in the next 16 months.

Jon Hickman - Ladenburg

Okay. Let me let someone else ask questions.

Todd Wilson

Thanks Jon.

Doug Stovall

Thank you, John.

Operator

(Operator Instructions) We'll move next to John Baker with JCB LLC. Please go ahead.

John Baker - JCB LLC

Great, thank you. Todd, first of all I just wanted to say, I think that was a very impressive, clear and objective presentation that you gave. So, thank you very much for that.

The question I have is, it's my sense that you look for about past year, the technology team led by [Dave] [ph] has been operating almost in stealth on some pretty interesting things. And recently through a series of, both from press releases and also some presentation made by Hipcricket, represented at industry conferences, I'm getting the sense that some of these products are coming to provision and actually coming into the marketplace.

And I guess, you guys are backdrop, I want to ask a question, given the extremely strong blue chip brand customers you have, just wanted to ask how you feel about how the company is positioned broadly in the mobile advertising and marketing past year with some of these new technologies and products coming into market to a real time.

Doug Stovall

John, this is Doug. I'll speak a little to that and then I'll let Todd, Chairman if he want some. You're very accurate in your statement related to us, over the last year operating in a bit of a stealth mode and I'll give you a little peek to the future, there's a little more stealth going on and some exciting more news will be coming out over the next quarter or so.

And there is obviously strategic reasons why we do that sort of stuff but we're very excited about what the future holds and just I think you've seen here recently us bringing the market as well as some, as I handed there some new ones.

Related to our blue chip customers, we are, really that is one of our great assets there, our customer base and the fact those customers, number one, when they buy from us, they stay with us for a long time. Over 95% of the time they actually then buy more products from us.

So, we upsell a lot there, and so that keeps us very, me, myself keeps me very excited and it's one of the reasons why we constantly try to bring new and innovative products to market because we know we have a friendly customer base to take them to, Todd I don't know if you want to elaborate only near that.

Todd Wilson

I think, that too I mean, the vision of the company really John for the last year when we brought in both Tony, our VP of Analytics and David Hostetter our CTO was that we were going to leverage these campaigns we run, these mobile websites we've built and these mobile phone numbers that had opted into our clients to kind of gather data and become more effective at delivering for our customers.

And as Doug said, we're here and it's really, just at the point of starting to generate revenue for us and we're excited about it and we think our clients are excited about it.

John Baker - JCB LLC.

Great. Thank you very much.

Todd Wilson

Thanks John.

Operator

(Operator Instructions) We'll hear next from David Wilmerding with Red Comb Investments. Please go ahead.

David Wilmerding - Red Comb Investments

Thank you, Todd. I was checking John's comment about your presentation. That was very clear and very helpful. I just wanted to follow-up specifically from a technology standpoint on the analytics that you guys have developed and are beginning to roll-out, and if you could just provide more color on what the opportunity there is. I got the news it's not so terrific value added and hopefully higher margin opportunities. So if you could just put some perspective around how big that could be relative to current marketing and advertising sales?

Todd Wilson

Thank you David for the kind words.

Doug Stovall

The market opportunity there, we really kind of in our mind we think up it in three buckets or areas that it will influence. And what I mean by that is, I'm taking that data, our data and injecting them to our analyst platform and then utilizing that in different ways.

Way number one, as an add-on to our mobile marketing products. So think of it as a additional component for lack of a better term that you would sell when you sell, when we sell one of our SMS deals, that gives enhanced targeting, better performance, better optimization. And so that's one bucket of revenue or additional revenue we think of.

And on the advertising side of our business, one of the things that market is demanding or asking is better visibility, better targeting, better segmentation. And our data we believe, well we don't even believe, we know gives our customers that opportunity and what we'll see there is a higher CPM [ph] being able to charge, to be charged.

So think of and I'm just using some hypothetical numbers here but a normal deal maybe we charge a $3 CPM but if you layer the Hipcricket first party data which our analytics platform on top maybe let's say $3.50 CPM.

So, a premium on top of our advertising which improves our advertising margins, that excites us.

Then the final piece is just our standalone analytics platform where brands and agencies are coming to us to utilize that data for their own purposes, maybe across totally different marketing channels, maybe across their email programs, or their own TV or radio. So those are the buckets.

Now the hard part you asked the size of that opportunity, that's the part that we're having, I don't want to say we totally cracked the code in figuring that out yet but that's what we're working to get our arms around on exactly how big the opportunity is.

What we do know is big data, customers are asking for it and they're willing to pay for it and it's already happening for us. So we're very excited about the way that does into our analytics platform.

Todd I don't know if you want to say.

Todd Wilson

Well said, and so, from a revenue opportunity standpoint, again just to summarize what Doug said, it will help us sell more marketing and advertising, which we know but then it will also help us be a standalone product which will drive it's own revenue. Again, David, probably little too early to tell the size of that market but we know it's big.

David Wilmerding - Red Comb Investments

And the revenues I presume, I mean the margins on that I presume are very, very good.

Doug Stovall

Yeah, they're much more inline with our mobile marketing margins which are very nice.

Todd Wilson

Yeah, they are very solid margins.

David Wilmerding - Red Comb Investments

Yeah, thank you.

Todd Wilson

Thanks. I think we may have time for one more question.

Operator

And we'll take that question from Bill Musser with New Frontier Capital. Please go ahead.

Bill Musser - New Frontier Capital

Hi guys, I'd like to echo the compliments on a very good presentation. I had two questions, one is that given the importance of the FastPay relationship, I wonder if you could elucidate to a greater degree on how it works, how much of the receivables become eligible for loans et cetera.

And then second of all, should it become necessary to further reduce the expense levels, do you have a clear view as to how you go about and do that?

Todd Wilson

Thanks Bill, I'll address those questions here. We obviously put out an 8-K with the details of the FastPay relationship, but I'll talk for a minute about just the mechanics of it and how it works.

It really is a line of credit but somewhat similar to a factoring relationship. In regard that, we can use as collateral our account receivable from our, tier one kind of blue chip customers and borrow against those.

So we literally submit a receivable to FastPay as we said in our 8-K we can borrow 70% against that receivable and then that receivable is collateral against that particular loan, when our customer pays us FastPay, we'll then reemit the additional 30% to us. And so, that really is the way that it works.

So, Tom [ph] if it's a working capital line, it has some essence of a factoring relationship that we can let borrow against receivables, the cap on that is $5 million, when you look at any months in time our receivables were roughly this quarter - around $6.5 million to $7 million receivables. So, 70%, that's right on the $5 million number.

Bill Musser - New Frontier Capital

Thank you.

Todd Wilson

And then, so getting on your next comment of, are we prepared, do we understand from a cost stating standpoint additional actions that are going to be undertaken and the answer is absolutely.

So, one example that we didn't mention here is as many of you know we had an office in Atlanta, effective July 1, we've actually started to subtly [ph] substantiate all of that office.

So that the kind of other operating expense, they're obviously just monitoring and watching closely but even beyond that, there'll continue to be things both on the technology side and use of technology and other items that we're really focused on to ensure that we get to that, I mean EBITDA positive in Q3. Doug, anything to add?

Doug Stovall

No, I just think on the technology side as Todd said, we've identified a couple of areas related to cost for third party services we use such as inventory and things of that nature a bit, technology advancements, we expect to see immediate reductions and cost on, which is a key expense for us.

Bill Musser - New Frontier Capital

Great. Thank you very much.

Operator

At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Todd Wilson for his closing remarks.

Todd Wilson

Thanks again everyone for joining the call today. I want to thank you for your continued support and patience, as we bought Hipcricket into a leader in the mobile engagement and analytics space.

Lastly, if we weren't able to address any or all of your questions today, feel free to contact us directly or contact our Investor Relations Group, Liolios and we'd be happy to answer them.

I look forward to speaking with every one soon. Operator?

Operator

Thank you. Before we conclude today's call, I would like to provide Hipcricket Safe Harbor statement that includes important cautions regarding forward-looking statements made during this call as well as the statement regarding the company's use of non-GAAP financial information.

During today's call there were forward-looking statements made regarding future events including Hipcricket's future financial performance. All statements other than present and historical facts which includes any statements regarding the company's plans for future operations, anticipated future financial position, anticipated results of operations financing plans, business strategies, competitive position, opportunities for growth and industry trends are considered forward-looking statements.

Such statements include but are not limited to the company's expectation for revenue growth in fiscal 2015. All such forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond the company's control. The company's actual results performance or achievements may differ materially from those projected or assumed in any of the forward-looking statements.

Factors that could cause actual results to differ materially from the forward-looking statements include among others, overall economic and business conditions, the demand for products and services, competitive factors, the emergence of new technologies, the company's cash position, the availability of funding sources, the strength of the company's intellectual property portfolio and changes in government regulations.

In more detailed discussion of these factors that set forth in the company's annual report on form-10K for the year ended February 28, 2014 and other reports filed with the U.S Securities and Exchange Commission.

The company does not intend and undertakes no duty to update any forward-looking statement to reflect future events or circumstances.

Today's presentation also included financial measures to find as non-GAAP financial measures by the SEC. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in according to with Generally Accepted Accounting Principles accepted in the U.S., otherwise refer to as GAAP.

Please refer to a more detailed discussion about the company's use of non-GAAP measures and their reconciliation to the nearest GAAP measures in today's earnings press release which is available on the company's website at www.hipcricket.com.

Finally, I would like to remind everyone that a recording of today's call will be available for replay via link available in the investors section of the company's website.

Thank you for joining us today for our presentation. You may now disconnect.

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