SITO Mobile's (SITO) CEO Jerry Hug on Q1 2016 Results - Earnings Call Transcript

| About: SITO Mobile, (SITO)

SITO Mobile, Ltd. (NASDAQ:SITO)

Q1, 2016 Earnings Conference Call

May 16, 2016 4:30 PM ET

Executives

Joe Wilkinson - Senior Vice President, Investor Relations

Jerry Hug - Chief Executive Officer and President

Kurt Streams - Chief Financial Officer

Analysts

Brian Kinstlinger - Maxim Group

John Nobile - Taglich Brothers

Don Hickman - Ladenburg

Taylor O'Neil - Private Investor

Operator

Greetings and welcome to the SITO Mobile Q1 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

I will now turn the conference over to your host Mr. Joe Wilkinson of Investor Relations. Mr. Wilkinson, the floor is your, sir.

Joe Wilkinson

Thank you. And welcome to SITO Mobile’s 2016 earnings call for the quarter ended March 31, 2016. We appreciate your interest. In order to be more efficient with your time today, we’ll be reading SITO Mobile’s Safe Harbor statement following the Q&A portion at the end of the call. With us today are SITO Mobile’s CEO and President, Jerry Hug; and the company’s CFO, Kurt Streams.

Before I turn it over to Jerry and Kurt, I want to quickly mention administrative matters that will directly affect today's discussion of results. On May 5, the SITO Board of Director's elected to transition SITO Mobile to a December 31 year end financial calendar in order to better align our financial reporting date with our calendar year operating timelines and the advertising market and dynamics. So starting with this press release and earnings call we will be referring to the March 31, 2016 quarter as the first quarter of 2016 or simply Q1. And we will also refer to the comparative same quarter for 2015 as Q1. We believe over the coming quarters our shareholders will be better served by this transition to calendar year of financial reporting. Thanks in advance for your patience and understanding as we make this transition.

And with that it's my pleasure to introduce Jerry Hug, SITO Mobile's President and CEO.

Jerry Hug

Thanks Joe. And thanks to everyone for joining us on our call today. We've had a very productive Q1 and we have a very positive outlook for the balance of the year based on the foundation we built in our media business over the last several quarters. I have a lot of things to cover today. I'll talk about some of the exciting improvements to the SITO platform in a moment but first let me give you some perspective on how we can use SITO Mobile as we move through 2016.

Over the last couple of years we talked about how we've been pivoting the company from an SMS company with high revenue concentration to a leading edge mobile advertising platform. This transformation is complete. The Double Vision and Hipcricket assets are now fully integrated and the strategy shift is coming to fruition and now producing the kind of revenue growth and future prospects we envisioned when we began this transition. In early 2014, Single Touch Systems as the company was then known was an SMS text messaging company where one company represented more than 90% of revenues and growth of those revenues was challenged by regulation and commoditization. Today, in early 2016 SITO Mobile owns and operates a leading edge mobile technology platform with a growing data asset operating in the already huge and fast growing mobile media space.

With hundreds of diverse customers representing over 500 underlying advertisers and brands. This transformation has not been easy and it was not without risks, but I can very confidently tell you that we are now in a much better position today to grow revenues and create shareholder value. The major focus at SITO Mobile these days is building on the foundation of our advertising platform and leveraging this platform and its growing data asset to generate significant revenue growth. On this foundation in Q1 ended March 31, SITO delivered total revenue of $6.5 million, up 74% over Q1 of last year. Our year-over-year revenue growth was once again led by high growth in our Media Placement business. The revenue associated with our mobile programmatic ad business which grew to $4.9 million in Q1 more than doubled last year's Q1.

We had another strong quarter and really placement on year-over-year basis while experiencing the normal seasonal low in January and February as advertiser back off after their yearend spending and reset their budgets and planning process. January and February are fast paced from a planning, coordination and future booking standpoint but slow from a revenue generation standpoint. The in quarter effect of this dynamic in Q1 was slow revenue production in January followed by a steep ramp up and ending with a very strong March as advertisers begin to spend their annual budget aggressively again.

This is our first full calendar year participation in the annual planning and coordination cycle, and in Q1 we are also seeing very strong bookings for the balance of the year. March 2016 Media Placement revenues were the highest monthly revenue and bookings totals thus far in SITO's history and these trends continue in Q2 as we are seeing preliminary April Media Placement campaign bookings were about even with our record March level based on very strong bookings for the balance of the quarter we expect steady sequential quarterly growth from here.

Now that we are fully participating in the advertising planning cycle, one of the metrics we used to plan our operations and provide insight to future revenue is our backlog of business or bookings. Our business operations are driven by what we in the advertising business called Insertion Orders or IOs. These orders submitted by our clients to finding the parameters of their campaigns including authorized spending levels. As we accumulated insertion orders, we generate order backlog or bookings in the system which represents current and future campaign planning commitments. As part of our normal planning process in the Media Placement business, we assess our outlook and forecast using these bookings as a key revenue generation indicator. As we move forward, you'll hear us talk more about bookings in order to give some perspective and outlook on future revenue. And when we discuss bookings for a given timeframe, we are including campaign spent which is already occurred during that timeframe. Plus insertion orders for which campaign spent has been submitted by clients but where the campaign has not yet been run and therefore revenue has not yet been earned or recognized.

We are continuing getting new orders or adjustments in addition to orders and running campaigns and earning revenue dollars. So this is an ever evolving measurement and clearly the more near-term the IO commitment the better visibility there is to future revenue.

So with that as background and explanation here some color on our bookings thus far this year and especially for the current quarter ending June 2016. The March quarter was our strongest quarter ever for generating full year bookings and we are seeing this trend continue so far in the current quarter. The drivers of this growth in bookings are of course the same as what we are seeing in the revenue generation driven by these bookings. More clients, strong client retention, more campaigns, longer campaigns and larger committed campaign spent. Altogether, this results in record bookings and backlog.

For the June quarter specifically as we sit here on May 16, we are already booked well above what we ran and earned last quarter with about half of the quarter still ahead of us and we expect more bookings to come into the quarter. So I can say with the high degree of confidence that we'll produce significant sequential revenue growth for the June quarter. Further, customer engagement is high, our RFP pipeline is growing and our bookings for the balance of the year are also growing.

Last quarter, I took you through some additional relationships to our partnership and distribution ecosystem that expand our reach and improve our product and services offerings. Q1 was another busy quarter on that front and we've added more exciting partnerships and product enhancements that we believe will make our market leading solutions even better. I'll go through some of these and give you an idea of how we are helping our clients achieve success with their mobile ad campaigns and who are in turn adding more business to the SITO platform.

First, let me give you some perspective on Q1 client and campaign dynamics to illustrate how we are growing and diversifying our revenue and client base. In Q1, we once again saw more new customers and increasing average campaign size while maintaining a healthy client retention and renewals rate. During the quarter, approximately 30% of our customers were new to SITO. In Q1, we ran approximately 300 campaigns, up from a 120 a year ago. And although down slightly sequentially due to seasonality, we also once again saw a nice sequential lift in average campaign size as our campaign size is now over $25,000.

So we are adding more clients, running more campaigns and our clients are typically renewing. And as I mentioned, these trends continue in our Q2 bookings as the higher projected revenues are driven by a combination of more clients, more campaigns and larger campaign sizes. So why are we adding new clients? And why are our existing clients adding budget to their campaigns? Because we are giving our clients visibility and insights into their mobile campaign effectiveness that they are not finding elsewhere in the mobile digital advertising and ultimately we are providing measurable and demonstrable results and an excellent return on their advertising investment. And as I mentioned on previous call, we also now have a larger, more widespread sales and channel partner ecosystem, the market is clearly beginning to take notice at SITO Mobile.

Here is quick summary of our recent case study that illustrates the type of client results that bring more business to the platform. In late Q1, a large national grocery chain used SITO Mobile to run an Easter campaign where they targeted likely customers based on location demographics and past consumer behaviors. Key performance indicators on this campaign were quick true rates and Verified Walk-Ins. In short order we were able to demonstrate a quick through rate at 2.5x the industry average as well as verified lift in store foot traffic of 34%. These are powerful results and can have significant positive impact on a brick and mortar retail orders business.

These results are directly driven and measured by SITO's mobile platform solution and this particular customer is coming back for more with more budget and more widespread campaigns driving new campaigns centered around various future promotions and holidays. Further, the agency behind these campaigns is bringing SITO's capabilities to an expanding range of their client base.

This is just one example of many in multiple industry verticals where location is a key to understanding customer behavior driving traffic and revenue and measuring results of the underlying campaign. According to e-market, location based advertising is predicted to be an $18 billion by 2019. And location based mobile advertising is the sweet spot for SITO. Our location based verification products have particular relevance with several large vertical market segments such as retailers, automotive manufactures and dealerships, entertainment facilities, food and beverage, pharmaceuticals and consumer products. All of these segments represent large, local and national advertising budgets and these budgets are moving rapidly into mobile advertising. We now run campaigns for a growing number of Fortune 500 companies in these segments and elsewhere either directly or indirectly through agencies.

Advertisers have always attempted to understand and measure the success of their advertising campaigns and determine which advertising strategies and tactics work and how and why. They want to know which ads work and which ones do not and in which situation this is all happening so that they can measure their success and failure and allocate budgets accordingly. This is all very difficult in traditional advertising media with any degree of precision and probability and very often the guess work is a lagging indicator and not determined until long after the campaign is over and ad dollars are already spent.

In order to measure their campaign effectiveness, the mobile ad client base is asking for a number of data points in addition to the demographic audiences they are targeting. Clients want to measure campaign effectiveness using location, attribution, viewability and verification. And they want all of these in combination with visibility and transparency and they want it all in real time so they can very quickly learned and understand what is working and what is not, allowing them to adjust their tactics rapidly and spend accordingly so they can increase the effectiveness and return on their advertising investment.

The mobile digital advertising medium has the ability to deliver location based data collection and verification of location based behavior. Mobile offers a one to one measurement feedback loop that is incredibly unique in the advertising space. We believe our Verified Walk-In product is unique differentiators and is the best mobile location based product in the industry period. The capabilities of our verified walk-in products offer incredible value to our mobile advertising clients by giving them confidence that their ad dollars are being well spent and they are telling us this through their increased engagement buying behavior and our growing bookings.

Our solutions are very good today and we are making them better and more efficient and effective through a number of enhancements to our products and capabilities. The most exciting development on this front in Q1 was our launch of real time Verified Walk-In. This is a significant enhancement to our product set which allows campaign management with unprecedented visibility into mobile ad campaign effectiveness through real time one-to-one in store attribution. We believe this proprietary solution will revolutionize how brands measure and optimize mobile advertising campaigns.

Real time Verified Walk-In is enabled by a series of recent upgrades and enhancement to SITO Mobile advertising platform. With these improvements, our Verified Walk-In dashboard allows us to track and verify the success rate of ad campaigns in progress and make on the fly adjustments to these campaigns based on measurement of real time engagement patterns. With the benefit of this data we are able to rapidly direct campaigns to improve performance mid campaign in a way that is significantly better than industry standards and averages and we are able to prove these results to our clients on a continued basis.

Until now measuring campaign effectiveness typically took as much as a month as ad tech firms reconcile campaign performance data and then reported results to clients. These reports provide valuable post campaign measurements but they are lagging indicator of campaign effectiveness. Our newly released real time Verified Walk-In solution allows for one-to-one attribution analysis and provides actionable campaign optimization and reporting as the campaign unfolds in real time, not after its completion. We can provide in-store foot traffic lift that can be segmented by demographic strategy audience or any targetable parameter and even report on the average amount of time it took a customer to walk into a store after ad exposure.

These are incredibly powerful and valuable tools for our mobile advertising clients and I am very proud of our ability execute this ambitious goal. The release of this version of real time Verified Walk-In is the first to the series of upgrades planned for SITO Mobile platform. Future releases will include more data and reporting enhancements including purchasing data which I'll talk about in a moment, greater measurement and visibility capabilities and direct hands on client access to SITO Mobile's platform via a client dashboard allowing them to manage and direct their own mobile campaigns in real time.

With real time VWI we are offering unparallel transparency into campaign effectiveness along with actionable reporting, enabling our clients to make more timely and better informed decisions on campaign optimization. We believe the enhancements brought thorough real time Verified Walk-In bring tremendous value to our mobile advertising clients and are our clients very excited about it.

Another exciting recent development is the enhancement of our measurement capabilities by adding purchasing data to our location based measurement capabilities through our partnership with Cardlytics. A point of purchase measurement intelligence platform. This partnership is a natural extension of our engagement solutions and offers our advertising clients a direct link from our mobile location based advertising and foot traffic via SITO's Verified Walk-In directly to consumer spending data at the point of purchase for a full closed loop solution.

Combining location based targeting with directly correlated offline and online purchase results gives advertisers excellent and timely insight into effectiveness of their campaigns and highly visible return metrics based demographics, walk-in traffic and ultimately on consumer spending behavior. We are very excited about this partnership and the early client demand is very encouraging.

Suffice it to say we had a busy quarter improving our product and data set and our clients are very enthusiastic about these upgrades.

I want to quickly run through a couple of items before I wrap things up. In early March, we amended our debt agreement with Fortress. Fortress has been a committed and supportive investor in both our debt and our equity and agreed to these more favorable payment terms and recognition of our strong revenue growth and positive outlook. The amendment to first $2.5 million in principal payments. This near-term principal payment reductions offer SITO greater liquidity and more financial flexibility in the coming quarters as we continue to grow revenues and EBITDA.

Now let me provide a quick update on our pat monetization efforts. During the last earnings call I indicated that greater attention would be placed on further developing and leveraging the company's patent portfolio. Since then we've had allowance of four total patent applications including three in our streaming portfolio and we expect several others to be allowed in the coming months. After the allowed application issue, SITO will have a total of 27 patents issued and more than 40 pending applications. Led by our board member Peter Holden who is previously overseen successful IP monetization projects and IP value, we've also formalized and kicked off a monetization process.

To date we've received a high level of interest in the portfolio and positive feedback from potential strategic investors, corporate partners and financial buyers. Although we don't have a specific timeline for making a financial decision on course of action as the monetization process unfolds and discussion continue, we'll develop a better understanding of our options in order to choose the best path to maximize value. We look forward to updating to you on progress when appropriate.

Before I close, I wanted to say a few words about the team we are building here at SITO. Our recent success has attracted new hires in our sales, finance, operations and human resources functions from a variety of background including from some prominent and very successful companies in the text space, and including experience from large and small companies. We've gone from 28 to 55 employees in the past year or so not only based on the strength of our recent results but also in anticipation of building this company to a much larger and more valuable entity from here.

We put press release out on some of these individuals but not all, and in this releases you can see that these are people who have been there and done that. They have been part of successfully building companies. They have experienced success and some have witnessed failure. And undoubtedly they learned important lessons from this experience which has given them important connection, knowledge and judgment. They know what works and more importantly what doesn't work. They know how to build teams and more important build companies. And all of these will help SITO Mobile as we build and execute on the company's vision.

We've had an excellent start to 2016. We are only beginning to reap the benefits of the moves and acquisitions we made in the last couple of years pivoting the company from an SMS company with high revenue concentration and limited growth to a powerful next generation mobile ad tech platform with a growing list of hundreds of customers operating inside of the exploding $18 billion location based mobile advertising space. This strategy is paying big time as we are seeing excellent growth based on fantastic results for our clients and leading to an excellent growth outlook in the coming quarters.

Now I'll turn the call over to Kurt for a more detailed review of our financial results. Kurt?

Kurt Streams

Thanks, Jerry. I'll briefly review our financial performance for the quarter noting once again that we are now operating on a December 31 calendar year end for financial reporting purposes. For Q1, 2016 SITO produced revenues of $6.5 million, a 72% increase over Q1, 2015.

As Jerry mentioned, this improvement was led by continuing growth in our Media Placement revenue, which tripled to $4.9 million for the first quarter compared to $1.6 million in last year’s Q1 and was down slightly sequentially due to the Q1 seasonality Jerry mentioned. Media Placement revenue has grown to represent 75% of our total revenue in Q1, 2016. This revenue comes from approximately 100 different clients and around 300 campaigns, demonstrating our continued revenue diversification. The Media Placement business is our revenue growth engine and we expect to maintain and grow this diverse revenue base in the coming quarters as we add customers and their larger mobile advertising campaign.

SITO Mobile generated approximately $135,000 in licensing and royalties revenue, flat with last year and down from Q4 due to one time revenue item in Q4.

For Q1, our wireless applications SMS revenue was approximately $1.5 million in Q1, 2016 down from $2 million in Q1, 2015.As Jerry mentioned this part of our business is under pressure due to regulatory and competitive pressures.

Gross profit in Q1, 2016 was $3.4 million, up 62% from the $2.1 million in Q1, 2015, driven by higher revenue. Gross margin was 53%, up slightly from Q4. Sales and marketing expense excluding stock based compensation was approximately $2 million for Q1, 2016 compared to $1.8 million for Q4, 2015. As we've mentioned in the last couple of quarters as our built up to media placement business, we are incurring additional sales and marketing spending related to the substantial expansion of our direct sales force and additional operations personnel in order to handle the growing demand in our anticipated revenue growth.

We believe these are frontloaded expenses. And we expect that our new sales and operation personnel come on board and deliver the results we are expecting in the coming quarters that this expense item will scale with revenue growth and expected normalized percentage of sales in the 20% range.

General and administrative expense, excluding stock compensation expense, was approximately $1.6 million for Q1, 2016, compared to $1.5 million for Q4, 2015, up slightly due to increased personnel expenditure for professional services.

Adjusted EBITDA was approximately $60,000 compared to approximately $400,000 in the year ago quarter. The decrease is due to the shift in the business model and cost structure as we transition into a largely media placement ad revenues business and the growing infrastructure that went with it. During Q1, we reported a net loss of $1.2 million or $0.07 per share. At March 31, 2016, we had cash and cash equivalents position of approximately $1.7 million, reflecting continued positive operating cash flow, debt service and investment in our core technology.

In Q1, we serviced the Fortress long-term debt by making $842,000 in principal repayments. The Fortress debt outstanding now stands at $8.4 million. As Jerry mentioned, in Q1 we amended our agreement with Fortress to reduce monthly principal payment until the loan matures in 2018. During Q1, we invested approximately $427,000 in developing software including the significant investment in upgrades to our Verified Walk-In solution which Jerry discussed. In Q1, our accounts receivable balance at March 31, 2016 was $6.3 million.

I'd now like to turn the call back over for question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions]

The first question we have comes from Brian Kinstlinger of Maxim Group. Please go ahead.

Brian Kinstlinger

Great. Thanks. Nice results. First question I had I think you said 300 campaigns are the number for Q1 in 120 in a year ago period. And if we want to get a trajectory to see how that's been ramping, could you give us maybe for the last three quarters if you have them handy?

Kurt Streams

Sure. This is Kurt. So as we mentioned in our remarks that we had 300 campaigns in the current quarter. And those numbers let me get them; we do share those on our website and the investor presentation. But going back a few quarters so a year ago it was 102 campaigns in the March quarter. In the June quarter of 2015, it was 213 campaigns. Moving to the September 2015 quarter, 243 campaigns. And for the December quarter it was just a little over 300 campaigns. It just in a successive growth rate.

Brian Kinstlinger

Yes. And then I think you said you had 100 customers in first quarter. How many did you have in a year ago period?

Kurt Streams

It falls very closely to the campaigns numbers. It would be -- in terms of the ratio

Brian Kinstlinger

Okay. And then just to touch on bookings. When you book revenue I think there is some kind of timeframe to that but how quickly does it start -- how quick the campaign start to come out of backlog?

Kurt Streams

The insertion orders specify the date that the campaign is to start and run and how many ads impression are to be served over that period. So we record revenue as ad impressions are served. So if a campaign starts on March 5, we begin recording revenue on March 5 until the campaign is over and the ads are served. For cut off purposes and reporting, we cut off as of March 31, so all campaign deliveries through March 31 included in that March 31 quarter revenue.

Brian Kinstlinger

Got it. And then the average campaign, do you share that how long is that in general?

Kurt Streams

Average campaign length?

Brian Kinstlinger

Yes. I mean is it normally a month?

Jerry Hug

The average campaign we are seeing is about 45 to 55 days.

Brian Kinstlinger

Right. Okay. And then with a Verified Walk-In system, I expect your existing customer base has seen that and maybe piloted even. Can you sort of talk about their desire to increase based on this product? Is that come in as added feature or is it increased the pricing of the campaigns and just maybe talk about the feedback you have gotten from that system.

Jerry Hug

So the rollout thus far has been methodical from our perspective, Brian. We are rolling it out to our agency clients and the real what I would call the heavy users and the strongest relationships thus far. I can tell you that the feedback has been spectacular. People are beginning to get tutored on the platform. We are doing online learnings and giving showing our clients how they can leverage this and it has been incredibly well received. I think it has been so well received that people are actually really questioning its ability to deliver because it was such a quantum leap of what has been out there thus far in the market. And I spoke too in my comments and what I am really referring to is thus far if you think about advertisers and how they deploy and allocate their advertising budgets across various mediums and then their ability to assess the results and measurement across various mediums to take that from lagging indicators to a real time leading indicator, it is pretty significant quantum leap in the advertising industry. And we are seeing the early adopters start to use this and we expect it to have an impact on our results going forward.

Brian Kinstlinger

Great. Last question I have because it has been methodical and you mentioned that Q2 bookings are a strong as your entire first quarter in terms of media placement, has that product yet had an impact you think or significant impact on bookings yet or will that be more of a second half of this quarter and more of 3Q?

Jerry Hug

So we see that having more of a second half impact as we move later in the year. It hasn't really impacted this current quarter's results.

Operator

The next we have John Nobile of Taglich Brothers. Please go ahead.

John Nobile

Hi. Good afternoon, guys. I just have a couple of questions. Being we are in an election year I was curious you have the SITO Elect product out there now, if you have numbers can breakdown through the quarter what SITO Elect contributed to the quarter in revenue?

Jerry Hug

So in the prior quarter it was really very little, the minimis John. What we are seeing is some -- we are seeing bookings starting to build and we are -- I am not going to talk about that in -- as a specific product line. We don't breakout the numbers in a product line. But suffice it to say as we move into the general we are now starting to see insertion orders come in and we are working hard to get more.

John Nobile

Okay. I just wanted to make sure you had mention about -- you currently have about 100 customers. Is that correct? If we stand there.

Kurt Streams

That's what our customer count was in that first quarter, correct.

John Nobile

Okay in Q1. And 30% of these were new so 30% of 100% you had about 30 new customers that came into your platform over the quarter.

Kurt Streams

Right. We are always bringing in new customers.

John Nobile

All right. I just want to make sure because I mean if you think about that's a significant jump in your customer base just over the first quarter, the new current first quarter, the March quarter however you want to classify that. And actually we have the campaign length but during the quarter what was the average campaign size. I just want to see how that has been building. I take it's build up since the previous quarter. So I just wanted to get an idea of what the -- one of the March quarter if I could call it, what is the average campaign size for the March quarter?

Kurt Streams

It is approaching $25,000.

John Nobile

$25,000 okay and that's I think it was $20,000 last quarter -- the first quarter, actually what was the first quarter of December quarter.

Jerry Hug

Correct. December quarter

John Nobile

All right. That's all I have. I just wanted to get those specifics. Thanks.

Operator

Next we have Don Hickman of Ladenburg.

Don Hickman

Hi. Thanks for taking my calls or my questions. Jerry, can you -- what's the getting factor here like how many campaigns can you do? How many customers can you handle?

Jerry Hug

So if you think about the capacity on this platform and I think what we've alluded to in this part quarter's results, we've really prepared to scale significantly. And because this -- because our platform is programmatic which is a fancy word for automated, we think that we can handle thousands of campaigns at a given time. Because once the campaign parameters are set without making modifications intra campaign which we are unique in having the ability to do because we are giving people real time visibility into their campaigns, if all that being constant it is a very highly automated process where transactions meeting us by media and then selling the media on behalf of the client, these transactions happen in literally 200 milliseconds. So we feel that as on a managed service basis we have the ability to operate thousands of campaigns. Ultimately, where this business is going to migrate to Don is going to be -- it will be self service component as well as the market matures and becomes more sophisticated. You are going to have marketers or agencies that want to use our dashboard and our tool set to execute campaigns on their behalf. So that opens up a whole another level of capacity whereby there is a whole another layer of campaigns that will come on to the platform. So with infinitely scalable, there is enormous capacity in ad impressions or ad units so from a demand side which is what we create, we are really in the second inning of nine inning game.

Don Hickman

Okay. So I'd like to follow on the competition, I just want to make sure that I understand the reason why you are unique with this real time Verified Walk-In is because you control your own technology stack and others don't. Is that true?

Jerry Hug

Well, I am going to opine on what others do and don't. I can only opine on what I know that we do. And we made a very calculated decision as we've invested in our text stack to own our own data management platform. And other companies do that on behalf of strategic partners. For us, it was an opportunity to be able to control our destiny and create and innovate new products into this market that as we all know is very fast paced and evolving very quickly. So we felt it was imperative that we were leading the innovation and leading the pack and you are going to start to see that even more so in our back of half and year results.

Don Hickman

So let me ask another way. If you don't control your own data management platform, is it possible to do real time Verified Walk-In stuff?

Jerry Hug

No.

Don Hickman

Okay. Then this self service thing you mentioned, how are you going to build for that since like how are you going to price that if people are doing their own --

Jerry Hug

Well, I mean there are different reasons -- there are different thoughts and we are looking at different pricing models and experimenting with different pricing models as we think about when that market comes online. For us, we don't see that becoming a meaningful revenue driver because we are seeing -- we are still seeing significant growth in backlog and in our bookings and in our managed service product. And I think what that speaks to is that it's still very early on in this cycle as marketers are now shifting budgets and if you look at our new customer growth that speaks to the ability for us to take customers into the mobile advertising space and suffice it to say they are not sophisticated so we are providing the capability on a managed service basis. And thus far we've seen our margins be fairly consistent over the past couple of quarters.

Don Hickman

So just one quick follow up. Are you going to charge more once you are able to give the customer their own dashboard? Or would that just be part of the package?

Jerry Hug

Don, I think the devils in the details I think it's fair to say that we as an executive team are looking at different pricing models where there is a kind of baseline offering and then think about it as gold, silver, bronze type of situation for what I would call enhanced product and services. How that often that we plays out I think it's still too early to have an intelligent informed answer.

Don Hickman

Okay. Then one last Kurt as the AIR line expands to $6.3 million you said this quarter is that kind of put any pressure on your financial reserves?

Kurt Streams

No. It will not. We've seen that bounce grow to the balance March 31, we brought it down since then. The receivables are performing well. We are not having an issue of nonperforming receivables at all. I think that the sales growth receivables are grow but the quality of receivables is going to be just as good as they have always been.

Operator

Next we have Taylor O'Neil, Investor.

Taylor O'Neil

Hi, guys. Thanks for taking the questions. So first question on the real time product. That's one you all control with no partners, is that correct?

Jerry Hug

That's correct.

Taylor O'Neil

Okay. And would you expect the margin profile on that to be similar to the current product offering or is there anything different we should be looking for?

Jerry Hug

I think for now we think it's margin neutral.

Taylor O'Neil

Okay. Great. And then I don't know is there anyway you guys could share some expectations of how many clients you think might do over $100,000 of revenue with you guys in the current year?

Jerry Hug

It's a good question. I think we are actually looking at this morning. I think over the course of this fiscal year probably I think between 20 and 25 is a good number.

Taylor O'Neil

Okay. Great. That's great. And anyway you could just roughly-- how many you might had last year at this time?

Jerry Hug

Zero

Taylor O'Neil

Okay. That's good. And then I guess just one last one around the Fortress deal. Would it be wrong to assume that part of the reason you did that deal at the time you did it was because you don't think that a resolution is reasonable to be expected in the next quarter or two based on where you are at in the process today or is that a bad way to read that agreement?

Jerry Hug

Well, look I think from an accurate way to read that agreement is that we have a senior lender that happens to be accommodating a request that we made that will allow us greater flexibility in our liquidity. So I think as trying to be good stewards of capital and good fiduciary we are always looking at how at our liquidity profile and suffice it to say that we didn't think that the equity markets were a feasible solution that we as a management team felt comfortable as a solution for liquidity, therefore we focused on amending the debt which we were excited that we were able to get that accomplished. That's really it.

Taylor O'Neil

Okay. But it sounds like to me through comments on the call your -- the process for monetizing the patent is underway. There are people looking at the patents right now.

Jerry Hug

Yes. Without question. And I think so as we think about our liquidity right it is the constant discussion of okay what's the best source of liquidity or new capital for new growth capital for the company. So getting more visibility on the patent monetization process is certainly something that we are focused on versus looking at the equity markets as a potential source of capital.

Operator

Next we have Brian Kinstlinger of Maxim Group.

Brian Kinstlinger

Hi. Great. Thanks. Two follow ups. First of all, why is it not if we want to get the average campaign size not a simple as taking the media placement revenue dividing by the number of campaigns? Because that comes out a little bit of a lower number.

Jerry Hug

Because there are campaigns that run for eight months. And there is campaign that run for 15 days.

Brian Kinstlinger

Got it. Okay. And then the second question I had was you talked about the increased recruiting you've done in the past few months. Can you talk about the plans for the remainder of the year in terms of adding sales people and other overhead?

Jerry Hug

So we are looking at increasing our sales headcount in key markets where we feel that opportunity exist that we have yet to tap into. And those are prioritizing right now. We are also looking at expanding internationally which we feel is the logical next step for us. And the reason why that makes so much sense now is because we are literally going to follow our clients. And what I mean by that is if you look at our revenue composition and the breakdown of our revenue which is agency versus client direct, that 80% of our business comes from large media agencies and they are all global entities. So as in the UK for example mobile ad tech is about a year and half behind of where we are here in the United States. So that is a focus of ours and we will look to have a presence in the UK and in the EMEA markets over the next couple of quarters.

Brian Kinstlinger

Great. Actually I have one more. If you think about location based advertising, there are still I am sure companies who are uncertain about its effectiveness, although that seems to be changing, I am curious how often today in the sales process you get push back given the uncertainty of whether occasion based advertising does provide the returns that they would want or the effectiveness obviously that's changed with your technology. I am curious where we are today with that?

Jerry Hug

I think it's still we still find ourselves teaching in the sales process and educating our customers. That is definitely in our sale cycle. That said, we are at the point now from a confidence perspective where if it makes sense and the opportunity that presents itself is large enough, we will run campaigns for clients just to show them the results to convert them into believers because we know once they see the results we are able to deliver, that they are going to come back and they are going to come back for more.

Brian Kinstlinger

And so far a rather large company even there is red tape I mean how much how long is the sale cycle for a brand new customer today?

Jerry Hug

Today it ranges from -- for a brand new customer on average it's three to five months.

Operator

Well, this concludes our question-and-answer session. I'll now like to turn the conference call back over to Mr. Joe Wilkinson for any closing remarks. Sir?

Joe Wilkinson

Thank you. And thanks for your time on today's call and your interest in SITO Mobile. Before we close, I'd like to read our Safe Harbor statement. On this call, management personnel’ prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management made additional forward-looking statements during the Q&A session. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those contemplated by our forward-looking statements as a result of certain factors, and not limited to general economic and business conditions, competitive factors, changes in business strategy or development of our plans, the ability to attract and retain qualified personnel and changes in the legal and regulatory requirements.

In addition, any projections as to the Company’s future performance represent management’s estimates as of today May 16, 2016. SITO Mobile assumes no obligation to update these projections in the future as the market conditions change. The company will file its 10-Q with the SEC shortly and today issued a press release announcing financial results. So, participants in the call, who may not have already done so, may wish to look at these documents as they provide a summary of today's call.

Today’s call may include non-GAAP financial measures and were required a reconciliation to the most directly comparable financial measures are calculated and presented in accordance with GAAP and can be found in today’s press release, which is also available at sitomobile.com.

This concludes SITO Mobile’s Q1, 2016 earnings call. Thank you.

Operator

And we thank you, sir, to the rest of the management team for time also today. Again the conference call has concluded. At this time, you may disconnect your lines. Thanks you. Take care and have a great day everyone.

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