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MicroCap Digest: Q1 Earnings In Full Swing

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Specific Portfolio Updates:

Direct Insite:

Direct Insite released its Q1 results:

FORT LAUDERDALE, FL / ACCESSWIRE / May 11, 2016 / Direct Insite Corp. (DIRI), provider of the PAYBOX® unified working capital management platform, today announced financial results for the first quarter of 2016. Net income for the three months ended March 31, 2016, was $111,000, compared with net income of $80,000 for the quarter ended March 31, 2015. The year-over-year gain in net income was due to lower operating expenses in 2016.

Revenue for the three months ended March 31, 2016 was $1,775,000, a decrease of $285,000, or 13.8%, from revenue of $2,060,000 for the three months ended March 31, 2015. Recurring revenue for the first quarter was $1,500,000, a decline of $207,000, or 12.1%, from recurring revenue of $1,707,000 for the comparable prior year period, due to the previously disclosed February 2016 termination of a Hewlett Packard Enterprises client and lower volume from certain other customers.

Non-recurring revenue for the three months ended March 31, 2016 was $275,000, a decrease of $78,000, or 22.1%, from non-recurring revenue of $353,000 for the compared prior year period, as the non-recurrence of large prior year professional services were only partially offset by higher charges for the facilitation of scanning services.

Operating costs and expenses of $1,663,000 were $312,000, or 15.8%, lower than in the prior year as a headcount-related decrease in compensation expense and lower professional fees were partially offset by higher scanning charges.

Working capital (defined as current assets less current liabilities) at March 31, 2016 was $2,768,000, an increase of $60,000, or 2.2%, from working capital of $2,708,000 at December 31, 2015.

Cash provided by operating activities for the three months ended March 31, 2016 was $27,000, compared with $514,000 for the comparable prior year period. This decrease is due to the timing of collections from our customers and the timing of payments to our vendors.

"The Company continues to focus its energy and resources on its Sales and Marketing initiatives," said Direct Insite Chairman and CEO Matthew E. Oakes. "Our efforts, both through our direct sales team and through our banking partnerships, have created the most robust pipeline in recent Company history, and our ability to maintain our solid profitability and cash position while significantly enhancing our PAYBOX platform positions the Company well for future growth." (Bolded for emphasis)

Our Call With DIRI's CFO:

While we missed the conference call due to a meeting, we followed up this evening with Direct's CFO.

On top of that, we had a direct call with the CFO. He wouldn't say much (they are cautiously optimistic), but we got the strong impression that their sales pipeline never looked as promising as it does now. "there's an awful lot in the pipeline", to quote the CFO. Earlier on, Direct Insite relied on the sales teams of their Tier-1 Bank to resell PAYBOX, but they created a direct sales team on their own, strengthening the sales force significantly. He did note that Q2 will be a weak quarter due to the recent customer loss, so it all depends on landing new customers. We remain long, because the prospects have never looked this good and the financials are clean with a solid balance sheet and cost efficient operating structure. With a weak Q2 in mind we are still long.

Reliq Health Technologies:

Following our thesis we released this week on Reliq, the company announced a $1.22m contract with NextGen partners.

The contract provides NextGen with professional services and a limited license to Reliq's proprietary iUGO Health platform (formerly known as CareKit Health), specifically for the development of a consumer focused mobile health app ("Mindful Health" App) that will be provided to the residents of San Antonio, TX.

With an upfront payment of $450,000 (NYSEARCA:USD) coupled with the company's projected 70% to 80% gross margins, this also boosts potential cash flow for the company (as well as highlighting the adoption of iUGO).

Memex:

Memex's (a top SecretCaps holding) leadership was honored today by being recognized amongst the top 30 advanced manufacturing visionaries.

Memex also announced that Sun Hydraulics Corp. (NASDAQ:SNHY) has issued a Purchase Order for an additional 89 of their machines to be equipped with MERLIN MES Enterprise Edition software, as a phase 1 order of a larger IIoT move.

Smart Manufacturing magazine recognizes David McPhail, CEO of MEMEX Inc. for his relentless work towards creating solutions that help North American manufacturers solve tangible issues such as efficiency and sustainability of manufacturing operations. Adding further to the delight of MEMEX Inc., Smart Manufacturing magazine also applauds the work of Dave Edstrom, CTO of MEMEX Inc., in the field of developing MTConnect® an open, royalty-free standard to get information from machinery applications to enable increased productivity. (bolded for emphasis)

AcuityAds:

3 days ago, the company announced a nice 500k re-order. A day later, the company came out with solid Q1 results:

Revenue grew 71% y/y and losses shrunk significantly. To us it seems AcuityAds is on the brink on profitability, it won't take long anymore. As mailed earlier to you members, the valuation is still low after the recent run-up. Trading volume was volatile on earnings, but not resulting in a material change in share price at the end of the day.

Marathon Patent Group

Some very interesting news for Marathon this week.

The company announced that Erich Spangenberg has joined Marathon Patent Group's management team, as its Director of Acquisitions, Licensing, and Strategy. He is the founder and former CEO of IP Navigation Group (IPNav)!

Erich Spangenberg commented, "The patent market is in turmoil and under incredible pressure, so this is exactly the time I want to jump back in and join Doug and the rest of the Marathon team at what I believe is a historic point of opportunity in the patent market."

Mr. Spangenberg continued, "I plan to spend the majority of my time on the ground in Europe and Asia working primarily with large corporate patent owners on various monetization opportunities. We are also working on new and significant opportunities beyond traditional licensing that potentially offer very attractive returns. It is my belief that focused monetization efforts in Asia and Europe can contribute significantly to future top and bottom line growth at Marathon."

Spangenberg is the founder and former CEO of IP Navigation Group (IPNav). He is also the founder and former CEO of nXn Partners (predictive analytics). Mr. Spangenberg was previously a partner at the prestigious law firm, Jones Day, as well as an investment banking executive at Donaldson, Lufkin & Jenrette. He is regularly quoted and featured in major news and industry trade publications and his influence in the IP space has resulted in numerous industry recognitions. (bolded for emphasis)

Spectra:

Spectra earned 57k (more than tripled Y/Y) and generated 430k revenue (up from $352K Y/Y) in Q1. A solid quarter. The company has not released a press release yet, but you can check out the details on this SEDAR link:

BVX Medical:

BVX unfortunately came out with weak earnings, causing shares to drop 10%.

We still have a small position and diving into whether to hold or to drop shares. We'll keep you updated if we have made a decision.

Radcom:

Radcom reported on May 10th:

A nice profit and revenue ramp-up, but shares trade unchanged. It's all about signing up new customers here, just like with Direct Insite, before we can see any substantial share price appreciation.

Luna Innovations:

LUNA reported their earnings as well

Following the company's merger with Advanced Photonix, Inc. ("API") in May 2015, for the three months ended March 31, 2016, revenues increased by $8.6 million, net loss improved by $1.2 million, and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") improved by $0.2 million, compared to the three months ended March 31, 2015. A reconciliation of net loss to Adjusted EBITDA can be found in the schedules included in this release.

"As anticipated, we realized significant growth in the sales of high speed optical receivers and ODiSI systems in the first quarter of 2016," said My Chung, president and chief executive officer of Luna Innovations. "We are encouraged by our first quarter growth in high speed optical receivers, centered around 100G receivers for the metro/long haul data transmission market and 2.5G APDs for the fiber to the premise market along with the market's acceptance of our ODiSI systems for the measurement of strain in composite materials, especially within the aerospace and automotive industries. We continue to expect these two strategic initiatives to provide significant growth opportunities for us throughout the remainder of 2016."

We remain long and expect shares to rally later in the year.

Our Latest Reports: (Released First To Pro Members)

Check out our latest thesis released this week:

Reliq Health Technologies: New Leadership Driving a Recent Acquisition Offers a Potential Inflection PointBeWhere Holdings: A Pulsing, Immutable NanoCap Growth StoryAtmanCo: Past Personality Is An Indicator Of Future ResultsReach An Audience:

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Education:

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Broader Micro-Cap Market:

The IWC continued to sell-off. It's a weak market out there, especially biotechs are feeling the heat again.

How was the Growth Capital Expo 2016?

This week, our friend Bobby Kraft hosted a large MicroCap conference. Were you there? Tell us about your experience!

Lesson Of The Week:

If a company reports a profit, check whether its cash balance has increased too. Sounds logical, but there might some reasons why that won't be the case. You'll find the answer in the cash flow statement, an often overlooked financial statement.

Holdings Not Listed In Our Portfolio:

Memex (OEE.V), UrbanImmersive (UI.V), AcuityAds (AT.V), Spectra Inc (SSA.V), Ivrnet (IVI.V), RSI International Systems (RSY.V), AtmanCo (ATW.V), BeWhere Holdings (BEW.V or BEWT)

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Disclosure: This content is strictly informational and educational. Do not invest or trade based upon this content. Always contact a financial professional before executing any trades or investment

Additional disclosure: Disclosure: This content is strictly informational and educational. Do not invest or trade based upon this content. Always contact a financial professional before executing any trades or investment