Rhythmone Share Discussion Threads

[1gw] 26/9/2018 13:52

Gowlane - I wouldn't particularly disagree in principle, but it is standard practice, even if the definition of "exceptional" may differ from company to company. The argument here is that, were they to stop buying things and restructuring, then the costs would disappear (for amortization it would require a few years to do so).
One for the auditors to challenge management on I would have thought - at what point does acquisition or restructuring become "normal" business?

[wheeze] 26/9/2018 13:48

No sympathy for shorters. Hope it hurts.Not selling until well past five quid - may not do so even then.

[midasx] 26/9/2018 13:47

Firstly I want to thank Silk for such an informative and well organised site, cheers!

The key to medium term share price increase is the potential for significant cost reduction. I have banged on about this for years with the multiple acquisitions the previous BOD have not taken the opportunity that the current incumbents are obviously taking.

There has been significant income with minimal profit, but this could change dramatically with appropriate cost reductions.

The machine has already been built and should be able to function and grow with minimal costs going forward!

[gowlane] 26/9/2018 13:43

But this metric is not GAAP compliant in the first place, 1gw, not signed off by the auditors, so the term 'standard practice' can cover a multitude of sins.

And surely you would accept that whatever defence there might have been for that practice when a company does an acquisition say once every 3 years, that argument falls away when acquisitions and restructuring are a regular part of the business model as in this case?

It seems that it is now standard practice for 1R to acquire other companies and grow in that way.

So it seems too easy to include the revenues but not to include costs which were necessarily incurred to bring these businesses together to earn these revenues. The cash burn is the figure to watch.

All in my opinion anyway.

Off out now.

[1gw] 26/9/2018 13:20

But it is also fairly standard practice to exclude "acquisition and exceptional" costs from "underlying" measures of profitability.

[gowlane] 26/9/2018 13:15

A big revenue miss accompanied by strongly rising ebitda numbers does not pass the Sniffer Dog test so I did a bit of digging and sure enough the actual reality is a little different.

JonC is of course correct when he says that ebitda, let alone the infamous 'Adjusted Ebitda' is not a good gauge of performance but much loved by CEOs who want to put a good spin on poor results.

The only half decent argument in its defence is that is should correlate approximately to cash flows from operations.

This is because they add back fairly hefty non cash items like depreciation and amortisation to the bottom line result be it profit or loss.

‘Adjusted Ebitda’ as used here however is an entirely different beast.

While it seems consistent with the above to add back non cash items such as share based payments, they also very cleverly add back activities that they say are exceptional but actually seem to occur every single year and consume great wads of real hard cash, such as acquisition related costs, restructuring and severance costs.

So they claimed to have earned Adjusted Ebitda in FY18 of $14m, but check out the cash flow statement in their FY18 annual report, (page 51, going by the page numbers), cash outflows from operations were -$5.87m versus this Adjusted Ebitda figure of $14m, that is almost a $20m difference.

So this metric is way out of kilter with cash flows from operations, in fact you might as well call it ‘Fake Ebitda’.

[borgioli] 26/9/2018 13:07

And me..;)

[jarvis4] 26/9/2018 13:02

And me too....

[digitalis] 26/9/2018 12:53

I have had the privilege of seeing the lid come off blnx twice.....it was uncontrollable.....don’t know how R1 will fare under the same pressure......I will be around to smell the burning.....

[barkboo] 26/9/2018 12:47

Hi Digi - good to hear from you...not paying too much notice/time on my phone or markets, but did see the bid is right up tight on the offer now - a little more honest at last.

Moving nicely - and at the right speed..the 40%er could come my prelims?

[seball] 26/9/2018 12:23

Thanks Midasx

N+1 Singer Note

Alongside the CFO change announcement, RTHM included a compact update on trading. While H1 revenues are off plan (weak Performance market and integration disruption), lasting effects look likely to be modest and the biggest implication of H1 EBITDA guidance is that costs have been reduced much faster than expected, providing comfort for the full year. EBITDA looks set to continue to soar and investors are likely to focus on H1’19 EBITDA progress; c$20m compares very favourably with $3.1m in H1’18 and $14.0m for all of FY18. Our new FY19 forecast is for $48m. The stock trades on just 3.6x FY19 EV/EBITDA. We adjust our TP to 533p (was 730p) implying investors can more than double their money. BUY.

[gowlane] 26/9/2018 12:10

Sikh, I am curious about post no 9002 above, have you a link to that?

[seball] 26/9/2018 12:05

Sikhthetech there is still time for you to buy in and enjoy the rise. Maybe you could recoup some losses. These are still very much undervalued at current price. Dyor.Best of luck

[jonc] 26/9/2018 12:03

Perhaps you should note when I started.

It wasn't at 190p

If you think I am wrong then it is you that are wrong.

Short to zero.

[wheeze] 26/9/2018 11:58

Btw, with regard to those who have been recommending short selling this share from 190p upwards, if anyone had followed their advice, you would have lost 40,000 quid on 100k shares by current share price lol.

[sikhthetech] 26/9/2018 11:57

Why would they want to 'lose' $60m worth of revenue..
Just because it's 'low margin'??
Really.. it doesn't make sense..

I suspect the industry challenges are having an affect.. also consequences of the court case with DataXu..

[seball] 26/9/2018 11:49

R1 just hit a monthly upwards breakout. Onwards and upwards. This should never have been this low in first place. Oversold and expecting a steady rise to more sensible valuation.

[digitalis] 26/9/2018 11:38

Thanks for the updates barky....far more interesting than a spineless short to zero....

[jonc] 26/9/2018 11:34

Did I say short to zero.

Always worth emphasising that.

[jonc] 26/9/2018 11:33

It is bizarre.

They have missed their initial forecasts by a country mile and still the idiots think R1 is performing.


As for the press and analysts if they were any good they would have made their millions investing instead of getting paid to write trashy inaccurate articles.

So cost cutting is the new way forward.
Good luck with that although I note that YuMe has slashed costs prior to the takeover with little impact on the bottom line. They are going to slash it again?

This is all smoke and mirrors and will end badly.

Short to zero.

[cromw3ll] 26/9/2018 11:09

I see this move as simply catching back ground that should never have been lost.

[sikhthetech] 26/9/2018 11:09

A miss is a miss...
The traders will concentrate on the metric which shows them in the best light..

[wheeze] 26/9/2018 11:06

A share buyback by R1 would truly light the blue touch paper - the fuse leading up the shorters @rses.