Rhythmone Share Discussion Threads

[barkboo] 04/4/2019 17:36

Expecting to see SAR rise by around 40% over the next two weeks.

[sikhthetech] 04/4/2019 16:12

"Could it be that part of the problem could have been brought forward from FY18 and they want to get a clean look at the last RTHM financial year to March 2019?"

I think so...
There's something amiss and it does make you think about the SEC filing regarding Material Weaknesses with the financial reporting...
Did they find anything major, which led to the 2 CFOs resigning...

I doubt it's just an academic excerise...

Regarding the debtors.. rthm were owed just over $1m by Sizmek and they have filed for Chapter 11 bankruptcy...

[gowlane] 04/4/2019 15:49

It does beg the question though Sikh, has a good chunk of the money not been banked at all?

The implication of what Finncap have said is that there is something wrong with H1 debtors - and H1 revenues in effect.

Can there be any other reason for such an academic exercise, than RTHM have had bad debt losses and TAP want to get a proper handle on the problem?

Debtors of $97.7m looked a little heavy in September at 102 days sales - when the average credit period was said to be 60 days. [Correction 79 days]

But even if the debtors come in late then it tends to legitimise the H1 revenue figure – as long as they do pay.

Now you have said something very interesting, they may want “a more consistent and accurate view for the full year”

Could it be that part of the problem could have been brought forward from FY18 and they want to get a clean look at the last RTHM financial year to March 2019?

[barkboo] 04/4/2019 15:00

NANO showing some good resistance on a red day.

[sikhthetech] 04/4/2019 10:26

I suppose it depends on WHEN they were recognised as banked..

Going back over H1 and H2 would provide a consistent and more accurate view for the full year..which would help when comparing the financials in the future

[gowlane] 04/4/2019 10:02

Yes, good spotting 1gw the dollar value would be higher of course.

An interesting point you rise about the reduced asset values which seems fair enough and I imagine that Taptica will be right on top of that. Presumably RTHM will prepare final accounts to 31 March, and they could even do a write off in there before being consolidated?

On another topic, Jonc reported an interesting discussion with the Finncap Research dept, in which they said they were applying TAP revenue recognition policies to RTHM - going back over H1 and H2.

The reference to H1 struck me as somewhat ominous, why go back to H1, those Sept debtors should have been banked by now. I think they were carrying 100 days revenues or something.

[barkboo] 03/4/2019 20:53

Gowlane loses most of his exchange rate down a swirling toilet.. His Scottish € will soon be swirling €100 to the Haggis!

Now I love you Scots - although the SNP's are a little weird...I have Gowlane as a SNP fanatic!

[1gw] 03/4/2019 19:21

gowlane - I think you might have a sterling/dollar issue in your balance sheet analysis.

I was basing my analysis on the 30th September R1 balance sheet and comparing that to what Taptica might do:

R1 b/s at 30/9/2018
$124m goodwill
$ 77m intangibles
$ 79m net tangible assets
$280m total net assets

So $79m tangible vs $201m goodwill & intangible

Now I was hoping that might improve a bit by completion as some of the intangibles would have been amortised in 2H ($12m in 1H) and they might have made a bit of profit in 2H as well. The warning suggests not much if any profit and possibly a loss, although it's difficult to understand what finnCap are actually saying. I will talk to them and the company next week to try to understand if the ebitda number is also on a Tap accounting basis.

Tap consideration valued at 68.34m new shares x £2.075 x 1.31 $/£ = $186m

So even if still only about $80m net tangible assets in R1 at completion, that still reduces goodwill + intangibles from say the $190m (after 2H amortisation) on the R1 books to $106m on the Tap books.

i.e. the starting point for Tap would be $186m consideration = $80m tangible + $106m intangible (although being "prudent" they might look hard at whether all R1's tangible assets should be brought on at the value they had on the R1 books).

The point being that future write-off risk on R1 assets sitting on the Taptica balance sheet should be considerably less than the risk if they were still sitting on the R1 balance sheet. Taptica also have a single ring-fence for impairment tests iirc, so problems on one asset might be offset by gains on another.

[football] 03/4/2019 14:45

Christ the tap message board is worse than here used to be

[barkboo] 03/4/2019 14:44

LLOD's really flying - 3% is a massive rise for such a stock!

[barkboo] 03/4/2019 12:04

Prime Ministers questions about to start - I would ask her, as she has never had children..is her latest idea/plan, for the purpose to experience Labour pains?

Off piste - LLOY up over 25% since the end of last year...no deal Brexit not having much effect on them. lol

[gowlane] 03/4/2019 11:38

Barky is a laugh a minute.

Anyway if the closing market price on Friday was 205p and TAP issued RTHM shareholders with 66.73m shares, that multiplies out to a valuation of £136m on the RTHM assets taken over to go on the combined balance sheet.

There do not look to be that many tangible assets, assuming that debtors and creditors cancel each other out.

You could say Net Cash of about $15m, property, plant & equipment of say $11m, deferred tax asset of $30m so say $56m in all, still leaving $80m in intangibles to go on the balance sheet.

[barkboo] 03/4/2019 10:53

I cant read Gowlane - but I have always had a connection with the company from the BLNX, RTHM, AU and Aurasma early days...I have friends that have worked and done business with these names - I have only ever had great feedback - even the last year or so has been very positive despite the lack of communication due to the TAP negotiations.

What I find now is that the meat on the hidden bone has been lost - and the new bone has been ravaged.

Now both Companies have done excessive DD on each other - so I can draw one or two conclusions..so 50/50 my money?

1] RTHM and TAP have planned a coup on those responsible for severely damaging the joint SP's

2] We have ended with two bent Companies that were in real trouble - those figures are impossible!

You pays your money - you take your chance,[and I dont like chance] I have a strict system that I never waver from...so my stance is, and will be a long-term hold..selling at target points only.

I have no idea what is going on other than a lot of buying - and would you buy a lot of food out of date? I have a very similar view to Tom53......... Strange times!

[1gw] 03/4/2019 09:47

Yes it completed on Monday. But if you do the numbers on the Friday closing price, the balance sheet consequences should be reasonable I think.

[gowlane] 03/4/2019 09:22

Has it not already completed given that they have already started the buyback 1gw?

There will have to be a lot of intangibles and goodwill on the balance sheet I would guess.

I had thought you might use the buyback as an opportunity to bail out?

[1gw] 03/4/2019 08:25

Except that the (consolidated) Taptica balance sheet will be reset now with purchase price for R1 split between tangible assets, intangibles and goodwill. And a "low" Tap share price at completion is helpful there.

[gowlane] 03/4/2019 07:40

Well we did wonder where Bonney was finding areas to make cuts in, where his predecessors failed.

Did he simply eviscerate the marketing budget and sales then fell off a cliff in H2?

You have to conclude that he did not know what he was doing. Nor did Singer.

Anyway what can we say about profits for RTHM in H2?

$75m revenues, at 45% margins gives $34m in gross profit.

If they reduced opex further in H2 that could come down from $12m to $10m a month, say.

So $60m Opex for H2, would mean a net loss of $26m, not including R&D, restructuring and acquisition costs etc., so would say $30m+ in net losses for H2.

Surely they could not escape balance sheet write downs, so it could be losses of $40-$50m+ even.

[barkboo] 02/4/2019 23:48

"English Democrats leader starts High Court battle to prove UK has ALREADY left the EU on March 29 and further Brexit negotiations are pointless
Robin Tilbrook said Theresa May's extension to the Brexit date was 'null and void'
He said he had asked for the High Court to hear the case on an expedited basis
The English Democrats leader said Britain would be out of the EU on WTO terms"

PUBLISHED: 22:52, 2 April 2019 | UPDATED: 22:52, 2 April 2019

Makes you laugh - if the law is changed and involves Government giving money away, it takes 2/3 years. If the law needs changing to halt Brexit, it normally takes 2/3 minutes!

Good luck Robin Tilbrook at the high Court.

[sikhthetech] 02/4/2019 22:51

gl,

"This is a sensational collapse, RTHM basically fell apart.

Something seems wrong here."


Agree.. sensational collapse is an understatement but was expected looking at the timeline from July 2017 onwards, when rthm/Yume takeover was being discussed......

Once new rthm management came onboard, they quickly realised something was amiss and decided they wanted out...

Those Industry Challenges the contrarian posters to sell at around 500p sure seem to have hit the industry... and they are increasing in number...

Imagine what would have happened to the share price if rthm had reported $250m in revenues...

TAP's in for a bumpy ride ahead..

[1gw] 02/4/2019 22:22

Looking back at my post on "have they genuinely turned a corner?" it seems to me like I was right to hedge my bets! From the adjusted EBITDA number in the finnCap report it does appear they missed the $50m target in year 3, although I hope to get more clarity next week on whether it's a like-for-like number. If so, then was it due to poor R1 management or were they just hit by one of the headwinds they could not reasonably have positioned for?

Either way, it looks like R1 shareholders might have dodged a bullet with the Tap acquisition. So some cause to be grateful to Singer & Bonney at least for salvaging that exit.

The revenue number is just strange. It could be definitional - moving to Tap's revenue booking policy - although I wouldn't have thought they would be able to do that yet for actuals if they've only just got the books (which in any case presumably are still closing). It could perhaps be a net/gross issue in terms of how they account for revenue where they collect a "gross" amount and then pass some of it on to partners, keeping a smaller "net" amount - possibly accounting for it differently from earlier periods as a result of some SEC rule to which they became subject. Or could it be they just exercised discretion in the unaudited 1H accounts to pull forward a whole lot of revenue that might have been booked in 3Q in earlier years? But I don't see how they could have said what they did in December about consensus forecast revenue if they already knew 3Q was a shocker. Another point to discuss next week.

One other thought though. When Arris bought Pace, the Pace full-year accounts were eventually published and appeared to show a fairly staggering miss in 2H revenue just before the deal closed. So I wonder if there's some convention here that incoming management do fully exercise whatever discretion they have in revenue booking to flatter the post-acquisition year at the expense of the pre-acquisition period? Or just the reality that everyone in the company loses some focus on day-to-day business once it becomes clear they are being sold and may not have a job in the near future?

Anyway, onwards and upwards. A new management team to get used to now. They appear to have started reasonably well in terms of disclosure and shareholder-friendly moves (buyback, roadshow). Inflection point, anybody?

-----------------------------------------------
1gw - 30 Nov 2018 - 15:45:04 - 8045 of 11275

Archy147 - am I convinced they have genuinely turned a corner?

No, I'm not, at least not in the sense of becoming "low risk". I believe they have broadly delivered what they said they would over the last 3 years, particularly with respect to their preferred profit metric of adjusted EBITDA and their participation in consolidation in the industry. So breakeven (adjusted EBITDA) a couple of years ago, $14m last year (slightly below original "guidance", but they pulled off some big acquisitions at the same time), and apparently on track for material growth this year. Brokers notes have for some time been pencilling in $50m or so adjusted EBITDA for this year I believe, with good cash generation, and it looks to me as though the first half indications position them well to deliver again. If they can get to $50m then cash generation should be reasonable and they may well get to actual (IFRS) profit for the full-year, but both cash and IFRS profit are likely to be 2H-weighted.

But revenue growth has been disappointing (slower than expected) over a number of years, there's no denying that. And clearly there are a lot of industry challenges as someone never tires of pointing out.

I essentially view them as an underpriced high-risk investment, and I think of the company as effectively having started again around the time they launched as R1 with the RhythmMax platform and the Zenovia technology (Dwight). In my mind, while they got on with the job of developing and expanding the platform pretty well, they have been very poor at managing investor relations, most obviously evidenced by the capitulation of Cogefi.

So the investment case for me is that the company is high risk but underpriced. I think the share price is overly penalised for past sins and poor investor management. Many institutions exited over 2014-2015 (post-blog) and some more who had bought in more recently exited over the last year or so. I think many institutions now will follow stt's mantra of "show me the money" having been burnt holding blinkx/R1 in the past, or having seen other fund managers burnt. So they will wait until confirmation of actual profits and cashflow before committing funds.

Then there is the added uncertainty of the recent change in management. The old R1 board and executive team have largely (if not completely) gone and Singer appears to have brought his people in. He told me directly that he thought he would be judged by whether he hit the numbers, not by how smooth his investor relations department was, so R1 seem to have largely gone silent since he arrived.

Again, and I acknowledge I often tend to emphasise the positive as far as R1 is concerned, I see the arrival of Singer and Bonney as a good thing. I think I argued in 2014/15 that blinkx should have replaced Brian Mukherjee with a turnaround specialist, so I was pretty happy when Bonney came on board.

So I'm hoping for great things from Singer/Bonney, and I hope we see the start with the 1H results and some sort of full-year guidance. But I've hoped for great things before and been disappointed, at least in terms of shareprice reaction. It's quite possible that they get hit with some new headwind that sets back profit expectations another year or two and stymies the shareprice. This time I didn't buy when the shareprice dropped back to 16p in old money (£1.60 post-consolidation). I decided I was fully-enough exposed already.

So a long-winded post, but essentially R1 is high risk but underpriced in my view. Lots of potential but might never make it as a sustainably profitable growth company.

And as usual, all my personal opinions, with no advice intended. DYOR.

[rocket fuel] 02/4/2019 21:29

lol, blinder!

[1scaffolder] 02/4/2019 21:20

Talking of bin cases fat Barky comes quickly to mind! He has misled readers for many years with his utter rubbish and fairy stories about my colleagues.
There seems something wrong here? There was always something wrong
here. Barkpoo was always wrong here.

[gowlane] 02/4/2019 19:41

Cheers Sikh, I have had a look at the Finncap report, and you are absolutely right.

On page 16, “Following the YuMe deal, the FY 2019 RTHM revenue expectation was for $470m, but in actuality the year now looks like seeing $250m of revenue....”

So that means $75m in H2, Oct-March, after $175m in H1.

Earlier on page 14 they make a provisional combined forecast of $495m for calendar year 2019, which includes 9 months of RTHM at $205m and 12 months of Taptica at $290m.

That is consistent with $250m for RTHM the full calendar year, allowing $45m for Jan-March, but it would mean that they only did $30m in Oct-Dec 2018 in the strongest quarter.

This is a sensational collapse, RTHM basically fell apart.

Something seems wrong here.