CSI Tip: HOLD ARI Networks

ARI announced Q3 2014 earnings (quarter ended April 30, 2014) on June 12th. Revenues were $8.2 million about even with last year. They actually made a profit of $.01 per share versus a $.05 loss last year.  Our valuation rose to $5.67 up from $5.57 last quarter. Recurring revenue was $7.6 million or 93% of total revenue.

It was nice to see them stop losing money, but growing revenue at their 80% margins boosts value more than earning $.01. Too bad their poor capital structure makes them have to balance the two. It will just take longer for them to grow.

From their press release:

“As we noted on our prior quarter earnings call, we expected year-over-year organic revenue growth in the back half of fiscal 2014 to be challenging, however, we anticipated significant improvement in our earnings and cash flow. The results for Q3 are in line with these expectations. The investments we are making in sales and marketing are having a positive impact on new sales and upsells. To date in fiscal 2014, we have invested 29.4% of revenue in sales and marketing versus 25.2% for the first nine months of last year. This has contributed to new dealer sales and upsell bookings, measured in annual contract value (ACV), being up 38.8% year-to-date. We believe this should translate into single-digit organic growth in Q1 FY15, growing toward low double-digit growth as we progress through fiscal 2015.”

HOLD

CSI Update: HOLD Synacor Inc.

SYNC announced Q1 2014 earnings after the close on May 13. Revenues were $25.2 million down from $29.1 million last year. Net loss was $.07 per share compared to break even last year. Adjusted EBITDA was a loss of $.7 million compared to positive adjusted EBITDA of $1.8 million last year. Not a great quarter.

Our valuation fell to $5.44 from $5.94 last quarter. Cash was $1.17 per share, more than 50% of the current market cap.

SYNC is trading at about 42% of our valuation. We will HOLD for now and see how the next couple of quarters look. Any signs of a turnaround and we think this stock will soar. A buy out is always a possibility.

It’s earnings season! I will be updating the blog more frequently during this time. If you don’t want to miss out, be sure to click the “follow” button on the left side of the page.