The shares of Blinkx (LSE: BLNX), the internet media platform provider, continue to fall. The recent half-year balance sheet shows the firm carrying about 28p per share in net cash, so does that make today’s 27p share price a bargain?
Profit collapse
If we know that the firm won’t spend the cash, the answer is yes. The trouble is we don’t, and the profit collapse confirmed in the half-year report leads to concern about potential forward cash burn.
A year ago, Blinkx delivered post-tax profits in excess of $10 million, the recent six-month period produced a loss of almost $10 million — that’s a shocking $20 million differential ‘achieved’ over just 12 short months. No wonder the share price cratered from 220p or so at the start of 2014 to under 30p today.
There’s no doubt that the first half-year’s trading was grim. Revenue generation slowed “considerably” during the period, amplifying the effects of seasonally slower summer months.
Can Blinkx recover?
One chink of light is that mobile revenues grew from 1% to 20% year-on-year. The chief executive reckons that mobile will likely contribute an increasing percentage of Blinkx’s growth going forward.
Since the mid-summer lows, the firm is seeing continuing revenue and profit growth, explains the top man, and he points to Blinkx’s adjusted EBITDA performance during the period as evidence that the firm might be down, but is not yet out. Indeed, by ignoring all the nasties, such as interest, tax, depreciation and amortisation, and then ‘adjusting’ for whatever, Blinkx posted a figure in excess of $1million. On top of that, revenue generation remains perky with the firm posting $100 million for the period.
The year has been transformational, he says. Deal making, prolific. Blinkx acquired LYFE Mobile, a Demand Side Platform (DSP) and Data Management Platform (DMP), and secured new content partnerships with Hallmark, Buzzfeed, LPGA and Whalerock. Then there is the continued engagements with marquee brands such as Disney, Target, McDonalds and The Gap, and partnering arrangements with Integral Ad Science, Nielsen and Forensiq to ensure traffic quality and enhance measurement.
The directors have been busy, that’s for sure, but given significant industry changes and the shifting product mix within the company, vibrant action is necessary. The firm operates in a dynamic marketplace, but that doesn’t diminish the firm’s aim to become a leading provider of premium cross-screen advertising at scale, maintains the CEO.
What now?
The directors reckon the worst is behind Blinkx and that, since July, month-on-month growth suggests trading has reached an inflection point. They expect mobile-related sales to contribute approximately 20% of revenues during the next trading period.
Mobile could be Blinkx’s saviour, as long as profits flow from the generated revenue, too. In the meantime, we need to keep a close eye on Blinkx’s cash-burn rate and look for bottoming out on the share-price chart before investing, I reckon.