Archive for May, 2013
Inuvo reported first quarter results last week with top line revenue of $15.9m coming in just below management’s previous expected range of $16.2 – $16.5m and the bottom line EBITDA figure of $1.4m slightly better than had been anticipated. Inuvo’s Network segment contributed 68% of total revenue in the quarter delivering strong year over year and quarter over quarter growth. Inuvo’s Applications segment generated a disappointing, but not totally unexpected decline with $5.1m in top line revenue. The Applications segment numbers were heavily impacted by recent changes required by key monetization partner Google and the resulting pullback in Inuvo’s ad spend to promote this segment while the company retooled its customer acquisition model to reflect these changes.
Inuvo management’s comments on the Q2 performance to date suggested some slowing of the top line growth with day to day revenue numbers thus far coming in below Q1. On a brighter note, it appears that the company has subleased the NYC office space at cost and the income statement improvements from the other cost reductions measures should start to be fully realized by the end of Q2. Additionally, the company is working towards the roll out of several new websites and applications that should be live by the end of Q2 or early Q3 at the latest. Overall, the action in trading since the release appears to suggest investors have chosen to focus on the growth of Inuvo’s Mobile traffic and revenues rather than the recent revenue slowdown that was evident in the ALOT Appbar operations. Near term positive catalysts include the opening of a window that would allow insiders to purchase shares (a few Form 4’s would likely do much to boost the stock until all of the expense reductions start to show up in the reported numbers) and upcoming investor conference presentations that might bring more attention to the company.
Following up on a request from community members for an update to our original post about the smallish public float in Remark, we are adjusting our estimated “True Public Float” number to reflect the new information released by Remark last week. Remark’s 10ka filed last week indicated that 5%+ owners now hold a little over 52% of the 7.1 million shares outstanding. What the new filing did not show, however, is:
Discovery Communications Shareholders – 1,510,123 shares were distributed to Discovery Shareholders since the last week of 2012. These shares are no longer included in the 5% owner calculations because they were distributed to multiple individual shareholders of Discovery, who (as mentioned in this blog post a couple of weeks ago) acquired this stock when it was called How Stuff Works International (HSWI) and trading between $50 and $97 per share. For the reasons discussed in detail here, we do not believe these shareholders will be wiling to sell their Remark shares in the $3.50 – $4 range and probably not even in the $6 – $7 range achieved last year. These DISCA shareholders as a group now own a little over 21% of Remark shares outstanding in addition to the reported 11% position still owned by Discovery.
Jeff Arnold was a 5.3% shareholder last year when the count was based on 6.4m shares of common stock outstanding, but the issuance of new shares to the owners of Banks.com pushed Arnold’s stake to just below the 5% threshold so he is no longer included in the list of 5% owners, but we have no reason to believe he has sold any shares.
Over the last few weeks, many GrooveVC participants have indicated that they have been buying (in small lots) shares of Remark Media, with an eye towards a much fuller valuation that reflects the full value of our 10.8% stake in Sharecare and the potential for Dimespring to become the “Sharecare of Personal Finance” with a market valuation that better reflects these assets. While Groove participants can buy and sell whenever they choose and we do not attempt to ascertain a definitive number, it appears that participants have acquired between 2 and 3% of Remark’s outstanding shares.
Thus, in addition to the 52% of shares outstanding owned by insiders and 5% owners, an additional 25-30% of Remark’s shares appear to be owned by investors who are unlikely to sell their shares anytime soon, even if the stock bumped up another 40-50% and maybe even to the upper end of last year’s trading range. This means approximately 80% of Remark’s 7.1 million shares are in “strong hands” that effectively removes them from the shares available to be purchased on the open market. While our thesis could certainly prove to be incorrect as to the nature of some of these shareholders, we note that our analysis of this year’s 10ka filing with last year’s 14D filings indicate that none of the larger holders indicated on this year’s list of insider/5% owners sold even a single share when the stock traded much higher last year.
In summary, we believe that the “True Public Float” of Remark shares is now in the 1.5 million share range, one of the smallest we have seen for a Nasdaq listed stock. We believe the increasing demand for MARK shares that will materialize over the coming weeks and months will move the stock to new highs and draw even more investor attention to the evolving Remark story.
I have a “Google Play” account and once a month I get an email from their editors telling me about various apps, upgrades, etc. Today Google Play sent an email titled “Dr. Oz’s favorite Health Apps”. It was a half page pic of Dr. Oz, a little intro piece on Dr. Oz (in case you have lived in a hole for most of the last decade) and then it showed the apps he has chosen as his favorite health care apps. His #1 pick was the “SOS” app, from Sharecare. I think people are really overlooking the “star power” and reach that Sharecare will be bringing to the table when it eventually brings its IPO to market. Between Dr. Oz, Oprah Winfrey, and the reach of Discovery Communications, Sony and Hearst Corporation, the Sharecare IPO is sure to be very widely followed and these high profile shareholders have not just the means but the incentive to drive as much traffic and revenue as they can for Sharecare.
Remark Media (Nasdaq: MARK) has probably the lowest profile of all the top shareholders of Sharecare, but we do not think Remark will be able to remain “below the radar” for very long. We note that investors have recently begun to take notice, as it appears that the very small number of Remark shares that are available to the public are being scooped up, which is causing the stock to move a little higher almost daily now. Remark Media shares remain the purest vehicle for retail investors to get a stake in what we could be one of the hottest IPOs brought to market over the next few quarters and we believe that this understanding plus the growth of Dimespring.com and its sister sites Banks.com and IRS.com will cause even more investors to “discover” Remark Media over the next few months.
Participants in the GrooveVC community have much to gain by using these sites (and the search box in the upper right hand corner of Dimespring.com, IRS.com and Banks.com) when searching for information on personal/consumer financial information on things like online brokerage accounts, auto insurance, life insurance, income tax related items, mortgages, credit cards, etc. Along with much great content from many of the leading financial planners and sources of such information, Remark’s deal with TheStreet.com to provide the advertising has resulted in Google pay per click and contextual ads being offered, thus giving users of these sites easy access to many of the most relevant providers of each type of service the user may be seeking. Keep spreading the word to associates, colleagues, etc. who can buy the stock, use these services and benefit as we help grow the reach and reputation of Dimespring while Remark shares move to a valuation that better reflects the value of its Sharecare stake and the potential for the company’s growing communities that target the financial and lifestyle verticals.