Member Info for stt1

SupportFreeContent was described as a Pioneering Initiative in fy2017 results...

"Another pioneering initiative designed to enhance the experience for RhythmOne publishers is called Support Free Content. This initiative arose out of the need to recapture revenues lost due to ad blocking. Support Free Content helps publishers address ad blocking by offering consumers choice - gating their access to publisher content via a set of monetization options that range from subscription, to white listing within their ad-blocker, to downloading a browser extension that provides alternative avenues for monetization."

https://investor.rhythmone.com/assets/pdf/RTHM_FY2017_ResultsRelease_15May2017.pdf

According to Alexa, seems like it was closed around Aug/Sept 2017, during the latest reported fy, fy2018

https://www.alexa.com/siteinfo/supportfreecontent.com

So it seems like it was closed around Sept 2017, so possibly when the rthm/Yume deal was confirmed..

23/08/17 - press speculation:
https://investor.rhythmone.com/newsroom/2017/08/23/statement-re-press-speculation

04/09/17 - confirmation of Yume deal:
https://investor.rhythmone.com/newsroom/2017/09/04/rhythmone-to-acquire-yume-and-consolidation-of-share-capital

Ad-blocking browser Brave says Google is breaking EU privacy law

Its GDPR complaint could set an important precedent for adtech.

"Ad-blocking browser Brave has hit Google and other adtech companies with a formal complaint that could set an important privacy precedent for search engines and digital advertising firms."

"This happens through a process called "real-time bidding," which takes place through two main channels, OpenRTB and Authorised Buyers -- the latter is run by Google. "

https://www.engadget.com/2018/09/13/ad-blocking-browser-brave-google-eu-privacy-law-GDPR-data/

rthm uses OpenRTB:

"RhythmMax now provides a centralized platform to access cross-device, cross-format
RhythmOne inventory across owned, controlled and extended supply sources. It also offers
advertisers flexible purchase options, whether through traditional direct deals, private “walled
garden” marketplaces with closed site lists, or via auction-based mechanisms – all of which use
the OpenRTB (Real-Time Bidding) protocol. Through RhythmMax, advertisers can reach target
audiences to achieve measurable ROI at their desired spend level through a single entry point. "

https://investor.rhythmone.com/assets/pdf/RhythmOne_FY2018_Results_140618.pdf

Oil,
"I'm not sure where Numis would have got the $58m cash figure from"

Maybe ask Numis??? and as I posted... 'Numis, the house broker were expecting H1 cash to be around $58m,'
- the forecast was for cash as at H1, 30th Sept 2017 - so pre Yume deal.

"but it wasn't that much because they paid a hefty dividend before the merger. "

Yes, and all those majority shareholders like Viex who received a part of that hefty special divi before going on to announce the Yume/1R deal...

Oil,

"but the management decided to 'invest' most of that cash in YUME"
"They probably thought it was better to merge with YUME rather than have a gradually decreasing - but safe - cash pile. "

'Most'.. Not really..
They had $75m cash as of fy2017, just weeks before the Yume deal was announced. The cash element of the deal was $60m cash, with the rest in shares.. Numis, the house broker were expecting H1 cash to be around $58m, so around the same mark as the cash element for the deal...

However, H1, which ended just days after the General Meeting in Sept to approve the Yume deal, showed cash of $37m, a substantial $21m below Numis' forecast.. I think the cash element of the deal was based on 1R having near enough the cash at H1...

so, going by the cash element of the deal and the House Broker's expectations, cash wasn't "gradually decreasing" but was far short of expectations.

1gw,

"If you really want to keep score, I would offer my many (profitable) arb trades Sept'17 - Jan'18 as evidence "

That just proves that you're a trader, a day trader...buy and sell on a few% gain...
And traders tend to buy in pre-TU/results, ramp and then sell a few weeks later...

And you did sell some last April, a week after your in-depth, well written post stating how great things are, didn't you?

I'm not a day trader... Therefore, obviously you would have lots more trades than me... .
I sold some at around 500p (consolidation price) after I had concerns over newsflow...

I think everyone should form their own opinion.....

1gw/brassneck,

I'm all for posters forming their own opinion, it's their money... They can read the posts and will see that you have been consistently wrong about 1R..

Whereas, those with contrarian opinions have been right.

I sold some at around 500p (post cons) mid last year, pre the Yume acquisition..

Everyone should form their own opinions regarding the increased risk when a company has such a huge credit facility...

The Shares On Loan are still high and more than double what it was a year ago....

1R is still a 'show me the money' share... still a jam tomorrow share... still a company where they make bullish statements and fail to back them up when it comes to results...

Look at the chart and their past results. The sp rises in anticipation of some good news. However, it's usually disappointing and the sp falls after..

I think it's best to wait until 1R are actually able to back up their bullish statements and that they are on track for fy2019..

1gw,
"They renew it because that's what grown-up companies do. They want some debt financing because it's relatively cheap"

There's nothing wrong with taking on debt, business or personal, as long as you can service it. That's not the point. The point is it makes the company higher risk ... The industry changes/challenges can change things in an instant...

Here's a example of what you would call a 'grown up' (or proper) company taking on credit facility...the ad tech industry changes/challenges changed things in an instant...

Videology, (were a rthm partner)...who took on a $80m credit facility. I'm sure the banks did their homework before granting the loan...and I'm sure Videology thought they would have no problems servicing the debt...

Behind the fall of Videology

"Ad tech middlemen have faced constant pressure from competition from the Facebook-Google duopoly, and Videology was no exception. In 2015, Google announced it would pull all YouTube inventory from Videology™s ad exchange. From that point, it was only possible to buy YouTube inventory via Google™s own buy-side tools, DoubleClick Bid Manager and AdWords."

"The spotlight on agency transparency that kicked off in 2016, with the Association of National Advertisers™ report on agency and vendor business practices, put pressure on Videology, according to industry sources. GroupM was well-known as a major partner to Videology, and the association created a perception problem with some."

"Videology was likely shackled by the fact they couldn't disclose all their partnerships and relationships said Edwards. The market has evolved since their inception marketers are smarter, people want to know more about WHERE THEIR DOLLARS ARE GOING, AND WHO AND HOW YOU'RE TRADING and maybe they couldn't disclose that"

https://digiday.com/media/behind-fall-videology/

"The company raised total venture funding of more than $130 million and TOOK OUT AN $80 million CREDIT FACILITY with FastPay and Tennenbaum Capital last year."

"Videology filed for chapter 11 in the U.S. Bankruptcy Court for the District of Delaware on Thursday. The filing states Videology has estimated liabilities of more than $100 million. The filing lists the company's assets at $86.5 million."

"Ad-tech companies, once a hot attraction for investors, have been beset with increasing turbulence in recent years in a digital advertising market dominated by Google and Facebook . Some of the recent deals in the industry reflect those changing fortunes. Notably, Rocket Fuel, a public ad-tech company once valued at $2 billion, sold last year to rival Sizmek for $125.5 million."

https://www.wsj.com/articles/ad-tech-company-videology-prepares-bankruptcy-filing-lines-up-buyer-1525953720

1gw,

Like I said "I think", it's my opinion...
There are a lot of IFs in your post... exactly as I say...
"IF the company backs up their bullish statements with solid financials and believable outlook then the sp will take care of itself"....
Well, in April, they said outlook was in line with current forecasts but then came the huge revenue forecast reduction, didn't it? So, yet again, even a few months ago, post Yume/Rad1 acquisition, the company still made bullish statements but failed to back them up...

I'm sure IF the company do show that things have turned around then, I THINK, there will be ample opportunity to buy in...IF they don't then I expect the sp will continue to move lower, as it has done so in the past...

19th Apr...
Rthm's fy TU bullish outlook statement.. weeks later the revenue forecasts were reduced...

"We are pleased with our results for the year, and the progress we have made against our targets in terms of revenue growth, profitability and product integration. We believe we are well-positioned to deliver a further strong performance in FY2019 – fully in line with current consensus estimates in market – as we realize the full contribution of the YuMe acquisition. "

https://investor.rhythmone.com/newsroom/2018/04/19/trading-update-financial-year-2018

Brassneck
" As has already been said most proper businesses would have the same in place."
1gw,
"They renew it because that's what grown-up companies do. They want some debt financing because it's relatively cheap"

So you're saying that because 1R have a credit facility, it makes them "grown up" or "proper".... really?

The point is it makes them higher risk than when they didn't have the facility, doesn't it?
I think a business with $75m cash is lower risk than a business with $100m secured credit facility, which has been partially (or fully) drawn down.
You may beg to differ but that is my opinion....

"The facility is for $25m, not $100m, although it may be increased up to $100m under certain conditions. "

Yes, so it's a $100m ($25m + $75m) credit facility available for just over another 2 yrs, isn't it? And it is a secured credit facility where SVB has 1st charge...
Do you have any credible evidence showing that they have or have not used any of it?

Didn't they say that they will be stopping low margin businesses, so leading to lower revenue forecast?
Didn't they also say the moves to improve the financial reporting will involve significant costs ...

I think they will use the credit facility for working capital

On Nov 9th, they INITIALLY only announced the credit facility for $25m:.

"with up to $25 million of capital "
https://investor.rhythmone.com/newsroom/2017/11/09/rhythmone-secures-line-of-credit

but then as part of their H1 results, they announced the total $100m . therefore, I think the initial announcement was misleading.. as it is clear from their statements that they knew about the additional $75m on the 8th Nov but the 9th Nov rns didn't mention it...

"15. Subsequent event
On 8 November 2017, RhythmOne and certain of its subsidiaries entered into a senior secured revolving credit facility with Silicon Valley Bank and certain other lenders party thereto pursuant to which certain subsidiaries of RhythmOne may borrow up to $25.0 million of revolving loans. The funds are designed to provide cash resources to support potential strategic initiatives and general corporate purposes. Subject to satisfaction of certain conditions, the total revolving commitments under the Revolving Credit Facility may be increased by an amount not to exceed $75.0 million. The revolving credit facility bears interest at variable rates. This revolving credit facility matures on 8 November 2020. "

https://investor.rhythmone.com/assets/pdf/H12018_Results_041217.pdf

Declining cash:
Fy-2017, 18months ago.. $75m cash
https://investor.rhythmone.com/assets/pdf/RTHM_FY2017_ResultsRelease_15May2017.pdf
H1-2018, a yr ago, $39m cash
https://investor.rhythmone.com/assets/pdf/H12018_Results_041217.pdf

fy-2018, 6months ago..net cash $27m
https://investor.rhythmone.com/assets/pdf/RhythmOne_FY2018_Results_140618.pdf

So over the past 18months..
fy2017 $75m --->H1-2018 $39m ---->fy2018 $27m

Hence why I think they needed the credit facility..

"If it's a 3-year facility then presumably they will look to refinance it fairly soon."

Yep agree, that's EXACTLY why I mentioned that it was only for a 3 yr period with 1 yr gone... 1R are likely to need to renew it...especially given their past cash/revenue/profit figures.. So not expecting cash to grow substantially anytime soon then...


revenue cash(cash + equ) profit(loss)
fy2008 $6.5m, $39.4m, ($16m)
fy2009 $13.9m, $21.3m, ($8.8m)
fy2010 $33.6m, $14.5m, ($8.5m)
fy2011 $66.1m $52.8m $7.6m
fy2012 $114.4m $38.4m $3.9m
fy2013 $198m $55.9m $17.4m
fy2014 $247.2m $126.9m $12.2m

Jan 2014 Blog
July 2014 profit warning

fy2015 $214.9m $95.7m ($20.8m)
fy2016 $166.7m $78.4m ($92.3m)
fy2017 $175m $75m ($18.7m) *(inc Perk acquisition q3 2017)

Nov 2017 - $100m secured credit facility arranged. SVB have first charge

fy2018 $255m $27m ($13.8m) (inc Rad1 & Yume acquisitions)

1gw

"No it is absolutely not credible imo, it's a completely different scale of "significant"."

I disagree. Wasn't the $100m secured credit facility ONLY over a 3 yr period and nearly ONE year has already gone...They've started moving to better reporting and expect significant costs, they're only recently started stopping low margin businesses... consequences of industry changes/challenges to hit this year onwards...

After all, it's now 4 yrs and they're still not anywhere near a predictable situation.

1gw,

"you keep quoting this as though it's something new and scary."

Where do I say it's new?... Yes and in the meantime the ""significant costs", Substantial managment time", "adversely affect...operating results..in the future."

The $100m credit facility ISN'T new either, is it?. They set it up last Nov, didn't they?.
So is it not credible to believe that they set up the credit facility because they expected to use it for some of these 'significant costs' that they have mentioned...and it's also credible to say that if they break banking covenants then they will be in trouble.

After all, despite saying during the Apr TU that everything was in line for fy2019, the revenue forecast was still reduced heavily, wasn't it?

Was that revenue forecast reduction also expected and mentioned in the F4???

It's not as clear cut as you/brassneck think it is. and it never is with 1R..

"“We are pleased with our results for the year, and the progress we have made against our targets in terms of revenue growth, profitability and product integration. We believe we are well-positioned to deliver a further strong performance in FY2019 – fully in line with current consensus estimates in market "

https://investor.rhythmone.com/newsroom/2018/04/19/trading-update-financial-year-2018

Rusty,
"We are NO LONGER an emerging growth company"

Yes and in the meantime the ""significant costs", Substantial managment time", "adversely affect...operating results..in the future."

"The combined company will incur significant costs and devote substantial management time as a result of becoming subject to reporting requirements in the United States, which may adversely affect the operating results of RhythmOne in the future."

Don't forget 1R have a secured $100m credit facility with SVB as administrative agent... Those significant costs could mean using their $100m credit facility. If so, they had better not break the banking covenants...Very risky if they break those banking covenants, don't you think?

https://beta.companieshouse.gov.uk/company/06223359/charges

Article about Dmexco - refers to GDPR...

Yes, a lot of businesses don't know exactly where they are with GDPR - some comments by ad tech companies..

say much more than they “are compliant”, “already had good data practice in place so haven’t noticed much difference” or that “it is too soon to tell”.

"There are still concerns. Almost every conversation turned to GDPR. It’s been three-and-a-half months since the biggest shake up to EU privacy law, and yet the majority of businesses are reluctant to say much more than they “are compliant”, “already had good data practice in place so haven’t noticed much difference” or that “it is too soon to tell”.

That’s not to say these things aren’t true; rather, it feels like the industry is none the wiser about GDPR. Even Google, home to some of the cleverest people in the world, admitted it had been having weekly meetings for two years in the run-up because of how complex it was."

https://www.marketingweek.com/2018/09/14/dmexco-ad-tech/

Page 43..

"significant costs", Substantial managment time", "adversely affect...operating results..in the future."

"The combined company will incur significant costs and devote substantial management time as a result of becoming subject to reporting requirements in the United States, which may adversely affect the operating results of RhythmOne in the future.

As a company subject to reporting requirements in the United States, the combined company will incur significant legal, accounting and other expenses that RhythmOne did not incur as a public company in the United Kingdom. For example, RhythmOne will be subject to the reporting requirements of the Exchange Act and is required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements will increase RhythmOne’s legal and financial compliance costs and will make some activities more time consuming and costly, while also diverting management attention. In particular, RhythmOne expects to continue to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when it is no longer an emerging growth company as defined by the JOBS Act. "

https://www.sec.gov/Archives/edgar/data/1713721/000119312517377843/d399085df4.htm

"It was reiterated in June and has not changed."

So not a new broker target.

McPrice, you beat me to it...

Toughatthetop,

"We also need a bullish outlook/forecast as part of the TU for our price to really increase.......'in line with management expectations' will only serve to stop the price from plummeting."

absolutely.. and 'believable' outlook/forecast... not jam tomorrow..

And also not like they stated in their fy TU... stated everything was in line and then a few weeks later,we had the huge revenue downgrades...

"“We are pleased with our results for the year, and the progress we have made against our targets in terms of revenue growth, profitability and product integration. We believe we are well-positioned to deliver a further strong performance in FY2019 – fully in line with current consensus estimates in market – as we realize the full contribution of the YuMe acquisition. "

https://investor.rhythmone.com/newsroom/2018/04/19/trading-update-financial-year-2018

stevie,

"when they see a uptrend they will go long"

If you look at the past Shares On Loan, pre Yume, pre TU, pre results, there was an uptrend in anticipation of 'maybe this time' the results will be good...

But the sp crashed back down after the results...

19th Apr TU - sp was 182p...rose to 244p by May 3rd - rise of around 30%....then traded below that 244 after the traders cashed in..

14th June - they announced their disappointing results... sp was 230p..
and as usual with 1R, the sp crashed back down to 170p by July 4th...

https://finance.yahoo.com/quote/RTHM.L/history/

If you look at the avg Shares On Loan... the TU (Apr) and fy results (June), the avg SoL dipped slightly during month of TU & results but then increased again after...

Mar 2.93m 4.1%
Apr 2.76m 3.79%
May 3.29m 4.47%
June 3.17m 4.29%
July 3.62m 4.89%
Aug 3.53m 4.76%

Therefore, as has been stated.. the sp rises in anticipation of good results but they fail to deliver and the sp crashes back down...
If they deliver good results and believable outlook then I think there will be plenty of time to buy in...

"The Shares On Loan position doesn't help either.."

and the Shares on Loan:

SoL:

Shares On Loan: since Nov, just before Yume acquisition was completed.
It is still more than double the avg % from last June, after fy 2017 results were announced and pre-BM departure and Yume announcements... and still 4x the avg % following the Perk acquisition...
We had 495K new shares issued around mid Aug.. Total issued: 78,515,863 ordinary shares..

Nov 3.68m
Dec 3.17m
Jan 2018 3.3m
Feb 3.49m
Mar 2.93m 4.1%
Apr 2.76m 3.79%
May 3.29m 4.47%
June 3.17m 4.29%
July 3.62m 4.89%
Aug 3.53m 4.76%

https://www.euroclear.com/en.html