Augme Restructuring, Focusing On HipCricket

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After going on an acquisition spree in the last year, Augme Technologies, the parent of mobile marketing and ad services firm HipCricket, is retrenching. The company on Friday announced a restructuring effort aimed at reducing operating expenses by $6 million on an annualized basis.

"Our goal is to minimize Augme's cash burn, while carefully investing our resources and protecting our strategic assets, which are the foundation of Hipcricket's leadership position in the mobile marketing and mobile advertising industry," stated interim CEO Robert F. Hussey.

He said the immediate focus would be on reducing headcount, slowing the pace of the company’s intellectual property investments and cutting all “excess variable expense items.”

Augme did not specify the scope of the cuts, and a company spokesperson declined to provide further details.

The restructuring comes on the heels of board member Hussey stepping in as interim CEO on Tuesday, replacing Paul Arena, who remains on the Augme board. The company said in a release that Hussey, who has previously served as interim COO at Augme, would be better suited to leading its next phase of growth.

As part of the recent management shakeup, the company also brought on former Ogilvy & Mather executive Tom DeLuca as COO last week.

Today’s cost-cutting announcement didn’t help boost Augme’s share price, which was trading down about 6% to $1.15 on Friday afternoon in the over-the-counter market.

Augme has grown rapidly since 2011 through a series of acquisitions, including HipCricket, bought in August 2011 for $44.5 million, barcode technology firm Jagtag (for $5.5 million in July 2011), and all the common and preferred stock of Geos Communications IP Holdings in May. The company last year also snapped up AdLife, a self-serve platform for managing and optimizing mobile campaigns.

According to the company’s financial report for its first quarter ending May 31, its selling, general and administrative expenses were $9.2 million -- more than double the $4.6 million in the year-earlier period. “The increase in expenses is primarily related to additional headcount and other increased activities resulting from the acquisition of Hipcricket and organic growth,” the company stated in its filing.

At the same time, revenue for the quarter was only $5.2 million, up from $1.2 million a year ago. Its net loss was $7.6 million compared to $4 million a year ago.

Earlier this month, Augme said it expects to report revenue of $6.1 million to $6.3 million for its second quarter ended August 31. It also stated that the value of signed contracts for the quarter was $18.9 million, up 9% from $17.4 million the prior quarter. It did not provide any guidance on net income (or loss) when it reports results on October 10.

The turmoil at Augme reflects the challenges mobile marketing companies face as public companies. Newly public companies like mobile ad network Millennial Media and mobile marketing firm Velti are rapidly growing, but still unprofitable. Mobile data services provider Motricity has undergone its own restructuring in the last year, but is still losing money and trading at under $1.

For its part, Augme is now clearly focusing on HipCricket as the core of its operations. The unit offers a range of mobile marketing services and technologies for powering SMS and QR code campaigns, rich media and video advertising, and loyalty programs. It boasts having run some 200,000 campaigns to date for clients including Macy's, MillerCoors, Nestle, Clear Channel.

HipCricket, which has relocated its headquarters to New York, where Augme is based, had grown to 150 employees from 100 at the time of the acquisition last year, according to an Xconomy report earlier this month.

In addition to its financial difficulties, Augme is also fighting on the legal front. It has initiated patent litigation against several companies including AOL, Yahoo, Millennial and Velti. The company has reported a patent portfolio covering areas including content delivery and targeting, voice advertising in mobile, and VoIP.

 

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