CrowdGather Sees Record Revenue, Strong Margin Growth
Ken Nagy, CFA
On March 8, 2012, the Woodland Hills, California based CrowdGather, Inc. (CRWG), with its networks of forum communities on the Internet, reported financial results for its fiscal 2012 third quarter and nine months, ended January 31, 2012.
The strong third quarter performance resulted in a 44.6 percent year over year increase in revenues and a 17.4 percent increase sequentially, with revenues increasing to a record $549,750 during the three months ended January 31, 2012.
Still, net loss increased by 20.1 percent year over year but fell 1.4 percent sequentially, to a net loss $746,980. This compares to a net loss of $621,835 for the comparable quarter of fiscal 2011.
The year over year increase in net loss for the three months ended January 31, 2012 was mainly due to increased payroll expenses from new employees and non-cash charges for stock-based compensation which was offset by improved gross margin.
Gross margin for the three months jumped to 99.1 percent year over year from 88 percent for the quarter ended January 31, 2011.
The improvement was primarily due to revenues being comprised entirely of the monetization of the Company’s forum ad space, including the recent Yuku.com acquisition, and not including any of the lower margin ad agency revenue from Adisn as in fiscal 2011.
It should be noted that during the quarter ended January 31, 2012, CrowdGather’s monthly page views across all properties increased year over year from 89 million to 231 million while monthly unique visitors jumped year over year from 4 to 5 million to 16.8 million monthly unique visitors.
Similarly, approximately 24.8 million users have registered to date on CrowdGather network sites, with 63.8 million total discussions comprising over 1.2 billion individual replies.
Based on a weighted average number of basic and fully diluted common shares of 58.139 million, basic and diluted net loss per share resulted in a net loss of $0.01 per share for the third quarter of fiscal 2012. This compared to a basic and diluted net loss per share of $0.01 based on a weighted average number of basic and fully diluted shares of 43.796 million during the three months ended January 31, 2011.
For the nine months ended January 31, 2012, year over year revenues improved by 15.3 percent to $1.352 million from $1.173 million for the comparable nine months of fiscal 2011.
Still, net loss for the nine months increased year over year by $427,744 to a net loss of $2.375 million for the nine months ended January 31, 2012. This compares to a net loss of $1.949 million for the comparable nine months of fiscal 2011.
Here again, the increase in net loss for the nine months was primarily due to an increase in total operating expenses which was offset by improved gross margin.
Total operating expense increased year over year by 30.8 percent or $852,140 to $3.620 million.
Still, gross margin improved to 91.6 percent for the nine months ended January 31, 2012 compared to 68.4 percent for the comparable nine months of fiscal 2011.
The improvement was primarily due to improved monetization of the Company’s forum ad space, as well as increased ad inventory from acquisitions.
Based on a weighted average number of basic and fully diluted common shares of 58.369 million, basic and diluted net loss per share resulted in a $0.04 loss per share for the nine months ended January 31, 2012. This compared to a basic and diluted net loss per share of $0.05 based on a weighted average number of basic and fully diluted shares of 42.285 million during the nine months ended January 31, 2011.
The Company’s balance sheet improved year over year with total assets jumping to $16.850 million as of January 31, 2012 versus total assets of $10.591 million on January 31, 2011.
Along the same lines, the Company had cash of $2.680 million, no long term debt and had working capital of $2.812 million as of January 31, 2012. This compares to $978,729 of cash and working capital of $892,748 as of January 31, 2011.
Furthermore, shareholder equity increased to $16.779 million or nearly $0.29 per share as of January 31, 2012. This compares to $10.300 million in net equity or a book value of just over $0.18 per share as of January 31, 2011.
It should be noted that CrowdGather recently restructured its efforts into pursuing revenue mainly from its forum network in an effort to capture higher margin revenues.
As a result, based on its year to date revenue, management is currently anticipating that it will achieve its projected total revenue of $1.9 million for fiscal year 2012 ending in April.
Similarly, with the improving monetization of the forum revenue stream, the upcoming utilization of the Company’s ad server and other forum services in development, and the efforts to expand the recently launched made-for-social-media fragrance Erox brand, management believes CrowdGather is well positioned for Fiscal 2013.
The Company continues to anticipate improved monetization of the forum revenue stream from the increased premium ad inventory and from the utilization of its integrated ad server which the Company anticipates to roll out commercially around year-end fiscal 2012.
Additionally, in an effort to expand its reach and prominence as a leading network for forum members, owners and advertisers, CrowdGather acquired the additional properties pbnation.com, writers.net and yuku.com during the first nine months of fiscal 2012.
CrowdGather intends to continue to seek other opportunities to acquire strategic properties that are expected to contribute to increased traffic growth for the Company.
To view a free copy of our most recent research report on CRWG or subscribe to our daily morning email alert, visit Ken Nagy's coverage page at http://scr.zacks.com/.
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