RNIN slashes staff, appoints new CEO, sees shares jump darned near 100%

Granted, when a move of less than $0.50 means your shares have doubled you're still in pretty bad shape, but this at least resets the NASDAQ de-listing clock that had been ticking for RNIN for well over a month now.  Well, it would have been ticking had the NASD not temporarily suspended that rule in light of the fact that a lot companies are trading at historical lows right now.

The firm first reported that they were reducing their head count by 24%, which would leave them with around 90 if my math skills serve me correctly. That's still about 60-70 more than they ought to have given their current revenue levels and publicly-touted prospects by my book, but it's a move in the right direction to be sure.

Then today they announced that James C. (Jim) Granger would be signing on as CEO. He apparently has some skill working with troubled companies, as he's cited as being "responsible for restoring company growth and increasing bottom line profitability [of Toptech Systems, Inc., a provider of software, hardware and data services]" at his last job.

Wireless Ronin can rebound -- they have plenty of cash left in the bank, and haven't been squeamish about cutting staff.  But as I've noted before, they have lot more to do before they can get anywhere near cashflow neutral or (gasp) profitability.

Tags: digital signage, RNIN

So, what's gonna happen to Wireless Ronin (RNIN)?

Yikes, it has been a bad week for one of the few publicly-traded digital signage companies in the US market.  Granted, it's been a bad week for most publicly-traded markets, but RNIN is facing some exceptional challenges right now.  As we noted a few months ago, the company had to write off a huge portion of its 2006 and 2007 income as a bad debt, and unless their estimates for next quarter are extraordinary, 2008 doesn't look to be doing them any favors in the revenue department either.

This week, in a triple-whammy, the firm's stock got downgraded, longtime CEO Jeff Mack announced he was leaving, and consequently, the stock saw about a quarter of its value evaporate. While an interim CEO has been appointed whose sole job is to find the next leader of the firm, clearly investors must be wondering what the company has going in its favor these days.  With the credit market so tight right now, it's hard to fund new projects, and RNIN's cost infrastructure is far too high for their own good.  As one commenter on Yahoo! Finance put it:

The current consensus is for a loss $1.15 per share for 2008, that is up from an estimated loss of $.94 just 90 days ago...They have been low side for the past 4 straight quarters, meaning the company lost more than expected. As they look to 2009, the estimated loss per share is at $.83 versus a loss per share of $.58 cents. That translates into RNIN burning through $17.25 million this year, and $12.45 million next year. Add those two number up, and you burn through more cash than RNIN has. Do you think they can do a secondary offering to raise more cash with a 2 or 3 dollar share price? I think not...

That's a hugely important point in this crazy market right now. RNIN has relied on the cash raised from two successful public offerings to keep them going while trying to ramp sales.  Unless there's a major turnaround in the market soon, they'll have a very hard time selling more shares to raise a significant amount of money.  And offering debt is totally out of the question given their performance.

And before you go bashing me for being a RNIN-hater, the fact is that I'd like to see these guys be successful.  We gain basically nothing for having them fail, and in fact it might hamper our own ability to raise money in the future.  What confounds me to no end, though, is how these guys managed to get such a high valuation and extract such a large amount of money from the public not once, but twice.  On the private markets they'd never be able to secure a $50M+ valuation with such tiny sales and such large expenses.  It's like they've exploited some bizarre reverse wisdom-of-crowds effect.

We'll continue to track this company to see if they can pull it out (or at least appoint a CEO that can stabilize them).  But as of right now, I would not be bullish on them at all.

Tags: digital signage, wireless ronin, rnin

Wireless Ronin (RNIN) calls in bad debt, is left with a big pile of hardware

I hate to say I told you so, but ... well, I told you so.

While Wireless Ronin has yet to restate its past years' earnings based on the decision by its biggest customer -- start-up company NewSight Corp -- to throw in the towel and hand over its assets since it hasn't been able to pay, that may still come to pass. Right now, the company has simply called in the note that it has been allowing NewSight to hold. Instead of the $2.4 million that RNIN originally claimed to have gotten from the company, it will instead get a load of quickly depreciating hardware that NewSight was busily installing into Meijer stores for their in-store TV network.

I know, I know, technically they could just write the whole thing off as a bad debt, and perhaps that's what they'll do. But seriously, it's $2.4 million of bad debt, which is an enormous chunk of their stated revenues since they went public. I don't know if their investors will let them off the hook that easily. At the very least, I'd expect a management change.

As for the Mejier network, Ronin has a few options. They could try to sell the hardware and come away with some cash (not that they need it after a few rounds of very successful fundraising on the public markets). They could try and contract out the network management to a new company, essentially replacing NewSight's role while maintaining control over it. Or, I suppose, they could try to run the network themselves, which would be a big repositioning from them (it's hard to sell hardware, software and services when you're competing with all of your clients), but might actually be the best possibility for both short-term revenues and long-term growth that the company has.

Granted, the rumors floating around that Meijer is looking for a new provider can't be helping them much on that side of things.

Tags: digital signage, rnin, business

What we can learn from Wireless Ronin (RNIN)

For anybody that hasn't been following the saga of Wireless Ronin, they're a small digital signage company noteworthy only because they managed to go public on the Nasdaq about a year ago at an improbably high valuation. In early November of last year (2006), we took a technical look at the company's SEC filings and came to the conclusion that for every $1 that came in, a bit more than $4 went out, for a net loss of $3 for every dollar of revenues. Despite this, they did manage to complete an initial offering and even a follow-on offering later this year that put a ton of cash into their coffers. At one point this year, their stock traded at over $10/share, giving them a valuation of over $100M.

Unfortunately, what they failed to mention to their investors was that lots and lots of potential clients in the digital signage industry are little more than start-up companies with lots of hope and good ideas, but little ability to execute. What's more, even good-looking projects with great prospects can get delayed, for months, years, and sometimes indefinitely. That has hurt RNIN, since they had to drop their earnings estimate for 2007 from the initial guess of $18-20M, to a much more modest $4-6M. Worse, looking at their third quarter numbers, RNIN committed one of the cardinal sins of digital signage: extending a large credit line to a small company. When you're selling software, it's easy to get lulled into the trap of extending a much larger credit line than a customer might be worthy of. After all, software doesn't often carry that high a cost of sale (unless you're licensing lots of components, have to pay royalties, etc.) But in RNIN's case, "for the third quarter of 2007, year-to-date gross margins averaged 38.6 percent, compared to a gross margin of 60.1 percent through the first three quarters of 2006. Gross margin levels in 2007 continue to re-build from 2006 as a greater percentage of higher-margin software revenue continues to get added into the product mix." So they fronted hard assets (hardware) as well as billable person-hours ("services," probably content creation or project management), which is a much more aggressive stance to take, since if your clients don't pay you, it's hard to reclaim the former and basically impossible for the latter.

And that's more or less what has happened. Earlier this year RNIN announced an agreement with a small company called NewSight Corporation to roll out digital signs to 2,000 doctors offices across the country as well as a network of large displays in shopping malls. From earlier earnings calls, it sounded like RNIN would be supplying everything -- hardware, software, content and logistics -- to make the networks happen. But we're now guessing that they "sold" some units to NewSight, gave them generous terms, but have not been able to collect. That leaves RNIN in the uncomfortable position of having a very large accounts receivable (it's nearly 3/4th of their YTD sales), most of which is in the hands of a company that may well never be able to pay them.

The only upside is that the company still has nearly $30M in the bank which will allow them to recover from the mistake should NewSight default on the debt, and it's enough that RNIN could even deploy and operate the network themselves if they wanted to.

The moral of the story? Even the best-intentioned companies can fail to execute, and even the best-laid plans can be put on hold forever. Unless it's your business, don't go loaning out money, goods or services to untested companies unless you and your investors all understand the industry well enough to estimate the true risk of doing so.

Tags: Wireless Ronin, RNIN, digital signage

Note: The information contained in this blog is to be used for entertainment purposes only. I'm not a lawyer, accountant or financial professional, nor am I qualified to pick stocks, set prices or give any kind financial or stock market advice. Disagree with something I've said? Let me know why in a comment.