Glowpoint, Inc. — Q2 2013 Form 10-Q
Business and period: The filing is for the quarter and six months ended June 30, 2013. Glowpoint provides cloud-based video collaboration, network, and professional services. The filing’s registrant is Glowpoint, Inc.; this differs from the company name in the request metadata.
Financial performance and liquidity
| Metric | Six months ended June 30, 2013 | Three months ended June 30, 2013 |
|---|---|---|
| Revenue | $17.240 million | $8.736 million |
| Operating income (loss) | $(1.333) million | $0.269 million |
| Net income (loss) | $(2.135) million | $(0.150) million |
| Net loss attributable to common stockholders | $(2.345) million | $(0.255) million |
| Basic and diluted loss per share | $(0.08) | $(0.01) |
| Adjusted EBITDA | $1.999 million | $1.163 million |
- Revenue increased 27% year over year for the six-month period and 28% for the quarter, largely because Affinity was acquired in October 2012 and was not included in the 2012 reported results. Against 2012 pro forma revenue including Affinity, revenue declined 9% for the six months and 9% for the quarter.
- Operating margin was approximately (7.7)% for the six months and 3.1% for the quarter. The filing does not present a gross margin measure.
- Six-month operating cash flow was $1.354 million, versus $0.297 million in 2012; investing cash outflow was $0.233 million and financing cash outflow was $0.535 million. Cash increased $0.586 million to $2.804 million.
- At June 30, cash included $0.457 million of restricted cash; working capital was $0.651 million. Current assets were $6.738 million and current liabilities $6.087 million.
- Debt totaled $10.430 million, excluding capital leases, of which $1.317 million was current. Capital lease liabilities were $0.388 million. The company reported $1.0 million of unused availability under its revolving facility and expected approximately $1.091 million of interest payments over the next 12 months.
Changes, outlook, and risks
- Compared with reported 2012 results, revenue rose, but the company moved from six-month net income of $0.420 million to a $2.135 million net loss. The loss reflected higher operating expenses and substantially higher interest costs, including acquisition-related debt. Quarterly operating income remained positive, but net income turned to a loss.
- Managed-services revenue grew versus reported 2012, principally from Affinity, but declined versus pro forma 2012 as Affinity video meeting suite use and legacy usage-based video collaboration revenue weakened. Network-services revenue also declined, primarily due to customer disconnects.
- Six-month general and administrative expense included $0.539 million of equipment impairment, $0.407 million of severance, $0.238 million of Affinity acquisition costs, and higher stock-based compensation. Depreciation and amortization also increased, including Affinity-related intangible amortization.
- Management expected revenue in the second half of 2013 to remain fairly consistent with the first half and believed cash flow and resources would be sufficient to fund operations and service debt for at least 12 months after filing. This is management’s outlook, not a quantified earnings forecast.
- The company was in compliance with Comerica and Escalate loan covenants at June 30. The revolving facility matures April 1, 2014; the company also faces scheduled debt payments and restrictive covenants. Management cautioned that future capital raising is not assured and unfavorable economic conditions or inability to raise capital could materially harm the company.
- Preferred dividends began accruing in 2013 at approximately $0.105 million per quarter; accrued dividends totaled $0.210 million. Cash payment is not required until cash exceeds approximately $4.176 million. Major wholesale partners accounted for 21% of revenue and 32% of receivables; losing a partner could materially affect operations.
- The company reported no legal proceedings, no off-balance-sheet arrangements, and no material changes to its previously disclosed risk factors. It stated that commercial telecom purchase commitments were expected to be met and that no shortfall loss contingency was considered probable.
Important facts for investors to verify
- Whether recent revenue weakness on a pro forma basis, especially in managed and network services, continued after June 30.
- Cash availability after restricted cash, upcoming debt service, and compliance with lender covenants and the April 2014 revolver maturity.
- Drivers and recurrence of equipment impairment, severance, acquisition costs, and elevated interest expense.
- Affinity integration and performance, including the decline in video meeting suite use and customer concentration among wholesale partners.
- Accrued preferred dividends, their payment triggers, and the company’s ability to fund operations without additional financing.