Wednesday, July 15, 2009

Earnings: Mandalay Media May Need More Cash For Tr... er, Quality Adult Content

LA-based mobile adult content and games holding company Mandalay Media (MNDL) announced fiscal Q4 (ended 31 Mar 2009) and 2009 fiscal year end earnings in a release today. The company, which is better known by its operating brands Twistbox & AMV, is spinning the release to emphasize that FY Q4 was its first with a positive adjusted EBITDA. Frankly, I'm not sure whether that's going to be the main takeaway. I was pretty distracted by their massive GAAP net losses (see below) stemming from a Q4 goodwill write off of $34.8mil, and after digging into their 10-K, concerns about their cash situation ($5.9mil at the end of March).
  • 2009 Revs = $31.3mil ^878% from 2008 (partial operating year)
  • 2009 Net Loss = $41.6mil compared to a $2.2mil loss in 2008
  • Q4 2009 Revs = $9.9mil
  • Q4 2009 Net Loss =$32.7mil
  • Estimated 2010 Revs =~$40mil
Perusal of Mandalay's 10-K also revealed that their business is clearly dominated by adult content, which accounted for 82% ( $25.52mil) of their revenues versus 18% ($5.74mil) for games. I think mobile adult content has the potential to be a pretty good business WW for the top players in the space and in a previous post I suggested that these guys were pretty well positioned in the sector. However, in their report they admit that the competitive landscape in the adult content business is pretty intense and that some of their competitors are better funded. The company spent a pretty substantial $7.4mil on content licenses in 2009 (for adult content & games) and management cited the ability to continue to have access to that content (pay for it) as a key success factor going forward. Since the company isn't yet generating enough cash from operations for it's needs they'll have to find a solution in the financial markets to quickly bolster their cash situation, before this becomes a serious point of concern for them.

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