Rightscorp, Inc. :RIHT-US: Earnings Analysis: Q3, 2016 By the Numbers : November 17, 2016

Rightscorp, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Rightscorp, Inc. – Finjan Holdings, Inc., Tapinator, Inc. and Perficient, Inc. (FNJN-US, TAPM-US and PRFT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 0.14 million, Net Earnings of USD -0.39 million.
  • Gross margins narrowed from 36.74% to 34.58% compared to the same period last year, operating (EBITDA) margins now -226.35% from -471.38%.
  • Year-on-year change in operating cash flow of 83.12% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 0.14 0.15 0.07 0.08 0.22
Revenue Growth (%YOY) -35.02 -37.54 -77.82 -68.88 -13.36
Earnings (mil) -0.39 -0.21 -0.78 -0.31 -0.42
Earnings Growth (%YOY) 9.13 92.51 -742.82 43.17 52.57
Net Margin (%) -275.64 -144.54 -1148.43 -417.5 -197.11
EPS -0 -0 -0.01 -0 -0.01
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) -1088.08 -314.62 -777.66 -162.75 -202.39

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Market Share Versus Profits

Revenues History
Earnings History

RIHT-US‘s change in revenue this period compared to the same period last year of -35.02% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that RIHT-US is holding onto its market share. Also, for comparison purposes, revenues changed by -4.25% and earnings by -82.60% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from -471.38% to -226.35%. For comparison, gross margins were 45.85% and EBITDA margins were -344.59% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

RIHT-US‘s change in operating cash flow of 83.12% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The expansion in operating (EBIT) margins from -484.64% to -242.32% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from -197.11% to -275.64%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Rightscorp, Inc. is a technology company that serves copyright owners by identifying and collecting settlement payments from Internet users who have infringed on copyrights. It uses software that monitors the global Peer-to-Peer file sharing networks to seek out and find illegally downloaded digital media. The Company’s patent pending digital loss prevention technology focuses on the infringement of digital content such as music, movies, software, and games and ensures that owners and creators are rightfully paid for their IP. Rightscorp implements existing laws to solve copyright infringements by collecting payments from illegal file sharing activities via notifications sent through Internet Service Providers (ISPs). Rightscorp was founded on April 9, 2010 and is headquartered in Santa Monica, CA.

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