Phorm (PHRM.L) reported its 2014 operational update on January 16. This table displays the metrics including our expectation for H2 2014 (remaining the same as published in October 2014) and our expectation for 2015 (updated from our original publication in October 2014).
As you can see from this table we were too conservative on the user growth and too optimistic on the total advertising impressions and revenues. We were right on the total advertising requests number.
The shortfall in advertising impressions and revenues can be explained by the fact that the company had to adjust its marketing strategy in one regional market (Source: Management). We believe that this adjustment in strategy addressed the issue and that advertising revenues are about to follow the trajectories of growth in users and advertising requests as advertisers join the platform at scale.
To give you an idea of the scope of the opportunity, look at this table:
We expect Phorm to generate more than 1 trillion advertising requests in H1 2015 and 2.5 trillion requests for the whole year. We expect the company will have more than 250 million peak daily users by the end of the year.
The company's burn rate should drop to a GBP1.3 million per month or less by April as costs are cut by GBP0.5 to GBP0.7 million per month and revenues ramp up.
We believe the company ended 2014 with daily advertising requests of close to 4 billion a day as it signs leading publishers.
We speculate the company will have no difficulty to fund the remaining funding gap of GBP10 million to achieve break-even. (Source: Management)
We believe that Phorm with its platform that generates leading advertising conversion results will prove itself to be one of the most powerful business model of the Internet.
Disclaimer: Michael Bigger and related entities own more than 18 million shares of Phorm. Phorm is a highly distressed situation and it is not suitable for the majority of investors. The likely outcome of an investment is a loss of principal. In other words, the probability of losing all your investment in this situation is very high. Phorm has generated no revenues for most of its 10+ years of existence. Take our opinions with a grain of salt and do your homework. None of Bigger’s entities individually or in aggregate have an obligation to file its position with the SEC or any other foreign regulatory entities at the time this article was published. The tables contain forward looking metrics that are highly speculative. This post is not a recommendation to buy or sell the stock.