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Hipcricket, Inc. Reports Fiscal Third Quarter Results

BELLEVUE, WA -- (Marketwired) -- 01/07/14 -- Hipcricket®, Inc., (OTCBB: HIPP) (OTCQB: HIPP) a leader in mobile engagement and analytics, announces its operating results for the third quarter ended November 30, 2013.

Ivan Braiker, CEO of Hipcricket, commented, "For our fiscal third quarter, revenue was $6.4 million, which was below our forecast. During the quarter, new Telephone Consumer Protection Act (TCPA) consent rules became effective, which interrupted operations of many of Hipcricket's customers, beginning October 16, 2013. In particular, the volume of mobile marketing campaigns slowed as brands responded to the new regulations and focused on re-opting in subscribers to their SMS databases. Hipcricket marketing and advertising sales representatives were deployed into customer service roles to provide client support. This is not a major road block for our business, but it hurt the focus of our sales teams, which already included new hires and new sales leaders that are not yet fully productive. Our product and technology teams were also impacted, already contending with completing a data center move requiring significant product and tech support, which as a whole, resulted in the delay of new products being released. While the quarterly revenue was challenged, our end markets remained solid, and we achieved our highest Q3 bookings in Company history, up 51% over Q3 2012 to $8.4 million, a number we believe would have been better in the absence of the temporary and isolated issues that arose."

Mr. Braiker continued, "We expect the effects of the new regulation will lessen in the coming months as brands complete their rebuilding process. Product development is back on track: including our analytics product which has already been released in fiscal Q4. We have hired new sales leadership, replaced underperformers, and the tenure of our sales force is growing. We have met our internal goals surrounding the reduction in core operating expenses. We have rebranded the Company, launched our new website and increased our marketing resources and PR spend. Given the strength of our underlying platform and recent and upcoming product launches as well as the massive opportunities we see in the market, I believe that this is a major moment in the evolution of the company. We have done a great job building out our platform on the marketing side and a solid job in launching our advertising business. This company transformation has been our target for the last year, and it's finally here with our data and analytics products. Ultimately, I expect that these will help drive our growth as we sit at the center of two of the biggest trends: mobile and big data."

Third Quarter Highlights

  • Third quarter bookings (the dollar value of contracts signed during the quarter) were $8.4 million, the highest Q3 bookings in Company history.
  • Third quarter revenue was $6.4 million.
  • Key leadership added to enhance sales team, attract top talent and drive revenue.
  • Signed a $3 million 3-year mobile marketing contract.
  • Completed a $9.6 million financing.
  • Successfully made progress in navigating new TCPA regulatory changes and technology challenges.
  • Reduced quarterly operating expenses to $6.2 million, exceeding internal goals in cost control.

Third Quarter Financial Results

Revenue for the third quarter of fiscal 2014 decreased to $6.4 million, from $7.4 million for third quarter of fiscal 2013, a decrease of 14%.

Operating expenses for the third quarter of fiscal 2014 were $8.4 million compared to $45.4 million in the third quarter of fiscal 2013. Non-GAAP operating expenses, defined as total operating expenses adjusted for non-cash charges for third quarter fiscal 2014 decreased to $6.2 million from $7.8 million for third quarter fiscal 2013.

Net loss for the third quarter of fiscal 2014 was $5.3 million, or $0.04 per share, compared to a net loss of $33.7 million, or $0.31 per share, for the third quarter of fiscal 2013. Excluding non-cash charges and benefits, the non-GAAP loss for third quarter fiscal 2014 was $3.1 million compared with $3.5 million for third quarter fiscal 2013.

As of November 30, 2013, backlog increased 28% to $20.8 million from $16.3 million compared to November 30, 2012.

Third quarter bookings (the dollar value of contracts signed during the third quarter) were $8.4 million, up 51% compared with the same period last year.

Cash and cash equivalents as of November 30, 2013 were $4.9 million with borrowings on our revolving credit facility of $1.4 million and an additional $3.2 million available under that facility.

Operating results and non-cash charges are shown below, including reconciliation of net loss to non-GAAP financial measurements noted above.

Non-GAAP information and reconciliation to comparable GAAP financial measures (unaudited):

This press release includes financial measures defined as non-GAAP financial measures by the SEC. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles accepted in the United States of America ("GAAP"). Generally, a non-GAAP financial measure is a numerical measure that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We supplement our GAAP disclosures with Non-GAAP Operating Expenses and Non-GAAP Earnings (Losses). These amounts exclude non-cash items, including share-based compensation expense, depreciation and amortization, acquisition related contingent consideration (including fair value adjustments and deferred income tax benefits), and impairment charges for goodwill and intangible assets and investments. The following table reconciles Non-GAAP Operating Expenses and Non-GAAP Earnings (Losses) to the comparable GAAP measures (Unaudited):

                                    3 months ended        9 months ended
                                   November 30, 2013     November 30, 2013
                                 --------------------  --------------------
Non-GAAP Operating Expenses (in
 millions)                          2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------
Total Operating Expense                8.4       45.4       25.3       67.0
  Goodwill impairment                    -      (25.9)         -      (25.9)
  Impairment of intangible
   assets and investments             (0.5)      (8.7)      (0.5)      (8.7)
  Share-based compensation
   expense                            (0.5)      (1.4)      (2.4)      (4.3)
  Depreciation and amortization       (1.3)      (1.6)      (3.8)      (4.7)
                                 ---------  ---------  ---------  ---------
  Total Non-GAAP Operating
   Expenses:                           6.2        7.8       18.6       23.4
                                 ---------  ---------  ---------  ---------

                                    3 months ended        9 months ended
                                   November 30, 2013     November 30, 2013
                                 --------------------  --------------------
Earnings before non-cash charges
 (in millions)                      2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------
Net loss as reported (GAAP)           (5.3)     (33.7)     (14.7)     (40.9)
  Goodwill impairment                    -       25.9          -       25.9
  Impairment of intangible
   assets and investments              0.5        8.7        0.5        8.7
  Share-based compensation
   expense                             0.5        1.4        2.4        4.3
  Depreciation and amortization        1.3        1.6        3.8        4.7
  Fair value adjustment of
   acquisition related
   contingent consideration              -       (7.3)         -      (12.2)
  Deferred income tax benefits           -          -          -       (2.6)
                                 ---------  ---------  ---------  ---------
  Earnings before non-cash
   charges                            (3.1)      (3.5)      (8.0)     (12.2)
                                 ---------  ---------  ---------  ---------

Management will host a conference call today at 4:30 p.m. ET.

To join the conference call, please dial 877-941-1427 (domestic call-in) or 480-629-9664 (international call-in).

A live webcast and replay will be available in the investor events section of Hipcricket's website (http://www.hipcricket.com/presentations-and-investor-events). All participants should call or access the website approximately 10 minutes before the conference begins.

A telephone replay of the conference call will be available from 7:30 p.m. ET on January 7, 2014 until 11:59 p.m. ET on January 14, 2014 by calling 877-870-5176 (domestic) or 858-384-5517 (international) and entering confirmation #4658901. An archived replay of the conference call will also be available in the corporate section of the company's website.

About Hipcricket, Inc.
Hipcricket, Inc. (OTCBB: HIPP) & (OTCQB: HIPP) provides a unified mobile engagement platform that drives awareness, sales and loyalty. The AD LIFE® platform has been used by internationally recognized brands and agencies to power over 250,000 campaigns across SMS, 2D/QR codes, mobile websites, advertising networks, social media and branded apps. Hipcricket, Inc. is headquartered in Bellevue, Wash. For additional Hipcricket news and information, please visit www.hipcricket.com or text "NEWS" to 24474.

Hipcricket®, Augme Technologies™, Augme®, AD LIFE®, BOOMBOX®, AD SERVE® and the Hipcricket and Augme logo are trademarks of Hipcricket, Inc. All rights reserved. 2009-14.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future financial performance. All statements other than present and historical facts contained in this release, including any statements regarding our plans for future operations, anticipated future financial position, anticipated results of operations, financing plans, business strategy, competitive position, opportunities for growth and industry trends, are forward-looking statements. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond our control. Our actual results, performance, or achievements may differ materially from those projected or assumed in any of the forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include, among others: overall economic and business conditions; the demand for our products and services; competitive factors in our industry; the emergence of new technologies; our cash position; the availability of funding sources; the strength of our intellectual property portfolio; and changes in government regulations in our industry. A more detailed discussion of these factors is set forth in our annual report on Form 10-K for the year ended February 28, 2013 and other reports filed with the U.S. Securities and Exchange Commission. The Company does not intend, and undertakes no duty, to update any forward-looking statement to reflect future events or circumstances.

Consolidated Balance Sheets
(in thousands)
                                                 November 30,  February 28,
                                                     2013          2013
                                                  (Unaudited)
                                   ASSETS
CURRENT ASSETS
  Cash & cash equivalents                               4,856         4,353
  Restricted Cash                                         214           214
  Accounts receivable, net                              6,432         5,707
  Prepaid expenses and other current assets               484           772
                                                 ------------  ------------
Total current assets                                   11,986        11,046

Intangible assets held for sale                             -         3,500
Property and equipment, net                               162            83
Goodwill                                               35,060        35,060
Intangible assets, net                                 25,479        25,812
Deposits                                                  261           238
                                                 ------------  ------------
TOTAL ASSETS                                           72,948        75,739

                    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                      4,042         4,812
  Accrued liabilities                                   2,569         2,614
  Deferred revenues                                       573           852
  Line of credit                                        1,357             -
                                                 ------------  ------------
Total Current liabilities                               8,541         8,278

LONG TERM LIABILITIES
  Deferred income tax liability                         3,518         3,518
  Accrued liabilities                                      30            82
                                                 ------------  ------------

TOTAL LIABILITIES                                      12,089        11,878

Commitments and contingencies

STOCKHOLDERS' EQUITY
Common stock                                               15            13
Additional paid in capital                            186,906       175,242
Accumulated deficit                                  (126,062)     (111,394)
                                                 ------------  ------------
Total stockholder's equity                             60,859        63,861

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             72,948        75,739



Consolidated Statements of Operations
Unaudited
(in thousands except Net Loss Per Share and Shares Outstanding)

                           3 months ended              9 months ended
                          November 30, 2013           November 30, 2013
                     --------------------------  --------------------------
                         2013          2012          2013          2012
                     ------------  ------------  ------------  ------------

REVENUE                     6,426         7,433        19,884        18,701

COST OF REVENUES            3,242         3,054         9,226         7,464

OPERATING EXPENSES
  Sales and
   Marketing                2,744         3,815         8,906        11,319
  Technology and
   Development              1,603         1,927         4,962         5,937
  General and
   Administrative           2,355         3,458         7,131        10,441
  Depreciation and
   Amortization             1,276         1,597         3,829         4,681
  Goodwill
   impairment                   -        25,919             -        25,919
  Impairment of
   intangible assets
   and investments            465         8,668           465         8,668

                     ------------  ------------  ------------  ------------
Total operating
 expenses                   8,443        45,384        25,293        66,966

LOSS FROM OPERATIONS       (5,259)      (41,005)      (14,635)      (55,729)

OTHER INCOME
 (EXPENSE)
  Interest income
   (expense), net             (19)          (40)          (34)          (37)
  Acquisition
   related
   contingent
   consideration                -         7,339             -        12,200
                     ------------  ------------  ------------  ------------

NET LOSS BEFORE
 INCOME TAXES              (5,278)      (33,706)      (14,669)      (43,567)

  Income tax benefit            -             -             -         2,619
                     ------------  ------------  ------------  ------------
NET LOSS                   (5,278)      (33,706)      (14,669)      (40,948)

BASIC AND DILUTED
 NET LOSS PER SHARE  $      (0.04) $      (0.31) $      (0.11) $      (0.41)

WEIGHTED AVERAGE
 SHARES OUTSTANDING   145,698,039   108,460,588   135,114,413    99,718,225



Consolidated Statements of Cash Flows
Unaudited
(in thousands)
                                    3 months ended        9 months ended
                                   November 30, 2013     November 30, 2013
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------
CASH FLOWS FROM OPERATING
 ACTIVITIES
Net loss                            (5,279)   (33,706)   (14,669)   (40,948)
Adjustments to reconcile net
 loss to net cash used in
 operating activities:
  Depreciation and amortization      1,276      1,597      3,829      4,681
  Bad debt expense                       2          7         24         46
  Common stock issued for
   services                             55          -        326        625
  Non-cash interest expense              -         37          -         37
  Deferred income tax benefits           -          -          -     (2,619)
  Impairment of goodwill                 -     25,919          -     25,919
  Impairment of intangible
   assets and investments              465      8,668        465      8,668
  Loss on sale or disposal of
   fixed assets                          -          -          1          -
  Share-based compensation
   expense                             486      1,376      2,364      4,302
  Fair value adjustment of
   acquisition related
   contingent consideration              -     (7,339)         -    (12,200)
  Changes in operating assets
   and liabilities:                      -          -          -          -
    Accounts receivable               (642)    (1,352)      (748)    (2,423)
    Prepaid expenses and other
     current assets                     22        110        288        (68)
    Interest on restricted cash          -          -          -          -
    Deposits                             -         27        (23)       126
    Accounts payable & accrued
     liabilities                      (289)     1,018       (810)     3,371
    Deferred revenue                   (27)       312       (279)       131
    Long-term liabilities              (18)       (23)       (52)       (57)
                                 ---------  ---------  ---------  ---------
    CASH USED IN OPERATING
     ACTIVITIES                     (3,949)    (3,349)    (9,284)   (10,409)
                                 ---------  ---------  ---------  ---------

CASH FLOWS FROM INVESTING
 ACTIVITIES
    Cash paid for purchase of
     patents                             -       (132)       (44)      (820)
    Cash paid for patent defense
     costs                             (96)      (470)      (327)    (2,724)
    Cash paid for acquisition
     related contingent
     consideration                       -     (1,182)         -     (3,182)
    Cash paid for long-term
     investment                          -          -          -       (200)
    Additions to property and
     equipment                        (116)         -       (170)         -
                                 ---------  ---------  ---------  ---------
    CASH USED IN INVESTING
     ACTIVITIES                       (212)    (1,784)      (541)    (6,926)
                                 ---------  ---------  ---------  ---------

CASH FLOWS FROM FINANCING
 ACTIVITIES
    Proceeds from sale of stock      8,969      6,162      8,969      6,162
    Proceeds received from line
     of credit                        (313)         -      1,357          -
    Proceeds received from the
     issuance of short-term debt         -        450          -        450
    Payments on short-term debt          -       (200)         -       (200)
    Proceeds received from
     exercise of options
     /warrants                           -          8          3      1,257
                                 ---------  ---------  ---------  ---------
    CASH PROVIDED BY FINANCING
     ACTIVITIES                      8,656      6,420     10,328      7,669
                                 ---------  ---------  ---------  ---------

NET CHANGE IN CASH                   4,496      1,287        503     (9,666)
CASH AT BEGINNING OF PERIOD            360        476      4,353     11,429
                                 ---------  ---------  ---------  ---------

CASH AT END OF PERIOD                4,856      1,763      4,856      1,763
                                 =========  =========  =========  =========

Investor Relations Contact:
James Carbonara
Hayden IR
(646)755-7412
[email protected] or [email protected]

Public Relations Contact:
Adam Curtis
Abel Communications
(443) 869-2197 ext.142
[email protected]

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