Page 5 of 9 – SEC Filing
| Item 4. | Purpose of Transaction. |
| Edenbrook Capital, LLC (“Edenbrook” or “the Reporting Persons”) acquired the Common Stock to which this Schedule 13D relates for investment purposes in the ordinary course of business. The Reporting Persons acquired the Common Stock because they believed that the Common Stock reported herein, when purchased, represented an attractive investment opportunity. The Reporting Persons have again increased the size of their position in the Issuer (“the Company”) because they believe that despite significant business improvements, the market continues to materially undervalue the Issuer, and that the gap between price and value has widened considerably. In an amended 13D filed by Edenbrook on September 14, 2016, the Reporting Persons stated that “we believe that the Company could be quarters away from a model that can deliver $20-25 million in EBITDA, and $30 million or more in the medium term.” Based on the strong operating performance exhibited by the Company in the past two quarters, including the best first quarter margin performance in Company history per the recent earnings call, Edenbrook believes that this path to success has been accelerated and that the Company can deliver $25-30 million in EBITDA as soon as this current calendar year. Further, given the strong growth in the Company’s programmatic and connected television related revenue, Edenbrook believes that the Company is on the cusp of reigniting revenue growth. Such growth, when coupled with the Company’s strong and expanding gross margins, should be additive to these profitability levels going forward. The Company is now engaged in a strategic alternatives review process, and Edenbrook believes that the Company offers many attractive characteristics to a potential strategic buyer: 1) a profitable, cash generative business model; 2) a path to accretive growth; 3) a strong book of business amongst top customers; 4) robust gross margins; and, 5) a unique product offering in a secularly attractive industry, and proprietary data capture that allow the Company to deliver improved results for its customers. Edenbrook believes that a business with these characteristics should be worth at least 8-10x EBITDA, or approximately $8.50-10.80 per share, 110%-170% above today’s price, using the midpoint of the EBITDA range above and taking into account the $1.97 per share of cash on the Company’s balance sheet. As growth comes back and the cash continues to grow, the valuation should increase accordingly. Private market transactions over the past year suggest even higher valuation potential. As there were no questions on the Company’s most recent earnings call on May 9, 2017, and there were no sell-side reports issued subsequently, Edenbrook believes that the significant improvements made by the Company in recent quarters continue to go underappreciated. If the market continues to ignore the meaningful value being created by the Company, Edenbrook expects that the Board of Directors, through its strategic alternatives review process, will pursue a path that creates value for all shareholders. The Reporting Persons and their representatives have, from time to time, engaged in, and expect to continue to engage in, discussions with members of management and the board of directors of the Issuer, other current or prospective shareholders, industry analysts, existing or potential strategic partners or competitors, investment and financing professionals, sources of credit and other third parties regarding a variety of matters relating to the Issuer, which may include, among other things, the Issuer’s business, management, capital structure and allocation, corporate governance, Board composition and strategic alternatives and direction, and may take other steps seeking to bring about changes to increase shareholder value. The Reporting Persons continually evaluate their investment in the Common Stock and may in the future seek to acquire additional Shares or to dispose of all or a portion of the Common Stock beneficially owned by them. Any such acquisition or disposition may be effected through privately negotiated transactions, in the open market, in block transactions or otherwise. In addition, the Reporting Persons may enter into hedging or derivative transactions with respect to the securities of the Issuer, including Common Stock beneficially owned by them. Any determination to acquire or dispose of securities of the Issuer will depend on a number of factors, including the Issuer’s business and financial position and prospects, other developments concerning the Issuer, the price levels of the Common Stock, general market and economic conditions, the availability of financing and other opportunities available to the Reporting Persons. Other than the above, The Reporting Persons have no plan or proposal which relates to, or would result in, any of the actions enumerated in Item 4 of the instructions to Schedule 13D. |
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