Tatango competitor Hipcricket filed for bankruptcy on January 20, 2015. Why? According to a bankruptcy declaration from interim CEO Todd E. Wilson, the company has accumulated losses of $93.7 million dollars since 2012, making it impossible for the company to continue operations. (2014 – $22.3 million in losses, 2013 – $48.8 million in losses, 2012 – $22.6 million in losses) This is huge news in the SMS marketing industry, as Hipcricket serviced clients such as Macy’s, MillerCoors, Nestle, KFC, and Clear Channel, they were a Premier Partner with the Common Short Code Administration where they managed greater than 200 SMS short codes, they had annual revenues of $26.7 million, and had 21 U.S. mobile marketing patents.
So what’s going to happen to Hipcricket now that they’ve filed for bankruptcy? A New Jersey based company has agreed to purchase the remaining assets of Hipcricket for $4.5 million. Who’s this company that is buying the assets of HipCricket? It’s called SITO Mobile Limited, which was incorporated in 2000, and did revenues of $3.8 million during 2014.
The good news for Hipcricket employees is that the asset purchase agreement includes SITO Mobile Limited offering employment to all of Hipcricket’s employees, with Hipcricket’s CEO staying onboard during a transition period of 6-12 months.
With Hipcricket losing $22.3 million last year, how are they able to keep on the lights? It’s been reported that since May, Hipcricket has been funding its operations with an up to $5 million factoring arrangement from Fast Pay, which is where a company like Hipcricket will sell its account receivables at a discount, to raise emergency funds. The situation is so dire, that during the sale period to SITO Mobile Limited, Hipcricket will take up to $3.4 million from SITO Mobile Limited in debtor-in-possession (“DIP”) financing, just to maintain normal business functions. It’s interesting to note as of January 20, 2015 the CEO of HipCricket says they’ve already taken $1.7 million of the $3.5 million available to them.
In their filing, Hipcricket listed $12 million in liabilities, include between $9.5 million and $10.5 million in trade and business debts, including unpaid rent obligations for its operational facilities. With Hipcricket being on of the larger players in the SMS marketing industry, it will be interesting to see how their filing of chapter 11 bankruptcy will impact vendors that are common between SMS providers, such as OpenMarket, Neustar, etc., and what impact that will have on the SMS marketing industry as a whole.
From the CEO of Hipcricket (Todd E. Wilson) —
“Over the past year, management has worked diligently to optimize Hipcricket’s expense structure and move Hipcricket toward profitable and sustainable revenue growth. While we have implemented various cost-cutting initiatives and explored a wide variety of strategic alternatives, the benefits of these efforts could not be fully realized and liabilities continued to mount. As such, the Board determined that a sale of assets via a court-supervised process provides Hipcricket the most viable option to protect our human capital and maximize recovery for our stakeholders. We are pleased that SITO Mobile has agreed to carry our business forward. We believe this partnership will provide a new foundation upon which to stand and brings together two best-in-class mobile marketing and mobile advertising solutions.”
From the CEO of SITO Mobile Limited (Jerry Hug) —
“By joining together Hipcricket and SITO Mobile, we will effectively be creating a market leader in mobile marketing and location based mobile advertising. We look forward to working with Todd and the rest of the Hipcricket team.”
SITO Mobile Limited anticipates the purchase of Hipcricket being completed within 45 to 60 days.
As you can see in the screenshot below, it looks like other SMS providers are already starting to smell the blood in the water, and have been actively trying to poach Hipcricket clients like Macy’s, MillerCoors, Nestle, KFC, and Clear Channel.