MIW Q1 2010 Letter to Shareholders

8/8/2019 MIW Q1 2010 Letter to Shareholders

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Make It Work, Inc.Quarterly Shareholder Report

Q1 2010

Issued by Carson Feleay, VP Finance

June 2010


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Table of Contents

A) Introduction to the Quarter (pgs. 3-4)a. Operations Reviewb. Financial Overviewc. Marketing Directiond. Business Development

B) Operational Discussion and Metrics (pgs. 4-5)a. Sales/Revenues per NTCb. Number of Technicians, Challenges and Goalsc. Average Appointment Time Analysisd. % NSA Customers vs. Non-NSA customers comparisons

C) Financial Discussion of Objectives and Results (pgs. 6-8)a. Revenues/Sales Analysisb. Targeted Spending Cutsc. Cash Preservation Focusd. EBITDA Success

D) Marketing Results and Expansion Plans for 2010 (pgs. 8-10)a. KSFO Make It Work Radio Show Syndicationb. SEO Focusc. Social Media and New Media Venturesd. Expansion Foundation via Radio Syndicatione. Future Marketing Direction and Objectives

E) Conclusion Summary and 2010 Expectations and Forecasts (pgs. 11-12)a. Summary of Q1b. 2010 Forecasting and Goalsc. Summary of Operational, Financial, and Marketing Resultsd. Focus on Top-Line Growth in Tandem with Bottom-Line Success


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Supplemental Information

Tables, Charts and Graphs

1) Technician Sales Analysis Table (pg. 4)2) Average Appointment Time (pg. 5)3)

Quarterly Revenues vs. Expenses 2009 (pg. 6)4) EBITDA by Quarter (pg. 7)

5) www.makeitwork.com webpage hits chart (pg. 9)6) blog.makeitwork.com webpage hits chart (pg. 10)

Financial Statements (Appendix A)

1) Comparative Statements of Operations (Income Statement)2) Comparative Balance Sheets3) Comparative Statement of Cash Flows4) MIW Quarterly Dashboard of Key Metrics


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1st

Quarter Overview

The first quarter of 2010 was focused on continuing the profitability of our operations, while also

introducing the Make It Work Media division which adds to our expanding scope of services. We

continued our profitability while launching targeted media marketing campaigns to supplement our

Tech News Radio Show along with our social media awareness campaigns. Make It Work successfully

launched our newest radio show in January, Make It Work with Jeremy Anticouni on KSFO 560from 3pm to 4pm on Saturdays, in San Francisco. Through MIWs syndication contract with Envision

Radio Networks, this show is now in the process of syndication as a 2 hour show to be launched in

markets across the nation. As we build the awareness for our services through the new show, we

will begin to launch our remote and on-site services in the geographies the radio show serves.

Further marketing and expansion details are highlighted in the Marketing section (pgs 8-10).

Operationally we maintained our high level of services in the first quarter. The Average Appointment

Time (AAT) remained steady at 1.44 hours per appointment, which was only a .02 drop from the

fourth quarter of 2009. Our average Neighborhood Support Agreement (NSA) sales perNeighborhood Technology Consultant (NTC) per month remained above the $9,000 mark, another

benchmark for MIW. MIW increased sales and revenues on a quarter over quarter basis, and also set

the pace to double our annual EBITDA. Further operational details will be charted and explained in

the Operations section (pgs 4-6).

In a parallel manner, we have worked to best utilize these productivity achievements by investing a

limited budget where best suited for further growth, and at the same time maintaining our efficient

new cost structure in order to further improve our financial standing. In doing so, we continued our

positive EBITDA trend throughout the quarter, netting $38k in positive EBITDA. MIW also kept

spending in check, and preserved the cash balance throughout Q1, netting a balance of $145k at the

quarters end. This is a slight increase from the $140k cash balance reported at year-end 2009.

Further highlights of our financial successes are detailed in the Financial section (pgs. 6-8) and on the


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geographies served, for our remote and on-site services. MIW has begun working on the syndication

process and recording of the new Make It Work radio show to roll out in the 2nd

quarter. We have

also begun laying the foundation for a new set of services MIW will offer targeted to small businesses

for web content building via the creation of a blog for the client and online presence via a search

engine optimization package. In addition, a realm of other media and online services can be added

to each package a la carte and any package can be customized to fit the clients needs. Financially,

we continue to strive for profitability, along with finding new ways to increase our top-line sales and

revenues. Operationally, MIW will maintain its tight controls now in place in order to boost

productivity further, and to increase brand awareness through our resources on-hand. Overall, theeconomic climate remains challenging, but the future for MIW brings many opportunities and we

look forward to serving the ever-growing needs of our customers with our ever-growing scope of

services.

Operations

In the 1st quarter of 2010 MIW again took the same approach as it has in recent past quarters by

further focus on streamlining our processes and procedures, increasing productivity, and most

importantly by delighting the customer with extreme customer service. In doing so, key metrics

show that the efforts that are driving our operational productivity to new highs are continuing to

drive greater profitability overall.

The Table below is a snapshot of the quarter over quarter operational results, even after a solid 4th

quarter.

Q110 Q409

NSA Sales $ 943,000 $ 920,000

Avg NSA Sales/NTC per month $ 9,525 $ 10,222

Avg NTC Headcount 33 30

Avg Appt Time (in hours) 1.44 1.46

# of Appts 6,655 6,035

As the table above shows, MIW was able to increase NSA sales due to a greater appointment count

in the quarter. At the same time, we saw slight decreases in the average appointment time, along

with the NSA sales per technician on average. While maintaining our streamlined operational focus,

we saw a slight growth in the number of NTCs needed to service the demand due to the increase in

appointments per day. We have experienced steady demand in the first half of the 2nd

quarter.


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many further consulting offerings in online social media, home user software, and small business

user software. In the 1st

quarter of 2010, MIW was able to maintain above the 1.4 hours per

appointment mark and ended up at 1.44 hours per appointment. It is worth noting that this was on

over 600 more appointments in the quarter.

The chart below displays the AAT per quarter since Q4 2008.

MIW will continue in its efforts of expanding its services scope in order to keep increasing this metric

and also to further delight our customers.

In conclusion to our operational metrics and discussion, we continue to see the challenge of

sustaining future revenues. As previously reported, over the course of 2009, MIW increased its

percentage of NSA customers overall. We know that the key measure of our success comes in thesales of the Neighborhood Support Agreement (NSA). With this sale come future revenues, and the

substantial increased probability of repeated appointments for the clients future technology needs.

In Q1 2009, we saw 73% of our clients that completed an appointment were NSA customers, and by

Q4 2009, we saw that number increase to 76% of all customers that completed an appointment were

NSA clients In Q1 2010 the 76% ratio was maintained on 600+ more appointments in the quarter


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Financial Results and Objectives

On the top-line, MIW saw services sales increase by 3% quarter over quarter, while revenues for

services also experienced an increase of 9% quarter over quarter. The increase in the number of

appointments was the major factor in these variances quarter over quarter. This further illustrated

the increased focus on AAT and productivity. Year over year, we see that the services sales were flatfor the comparable quarter, while services revenues were down 6%. MIW maintained its highly

variable structure to combat these metrics. MIW was able to continue on its path of profitability as

we increased gross profits as a percent of revenues by 11%.

The chart below displays the progress of aligning our cost structure with our top-line allowing for

MIW to fundamentally sustain its operations.

As previously mentioned and illustrated, MIW has made a coordinated effort at targeted expense

reductions. We have streamlined our mini-cooper fleet and reduced by 10 the number of cars in the

field to closer align with our number of technicians. This has resulted in nearly $5,000 per month in

savings. We have maintained our internal controls on spending and our variable model equating to

1st

quarter run-rate of doubling our annual Earnings Before Interest Tax Depreciation and

Amortization (EBITDA). We remained focused in investing in our Tech News Radio Show in Los


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our streamlined ongoing cost-structure to eliminate unnecessary spend. MIW cash balance at the

end of the 1st

quarter 2010 was $145k. We have seen further challenges to preserving our cash

balance in the beginning of the 2nd quarter 2010 and we plan to work hard in order to preserve ourcash balance. We will stay the course also with paying down our existing payables and legacy

payables, while continually working to pay down our short-term debt.

The highlight of our financial successes in Q1 2010 stands out in our EBITDA (Earnings Before

Interest, Tax, Depreciation and Amortization) improvement. EBITDA for the quarter was $38k

compared to $13k in the 4th

quarter of 2009. This marks the 4th

straight quarter of positive EBITDA

for MIW. We accomplished an 890% increase in our EBITDA year over year in 2009. In the 1

st

quarter of 2010, we saw a quarter over quarter increase of nearly 200%. Make It Work concertedly

focused its combined efforts to improve the bottom line of the company in 2009 and we have

continued that focus with great success as vividly illustrated in the chart below.

Overall, in Q1 financially we have seen a slight top-line increase that is consistent with the overall

economy and tech sector for the start of 2010. Concurrently, across all of our scopes of services we

saw a boost in demand in the first quarter, yet were able to maintain fiscal discipline and keep our

variable model in place in order to maximize profits . By increasing productivity, streamlining

operations, and carrying out targeted spending cuts, Make It Work has laid the foundation for

streamlined growth and self-funding. We look forward to expanding our scope of services, while also

servicing new demand within our expansion plans in the upcoming year. At the same time MIW will

continue to focus its efforts on bottom-line success and profitability. Detailed financial results are


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The marketing initiatives in the 1st quarter of 2010 were focused around a few new campaigns and

at the same time we re-visited traditional radio advertising to compliment our Tech News radio show

on KNX.

The utmost attention of our marketing team has been channeled into perfecting our radio shows.

Our KNX Tech News radio show continues to account for 20% of all of our new customers acquired insouthern California and is a great driver of the expansion of our Make It Work brand. It is also the

lowest cost of acquisition source for new customers of all of our current marketing campaigns. We

launched our second radio show, Make It Work with Jeremy Anticouni, in January on San Franciscos

KSFO 560. This show airs Saturdays from 3-4pm and will be the show we syndicate nationwide. On

April 16, 2010, we signed a formal syndication agreement with Envision Radio Networks to syndicate

this show nationwide.

We continually work to expand our online presence, and have now focused much of the marketing

departments attention to Search Engine Optimization (SEO) campaigns which include a strategic

Google Adwords campaign along with content building in our websites, newly developed blog and

social media networks. We have redeveloped our Make It Work website to be more user-friendly and

to better encompass the many legs of the business. See our most updated look here:


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Each of our radio show websites have been improved to further engage our audience.

Los Angeles KNX 1070: http://www.cbstechnews.com

San Francisco KSFO 560, along with Syndicated, national 2-hour show:

http://www.makeitworkradio.com

Our newest media venture is called T3, Todays Tech Trends. T3 is a 3 minute

video that captures three of the latest trending topics in the world of

technology. This builds more brand awareness for MIW and also

compliments our SEO campaign as all of the videos are searchable online

with the topics of discussion in each video. T3 is produced and distributed

on Mondays, Wednesdays, and Fridays via YouTube, the MIW Blog and

through partner websites and blogs. Our launch partner Noozhawk carries an

automatically updated version of our embedded media player athttp://www.noozhawk.com, which captures over 7,000 unique visitors per day. We look to build on

this relationship in order to branch out onto many other credible websites, in order to further build

the MIW brand. You can also find T3 on our blog at: http://www.makeitwork.com/t3.

k k h b h d i f li i l di i l di bl i d i l


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attention to our blog at http://blog.makeitwork.com. These efforts build brand recognition in the

social media arena, and have introduced MIW to an entirely new audience. In addition our onlineengagement has solidified and expanded existing relationships with our radio sponsors and has

brought new potential sponsors to the negotiating table.

Our future marketing plans and objectives run consistent with our current marketing agenda.

To continue to perfect our radio shows in order to further expand into new marketsvia syndication with Envision Radio Networks contract.

To continue the Make It Work presence in the social media arena for further brandawareness and online recognition driving hits to our websites and services.

To further build quality content on all of our websites for our Search EngineOptimization campaigns in combination with a highly targeted Google Adwords

campaign. To continue to produce high quality content for our websites and T3 in order to

achieve brand awareness and to serve our clients with an ever expanding scope of

services.

To continue to come up with new creative, highly efficient, low-cost means of


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Conclusion

Overall, MIW is pleased to see the increased demand in Q1 2010, for its premium services in what is

still an extraordinary economy. The opportunity for the expansion of our radio shows coupled with

the organic growth of our services into these territories of best fit lies ahead in the next 3 quarters of

2010. Operationally, the enhancement of productivity in the field-team resources has rendered

increasing profits. At the same time, our delight index has risen once again to 3.92 overall on a scale

of 0 - 4, with 4 being a perfect score. In the process of continuing to delight our customers, we have

worked harder to build the relationship even further, and have watched our rate of converting newclients to repeat clients rise as more customers purchase Neighborhood Support Agreements.

Financially, we have persistently worked to maintain our tight controls to reduce spend where

necessary in order to reinvest where we see the greatest return. In doing so, we achieved 4

consecutive profitable quarters as a company. MIW recorded $38k in Earnings Before Interest, Tax,

Depreciation, and Amortization (EBITDA) for the quarter, on pace to double last years total EBITDA.

On the marketing side, MIW has branched out into new avenues with social media awareness, while

also refining those campaigns showing the most promise. Of these, our Make It Work radio shows

stand out as the key driving force behind affordable new customer acquisition and geographic

expansion. We also have revamped our websites for the greatest Search Engine Optimization,

producing results we are now starting to see in the 2nd

quarter. We have also expanded into new

online brand awareness with our Make It Work blog, T3, and through revamping our Facebook and

Twitter display and strategies.

Looking ahead to 2010, our key objectives continue to be maintaining and increasing financial

controls to sustain bottom-line profitability. At the same time, we look to preserve the cash balanceand further shore up the balance sheet, all the meanwhile the ultimate goal is supporting the growth

of our scope of services and geographies served. Operationally, we have put forth metrics objectives

of:

1.50 AAT (Average Appointment Time - based in hours) 80% perfect 4.0 delight scores on respondent surveys $10k per month per technician in NSA sales

On the marketing side, we will further concentrate on the web branding campaigns, produce newcreative tech video content, and also continue to fine-tune and perfect our Make It Work radio

shows as we prepare for nation-wide syndication. On the whole, we look forward to the

opportunities for growth ahead, while also recognizing the challenges.


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I personally thank you for your continued support. I know you have been patient and everyone at

MIW appreciates it. We are working feverishly to find the best possible return for our shareholders.This economy has been the toughest time in my career, but I remain bullish in my belief that we will

achieve the results we all seek. Please remain positive in your thinking and happy in your lives.

To the moon,

Eric Greenspan

CEO

Make It Work Inc.

P.S. If you wish to discuss anything in this report or any other matter, I am available to you as

needed. You may email me directly at [email protected] or friend me on Facebook at

http://www.facebook.com/ericgreenspan and Twitter at http://www.twitter.com/ericgreenspan soyou may keep track of our progress on a day to day basis.

The information provided in this report is private and confidential and is not to be shared with anyone other than you, MIW Shareholder.


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Appendix A

Financial Statements

1) Comparative Statements of Operations (Income Statement)2) Comparative Balance Sheets3) Comparative Statement of Cash Flows4) MIW Quarterly Dashboard of Key Metrics


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STATEMENT OF OPERATIONS($ in thousands)

(Unaudited)

Period Ending Period EndingFiscal Q1, 2010 Fiscal Q4, 2009

Billings (1) 1,199 1,160

Revenue (1) 1,117 1,028

Cost of sales (2) 511 491

Gross profit 606 537

General and administrative expenses (3) 485 468Sales and marketing (3) 137 116

622 584

Operating income/(loss) (16) (47)

Other (Income)/Expense 3 (5)

Net income/(loss) (19) (42)

Reconciliation of Net income/(loss) to EBITDA

Net income/(loss) (19) (42)

Depreciation and amortization 47 49

Tax and interest 10 6

EBITDA 38 13

Notes1 Billings include sales of neighborhood support agreements whereby customers

commit to a predetermined number of hours paid in advance. For revenue recognition purposesthe company defers the value of hours sold until actually used.

2 Cost of sales includes the compensation of the Neighborhood Technology Consultants, tools andequipment to perform services, the operating cost of the Mini Cooper fleet as well as the cost ofproducts sold.

3 Sales and marketing expenses include advertising costs which are expensed as incurred.


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BALANCE SHEETS($ in thousands)

(Unaudited)

Period Ending Period EndingASSETS Fiscal Mar. 2010 Fiscal Dec. 2009

Current AssetsCash and cash equivalents 145 140Receivables 5 6Inventories (1) 67 65

Other current assets(2) 40 40

Total current assets 257 251Net fixed assets and intangibles(3) 365 384Other assets (2) 167 157

TOTAL ASSETS 789 792

LIABILITY & SHAREHOLDERS' EQUITY

Current Liabilities

Accounts Payable 137 124Accrued Liabilities (4) 108 142

Short Term Debt (5) 311 340Current Portion of long-term debt (6) 15 20

Total current liabilities 571 626Long-term debt (6) 31 40Deferred Revenue 2,818 2,734Shareholders' equity (2,631) (2,608)

TOTAL LIABILITIES &

SHAREHOLDER EQUITY 789 792

Notes

1 Inventories consist of computer products for resale and are stated at the lower of cost or net realizable value.2 Other assets comprised of vehicle deposits, miscellaneous non-trade receivables, rental deposits and prepaids.

3 Fixed assets are stated at cost less accumulated depreciation.Depreciation is applied using the straight-line method over their estimated useful lives of between 3-5 years.

4 Accrued liabilities comprises commissions payable, accrued expenses, sales tax payable and other non-trade payables.5 Short term debt consists of bank lines of credit.

6 Long term liabilities consists of auto loans and equipment loans payable within one year.7 Deferred revenue relates to neighborhood support agreement hours sold but not yet used.


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MIW Q1 2010 Letter to Shareholders

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