Active Network: Long History Of Losses

A survey commissioned by the recently listed Active Network (NYSE: ACTV) revealed that 73% of U.S. households paid to participate in a recreational or community activity last year. That translates to $110 billion in registration spending incurred by 1.8 billion residents in the country.

Active Network’s Financials
San Diego-based Active Network was founded in 1999 and is a technology and media company that puts registrations for recreational or cultural activities on the cloud, thus simplifying the registration process for the consumers and expanding the participation for the events. Their platform helps the organizers to record, track, manage and share information regarding activities and events. Besides the U.S., the company has a presence in Austria, Australia, Canada, France, Germany, Ireland, Italy, New Zealand, Singapore, Portugal, Spain, and the United Kingdom.

They currently cater to more than 47,000 sports, community activities, outdoors and business event customers. Their client list includes Little League Baseball and the United States Tennis Association which use their platform to market services and manage registrations, payments and events.

Besides sports, they focus on parks departments and universities, outdoors organizations such as campgrounds and business events and earn revenues through software licensing and advertising. Last year, they reported more than 70 million registrations and annual revenues of $279.6 million, growing 15% over the year. Loss for the year stood at $55.4 million. During the first quarter, they saw revenues grow 15% over the year to $72.7 million. Net loss narrowed marginally to $10.9 million from $12 million a year ago.

Active Network’s Acquisitions
Active Network recently acquired Fellowship Technologies, an online church management software provider. Through the acquisition, Active Network will be able to expand within the religious community and access the over 1,700 clients that Fellowship lists as their customers. Research estiamtes that there are over 300,000 churces in the U.S., making it an attractive market. 

Active has been expanding into newer business segments through acquisitions. In 2009, they acquired ReserveAmerica, a leading campground reservation provider from IAC. In 2008, they acquired HY-TEK Sports Software, a software solutions company that focused on swimming and track & field clubs.

Active Network’s stock is trading at $15.90 with a market capitalization of over $870 million. It had listed at $15 a share and touched a high of $17.11 earlier this week.

It is surprising to see that an organization has been in business for over 10 years and has yet to turn in a profit. It is scarier still, that their filing prospectus mentions inability to ever earn a profit among its risk factors.

“Some of these risks include:

• we have a history of significant net losses, and we may never achieve or maintain profitability;
• our limited operating history, new and unproven business model and rapidly evolving market make it difficult to evaluate our future prospects and increase the risk that we will not be successful;
• our growth rate over the past few years may not be sustainable. If we fail to maintain an adequate growth rate, our business will be adversely affected and we may not achieve or maintain profitability;
• if we fail to effectively manage our growth, our business and operating results could be harmed; and
• acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value, strain our resources and impair our operating results, financial conditions and prospects.”