Brazil Crucial for Cash-Burning Phorm

Behavioural targeting firm Phorm has posted a loss before tax of $15.7m (£9.8m) in the six months to the end of June, and is still using up cash reserves at $1.8m a month; but reports better than expected opt-in rates in Brazil, where its offer is nearing commercial launch.

In its unaudited interim results, the firm focused on its recent progress in Brazil including the launch of Navegador with leading ISP Oi and the announcement last month of a trial with phone company Telefonica. Moving staff positions from the UK to Brazil is one of the ways the company has tried to cut costs and focus expenditure.

CEO Kent Ertugrul says the Brazilian launch 'marks the start of a new chapter for Phorm' and comments: 'We are extremely pleased with the initial results that we have had from our operations in Brazil and look forward to the generation of meaningful revenues in the coming months. We expect to resolve our funding position shortly and, consequently, we remain confident about the Company's future and our ability to deliver substantial shareholder value.'

Damaged by the ever-rumbling row over BT's unauthorised trial of its services in 2007, Phorm is treading carefully in new markets. In his statement, Ertugrul says: 'Our strategy of explicitly opting in users helped us to establish a privacy standard beyond reproach while opt-in rates to date have significantly exceeded our commercial expectations in terms of user adoption numbers...' He adds that he believes the deals with Telefonica and Oi put the company 'on track for providing the substantial user base required to run commercial advertising campaigns in the next few months'.

Operating losses for the six month period ended 30 June 2010 were up slightly to $15.7m from $15.0m a year earlier, while loss per share declined from $1.06 to $0.91.

The firm says that it has recently reduced its rate of cash burn, from c.$2.3m per month in the first six months of the year to around $1.8m per month now: nevertheless it still needs to add more to recently raised funding and said it 'expects to be in a position to update shareholders in the near future'. Its cash balance at 30 June 2010 was $5.7m (£3.8m), and the accounts show that its accumulated deficit rose from $79m to $106m during the calendar year 2009.

Phorm has at least begun invoicing its Brazilian partners, although Oi's payment of the first $1.6m is awaiting the launch of commercial ad campaigns. Also on the plus side, the company says it is 'very actively exploring opportunities in markets outside of Brazil', is particularly pleased with progress in Asia and again, 'expects to announce a number of developments over the next year as various opportunities come to fruition'.

Web site: www.phorm.com .