Conference Call Notes
Greg,
I was also in on the conference call and although a bit disappointed regarding the charge there were many positive remarks. Here are my thoughts:
1998 Pro-forma
Revenues - $40-$42 Million
Net Income - $1.7-$1.9 Million (After Tax of 40%)
EPS - $0.33-$0.37
1999 Pro-forma
Revenues - $55-$60 Million
Net Income - $2.4-$2.7 Million (After Tax of 40%)
EPS - Unknown due to effect of warrants, options and weighted average of shares calculation.
1st Quarter 1998 Results
Eric Davis, CFO, would not divulge actual numbers as they are not complete nor would it be fair to allow a small number of investors access to such information. The only hint given was that the first quarter is tracking the '97 fourth quarter results. If so, that would be approximately $.08-$.09 eps based on the new average weighted outstanding shares calculation.
Customer Reliance Factor
AT&T is the largest single revenue contributor of SOLP. No percentage was given but I believe that it is less than 10%. It is not anticipated that AT&T will reduce its utilization of Solomon's services. In fact, AT&T recently reduced its approved vendor list from 90 to 22 approved companies and SOLP made the cut. If anything Mr. Solomon sees increased business potential from AT&T.
Warrant Purchase Program
As announced they have purchased in excess of 900,000 warrants via private and open market transactions utilizing a line of credit which conserves cash. This line will be repaid over the next few years. IMHO, repayment may be made through the eventual warrant conversion once the stock price hits $4.50 or above.
Dilution
The success of the warrant repurchase program has lowered the effect of any such dilution. There is still some possibility for dilution if the stock price remains at or above $4.50 for some period of time. I believe that period to be 30 or 90 days. Of course any warrant conversion would mean more capital for SOLP so that they can grow the business and pay down the line of credit.
Charge
The $50,00 charge to establish new lines of business was not questioned as much as the $200,000 charge. Evidently it is a one time charge taken over a disputed "consulting project". The $200,000 represents the total amount or exposure. Management is attempting to collect the moneys owed but thought that it would be prudent to take the charge now. The $200,000 might be collected at some future time. IMHO, if and when this money hits the books it will boost eps considerably.
Full NASDAQ Listing
SOLP meets all listing requirements for full NASDAQ listing except the $5.00 stock price qualification. Once the stock trades at $5.00 or above the listing request will be filed.
Institutional & Inside Ownership
Currently SOLP is a micro-cap and management is happy to move slowly onward to the small-cap qualification. Micro-cap investors are currently interested in SOLP and are the ones supporting the stock. The next step will occur when the stock price appreciates and hits the small-cap radar screens. This evolution will happen over time given the growth exhibited to date. There is no hurry!
Insiders own approximately 35% to 37% of the company's stock.
Buy Out Possibility
Mr. Solomon stated that there is no interest in being acquired.
Growth Through Mergers & Acquisitions (M&A)
Growth will be fueled internally rather than through acquisitions. Management has determined that a merger or acquisition growth strategy does not suit Solomon Page's business plan due to the high costs associated with such purchases.
If a suitable acquisition candidate were located at a reasonable or fair price the deal would be reviewed and assessed on its own merits. Solomon Page is not a "Roll-up" or "Acquirer". The company is a "Builder" that "Leverages Relationships" in order to grow.
SOLP Web Site
Mr. Solomon promised to update or enhance the corporate web site with respect to investor information, etc. solomonpagegroup.com
First Quarter '98 Earnings Release
Eric Davis indicated that the next earnings release for the first quarter ending December 31, 1997 would be made prior to February 15, 1998.
IMHO, Solomon Page appears to be a healthy growing franchise that is adding business lines, exploiting opportunities, building internally and forging relationships that should continue to improve revenues and earnings for many years.
Regards,
Tom |
