This is the e-mail I got concerning the Conference Call from someone at Yahoo.
Here's what I got on the Conference Call:
Overall positive news, after discounting the previously announced earnings warning.
Keneth Rardin (CEO)discussed the basic numbers in the release. And reiterated the delayed contracts as the reason for the shortfall. Made some brief comments on short term results VS long term results. And Discussed the fact that IMNT acquired several new partners this quarter. One called Calypso (sic) was going very well right out of the blocks.
Scott Remely (CFO)
Warned that all statements are forward looking and subject to the Safe Harbor Act. (As is my reporting of same.)
Also commented on the contract delays causing the shortfall and the probability that the delayed contracts would be closed shortly, although he said that you can't be sure about the timing until they are actually signed.
His explanation of the increased expenses made the most impact on me. The infastructure build up, as IMNT develops into a more mature company from a startup, caused the expenses to increase 50%. The majority of those increased expenses were from an increase in the headcount throughout the company. ((My thought injected here: More sales people, more accounting people, more R&D people, more G&A people. Just more people in general! And in my opinion, that's the explanation I have been searching for as to how $5 mill in delayed revenue could cause such a dramatic shortfall in earnings. The people have been put into place to handle the increased demand for the IMNT system. The expenses were NOT FOR JUST those delayed contracts. This company is growing as evidenced by the receivables!!))
Gross margin rate dropped to 50% as expected.
Sales came in from 60% direct efforts and 40% from partners. This ratio could be 60/40 or 40/60 in any given quarter. The sales partners are starting to add more though and may do even better going forward.
DSO's are too long. currently at 252 days. While this is too high of a number, and Remely stated that they were working to get it down significantly, it should not be judged as an unusually high credit risk problem as some long DSO's are sometimes perceived. The hospitals are credit worthy institutions, and will be working down from here.
SIGNIFICANT good news came from both cash objectives being met. IMNT interviewed 7 credit providers and chose Wachovia for it's unsecured line of credit at LIBOR plus .75 (I think that was the rate). And Sun Data was chosen as a financing partner because of their previous reputation in the IT and Healthcare industry. They are located in Atlanta near IMNT, and have 30 offices nationwide.
Rardin came back on and said that they had reviewed, and will continue to monitor expenses, but that they were still basically ramping up and that they hadn't found anything that should be cut. He also reiterated the backlog issue again, and said that this would help level out the earnings over time, but not to forget that the company is still dependant on only a few large contracts to make their quarters and that they will work to make them happen. The credit and financing partners will go a long way towards this goal.
Q&A
Punk Ziegel: Financing Partnership. Do hospitals want to use Sun Data? When will the first customer use Sun Data? Will Sun Data be taking over the current receivables?
Rardin: There has been a lot of interest in a longer financing opportunity and Sun Data has offered it. First contract for Sun Data could come this quarter. Several customers have been introduced to them. The rest of the sales force will be introduced to them in the next couple of weeks. Existing receivables will not be moved to Sun Data, but will be worked down as they have been internally.
Openhiemer: You've burned through about $5 mill in cash. Whats happening with the credit facility?
Rardin: We're at a point where cash drain should be about over for now. There may be a little more, but that would be it. Remember that IMNT is turning from a startup to a more mature company and the credit facility is a much less expensive way of creating cash than additional equity offering or long term debt. The demand for the IMNT systems are increasing dramatically. There are few competitors who can handle the same end to end system solutions. There have only been two disapointing quarters out of the last twelve.
Volpe Brown: What kind of impact will Sun Data agreement have?? And what about the sales funnel?
Rardin: Impact should be seen quickly. DSO's should improve as the outside financing is used. And that could be very soon. The sales funnel is great. The outside partners are where we would expect for them to be. Sales are good and gaining momentum.
Gruntal: VHA and DOD contracts? Tennant contract? 12 month backlog?
Rardin: Gov't area is strong. We continue to market to individual hospitals and regional VA hospital groups. DOD will be either directly contracted to the gov't or through the integrators. (IBM, etc.) Tennant contract is going great and continues to grow well. Installations are going forward strongly. The 12 month backlog is at $23 mill.
Robinson Humphrey: If delayed contract had been on time what would quarter have looked like?
Rardin: It would have been a very good quarter, but it's too far out on the speculation curve to really comment. So we'll just leave it at what's been reported.
END OF CALL |
