Charles- It's too bad PSDI doesn't have options, or else I certainly would have bought a put recently. I called investor relations at 4pm, but haven't heard back yet.
Anyway, after further review of PSDI's 10-K, here's what I found:
Receivables have been climbing steadily relative to revenues. In other words, days sales outstanding have increased steadily over the past 2 or 3 years. I can't believe I failed to notice this. The situation is even worse in Europe, where the DSO has increased more significantly than everywhere else. This is an excerpt from the 1Q earnings release:
"During the quarter the Company continued to reduce its days sales
outstanding to 105, falling somewhat short of management's target. European days sales outstanding improved due to the focus placed on collection within the finance organization. This was offset somewhat by a slight increase in US days sales outstanding, as the Company continues to offer extended payment terms, generally between 90 and 180 days, to certain clients."
Here's the link to the release: prnewswire.com
As I previously mentioned, Europe sales are significant, but since margins in Europe have been declining significantly, income from Europe is only a small fraction to total. Also, ADvantage sales & income are pretty small fraction of overall numbers. Therefore, unless the company spend a boatload of $$$ on something this quarter, I can't see how they could fall short by $2 million. One possibility is that margins in Europe decreased so much that PSDI actually began to lose money in Europe. If the sales were lower than expected, and the marketing costs grew as expected (or more), they might lose money in European operations. After all, the reason margins in Europe have fallen could be the high marketing expense.
Here's an article from Dow Jones:
Project Software Down 49% On Weak 2Q
Earnings Outlook
Dow Jones News Services
NEW YORK -- Shares of Project Software & Development Inc. (PSDI)
plummeted 48.8% after the company said it will report fiscal second-quarter
earnings below analysts' expectations.
Adding to the bad news, Piper Jaffray Cos. downgraded the stock to neutral
from strong buy, based on the weak earnings expectations. The investment
firm also lowered its earnings estimates to $1.25 a share from $1.52 for
fiscal 1997, and to $1.65 from $2.00 for fiscal 1998.
Project Software was trading recently at 16, down 15 1/4, or 48.8%, on
Nasdaq volume of 2.2 million. Average daily volume is 58,900.
Late Tuesday, Project Software said it expects to report second-quarter
earnings of 15 cents a share, below analysts' estimates of 34 cents.
In the second quarter ended March 31, 1996, Project Software earned 24
cents a share, excluding charges.
In a press release, Project Software said it expects to report second-quarter
revenue of $22 million, compared with $16 million a year ago.
The latest quarter's slower-than-expected growth rate is a result of the
continued shortfall in ADvantage revenue, combined with soft sales in
Europe, the company said.
Final second-quarter results are expected to be released on April 17.
Josephthal Lyon & Ross Inc. analyst Bert Hochfeld, who had also estimated
Project Software would earn 34 cents a share in the quarter, attributed the
weaker earnings to lower license revenue.
Hochfeld said the company earned about $2.5 million less in license revenue
than had been expected, primarily because of problems with European sales.
''Project Software just ran into local European-based competitors that they
apparently had never come up against before, and that's what did them in,''
he said.
Looking ahead, Hochfeld still thinks the company's products are good and
their management is solid, but ''they just don't have experienced sales
management in Europe, and that cost them dearly.''
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This last bit concerns me. A new competitor? They had never seen this competitor before? Lack of experienced sales management in Europe?
What are they doing there if they can't handle it?
I'm not happy. I'm going to try to talk to IR tomorrow B4 the market opens. I'll immediately post any info. that I get. I just hope I don't get that "Sorry, this is our quiet period" crap.
Grumble grumble.
TDW |
