Information from a RB Poster
I have never posted on SI before, but am fairly active over on RB. A few weeks ago I intiated a conference call with NTXY. On the call there were a few shareholders, Robert and Dean Rositano, and Jim Pearce of IR. I have posted the minutes from that call along with my own thoughts.
Hope this information proves useful.
CONFERENCE CALL REPORT:
As many of you are aware, I initiated a conference call with the management of NTXY. Aside from myself, the call had active participation from a few other shareholders, Robert, Dean, and Jim Pearce (Jim is a NTXY employee involved with Investor Relations). Before I summarize the call, let me first thank those who participated "live" and "in spirit".
The following information is from the notes of the shareholders who participated on the call. The call was broken down into three main areas:
1) Investor Relations - Increasing Investor Awareness
2) Marketing - Increasing Consumer Awareness
3) Specific Q & A
After summarizing the call, I will provide my thoughts/comments and personal insight on the call. Let me preface this by saying that what I am posting here are comments from those involved on the call. In the Q & A, I have paraphrased the answers and should not be construed as quotes from NTXY management.
INVESTOR RELATIONS
NTXY has retained the services of FocusPartners, a NY based firm to increase investor relations. FocusPartners has been responsible for producing and distributing the investor fact sheet. Currently they are working on the preparation of an annual report and are in the planning stage of organizing a shareholders meeting.
The primary mechanism for disseminating information as soon as it is made public is through press releases.
As for the NMS, NTXY has modified their NASDAQ application to be a small cap request. That change was done approximately 45 days ago. The company knows of no reason that the application should be declined and appears to meet all of the qualifications.
MARKETING
To increase consumer awareness, NTXY utilizes two concepts: top-down brand awareness and bottom up with affinity groups.
In the top-down approach there have been recent campaigns in the Bay Area, LA, Seattle, and Manhattan. Media used included buswraps, billboards, and banner ads. In the Bay Area there were some ads on a local television station. They are now evaluating the results to determine which media is the most effective and provides NTXY the "best bang for the buck."
NTXY's bottom up approach makes heavy use of their CD-Rom titled "Internet The City". For example, when they sponsored Randy Hannagan they went to the race event and gave away copies with a custom cover designed to appeal to racing fans. This CD-rom directed this "specific" target market to a community that appeal to them. Users were able to obtain information on their favorite driver, video of their last race, etc. This strategy is also be implemented by NTXY at some of the professional sport teams in CA including, the Raiders, 49ers, and San Jose Sharks. Thus far there has been a good correlation to results. The strategy also includes the seeding of affinity groups...the key - "retention of the users eyeballs". Next year we should see E-Bay giving away "Internet The City" at some 90 trade shows that are devoted to a particular affinity group (i.e. coin collectors, sports memorbilia, etc). E-Bay needs auction visitors, they plan to convert event attendes to internet buyers...using NTXY.
The high 100 hot ranking vs. unique visitors indicates user loyalty.
There is currently an agreement to distribute "Internet the City" with new iMac computers. This will steer new internet users to NTXY as they learn the internet and its capabilities.
SPECIFIC Q & A
Are there plans to raise additional working capital? If so, what type of arrangement would it be?
A: NTXY is looking forward to a MAJOR secondary offering in the year 2000. Intend to raise $50m to $60m.
Is there current institutional interest in NTXY?
A: NTXY has always invited institutional participation and such interest currently exists. This interest will be further increased with a small cap listing.
What do Robert & Dean view as their personal strengths and weaknesses, and has any consideration been given to hire a outside executive to handle the day to day operations of running a publicly traded company?
A: Dean is a "technical" / "operations" guy while Robert's strengths involve marketing and sales. YES, it is a goal of management to attract top flight talent and join senior management as the company grows.
Since the recent quarter had expenses of $5m and revenue of $1m, and given that NTXY is already popular, what will it take to become profitable?
A: The strategy has been to build traffic base and member base first. The next step is to convert that "base" into profit via lateral opportunities like e-commerce, direct e-mail, etc.
Is the current revenue per ad impression much lower than it could be?
A: Yes...Up until August, NTXY used networks such as DCLK for ad sales, but they now have an in-house sales person and they are seeing good progress in CPM rates.
How much revenue comes from impressions vs. clivk throughs, and what percentage comes from hosting fees?
A: Revenue comes from a combination of all including e-commerce, ad sales, and hosting fees. A breakdown of the numbers may be released in the future.
Insider Sales?
A: Robert and Dean have not registered to sell one share of stock.
What can we investors do to help?
NTXY is interested in receiving constructive suggestions from all users, including investors. Per our discussion, they plan to set up an area within the wall street neighborhood devoted to discussion about advancing the value of NTXY stock.
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BOCCARDI'S THOUGHT'S
First, let me say I was very impressed with Robert, Dean, and Jim. I can assure you that they have devoted themselves to growing NTXY and are working incredibly hard to do so. The call was very upbeat, positive, and reconfirmed my thoughts on the company.
Regarding increasing investor relations, it appears that a small cap listing will provide NTXY with opportunties not currently avaiable. I was very excited about the comments regarding the secondary offering. This type of capital infusion will provide NTXY the funds needed to get to the next level. These funds will be used for a large scale national advertising, form other strategic alliances, etc.
Bringing on a top flight executive is huge IMO. Remember, Robert and Dean are entrepreneurs. Being an entrepreneur myself I can relate in getting bogged down in the day to day mechanics and how easy it can be to lose sight of the intial vision. They are truly creators and innoventors. It also shows that they are not wrapped up in titles and egos and have the intellect to recognize their own strengths and weaknesses. I don't believe they are in a position to attract the type of talent they would want at this time, however over the next couple of years that would be a strong possibility.
Regarding the marketing, NTXY is just beginning to convert their traffic into revenue. This does not happen overnight. With the current marketing plans in place to increase traffic, a deal with EBay to give away CD-roms at over 90 trade shows, and CD-rom distributions with new iMac computers, the future is certainly bright.
With a small cap listing shortly, a secondary offering possibly in 2000, recruitment of top-flight, experienced management, rapidly increasing traffic, increasing traffic being converted to revenue, I am convinced that the NTXY business model is poised for prominant success.
IMO, when the investing community realizes the value of NTXY and their business model, the share price will rapidly appreciate. This appreciation will not happen overnight. If you need instant gratification, NTXY may not be for you. However over the next 6 - 12 - 18 months, NTXY can be a very interesting stock to own. How will you be positioned when this appreciation occurs?
My opinion...Own enough to count.
I have had a long day so I am stoping for now, but will add some additional comments tomorrow.
Boccardi |
