I am hopelessly confused here. I know something of mathematics but nothing of accounting.
First, if the product gross margins are 30% and the product revenues were $97.2 million, why doesn't that give $29.16 million to the bottom line? That seems how you have calculated quarters 3 and 4. Excluding one time sales, they've reported net income of only 15.3 - and that includes $12.1 million of licence fees.
Admitting that I don't know what I am doing, I'd like to run through some numbers and take issue with a couple of yours. Please bear with me and tell me where I am wrong.
The year on year increase in revenues were 171%. That is the compound annual rate, that translates coincidentally into a simple rate of 100% (the log of 2.71 is 1.00), and this gives a quarterly compound rate of 28% (exp(0.25)-1). Using method for royalties gives an annual compound rate of log(1212/821) of 39% which gives in turn a quartely compound rate of 10%. Thus
Product revenue Prod Prof (30%) Royalties Total
Q1 97.2 29 8.2 37!!!
Q2 124.8 37 9.0 46
Q3 160.3 48 10.0 58
Q4 205.8 62 11.0 73
Year 214
This would give an eps of 2.93 (214/73)! Ok, it must be wrong because it gives Q EPS of (37/73) 0.51. I suspect it is in my naive assumption that gross margin x product revenue = earning. There must be some cost in collecting royalties too.
I went through the numbers in a similar way to you, Cardin, but with the lower growth rate on Product Revenue. Would you, or anyone, like to enlighten me as to what I (we?) did wrong?
Thanks,
AJ |
