(from Yahoo) ILNK: 2nd Qtr EPS Projections....
by: Glotech (49/M) 6/12/00 12:22 pm
Msg: 31437 of 31488
..have about 80% confidence level at this stage? that is the middle of June.
Confidence level gets better as we come closer to the earnings announcement date? that is August 17th or so.
Each and every Qtr projections have a few wild cards that throw-off the estimates by a few cents. The year end 1999 projections, for example, showed 2 million less in actual earnings from operations due to two categories? higher than estimated "telecom network expenses" and higher "Selling, General and Administrative expenses". I-Link includes the capital cost of network deployment in the cost of "telecom network expenses". My EPS projections model can't really anticipates or track the level of network deployment the company decides to authorize from quarter to quarter. To me, any earnings short fall due to higher level of network deployment is a non-event. Because its like moving money from one pocket into another? you always have it? in one form or the other? as cash or extended network infrastructure.
In the 4th Qtr, the EPS projection numbers were very close. And the small short fall in earnings was mostly due to higher cost of SGA caused by increased customer support staff and travelling.
In the 1st Qtr, the short fall in operating earnings [excludes interest/dividend and special charges] was about $2.5 million dollars. Again, this was essentially due to higher network deployment [and the associated cost] and a whopping $500,000 increase in SGA. An additional wild card in the 1st Qtr was the whole sale pricing of REVENUE from customers transferred to Big Planet. In my 1st Qtr estimate, I did not include the cost of interest/dividend and special charges. These two items are yet another set of wild cards. There will be such cost on an on-going basis, and I have no way of accurately estimating them. In all fairness to the EPS projection model, I suggest you compare "apples" with "apples" and scrutinize the efforts of some folks on this board that try to distort the facts and discredit the work of this author.
Lets talk about the 1st Qtr earnings for a moment??.
The higher level of network deployment and the associated cost in the 1st Qtr is understandable and as I said before it's a non-event as for as the financial impact is concerned. However, the higher level of SGA is troublesome. I my projections model, I did not expect the management to dish out hefty salary increases to themselves? in most instances the salary levels went from $120,000 per year to over $200,000. Also, the cost of customer support staff should have been transferred, at least the majority of it, to Big Planet. The 3rd and 4th level customer support for Big Planet customers does not require the staffing level I-Link had on the books in the 1st Qtr. I am sure there may be some legal issues at the time that prevented the transfer of personnel and the associated costs to Big Planet. I expect the SGA to change and hopefully go lower in the 2nd Qtr. In my 1st Qtr EPS projection model, I had assumed 27% wholesale discount to Big Planet and not the 40% [at least that's what it looks like]. From the looks of it, now it looks like I-Link takes back about 13% for 3rd and 4th level customer support.
Now lets talk about the 2nd Qtr. earnings ????
1. The 2nd Qtr EPS Projections have about 80% confidence level at this stage? that is the middle of June. Confidence level gets better as we come closer to the earnings announcement date? that is August 17th or so.
2. We can expect over 100% revenue growth in the 2nd Qtr as compared to the 1st.
3. In the future, starting with the 3rd Qtr, we can expect over 30% revenue growth sequentially.
4. There will be NO impact of any Internet tax on I-Link's current earnings? because as part of its Real Time IP Network I-Link already pays cost of termination. And any cost impact, when and if, would be on the TalkFree service? which is still in BETA test.
5. Going forward, the wild cards will be:
ú The level of network deployment for global communications and the associated cost.
ú The SGA cost after the transfer of 1st and 2nd level customer support staff to Big Planet.
ú The actual sales number for INDAVO and the effective date of revenue collection for monthly service fee and usage charges.
ú The fees charged for GateLink APIs.
ú Special charges associated with JNCO settlement.
Overall, we are in good shape and should see a better stock price going forward.
Glotech |
