Interesting, Tom, glad for the post on RANDE's thread that brought this to my attention.
Interested...but cautious ;-)
Gross margin seems, well, gross. They've been running around 35% for at least a few years, which already seems low to me in the consulting business, and it's even lower (just over 25%) on the latest F/S. The transition they've been undertaking, if you look at most of the initiatives on their PowerPoint presentation, would hit their GS&A expenses more than their Cost of Sales. So I guess I'm wondering if you have any thoughts on why their GM seems so low? Are they finding it difficult to get the multiples they are looking for from the new model? Or is this a reflection of the HP contract you've mentioned, which I take it is large enough to have a significant impact?
On the plus side? Reducing staff turnover is a huge item - like to know more about that. And if they have been successful in retraining consultants in the key technologies so much in demand...well, in this industy that's a given requirement but at least they're moving aggressively. Of course, the insider purchases give some comfort. I note they also mention improvements in AR. Their AR turns last year were only just over 4, which is pretty terrible (90 days avg outstanding), a significant drag on cash flow, so improvements there would be great.
Sorry, don't mean to ramble, just seem to have lots of questions to help me more clearly see the value in this value play.
Thks again for the heads up,
WUWT |
