Post from Intentional on earnings from Raging Bull
By: Intentional $$$$
Reply To: None Saturday, 15 Jul 2000 at 2:19 PM EDT
Post # of 10812
Sunnyboy: my earnings estimate is more witchcraft than science. I calculated using a spreadsheet so the precision is false. The main number I care about is revenue growth. I know the street wants a path to profitability and my bet is that Snyder will make sure the company is managed towards solid results there.
But the revenue number really depends on the sales force. And the sales force, as Vocco noted, was mainly green and untrained last quarter. This quarter it should have nearly doubled in size and be going great guns.
As an aside, I stumbled into the DMA conference in Seattle a while back and talked to one of the salesmen at the Netp booth. He was pretty enthusiastic about what he was selling because the products are great products and easy to sell and there's not really a lot of competition. That's what I'm still hearing about BVSN and VIGN: there's not a lot of competition because it's still the Oklahoma land rush. So simply doubling the sales force should double sales. Plus Netp also has a significant number of cross-sell opportunities that it can take advantage of because of the increasing customer base and the increasing number of products. So that's my "big picture" of what I feel should be happening with sales.
Then, remember that some of the products are related to click-through rates and the volume of business its customers are doing. For example, VIGN and BVSN are both customers and growing at about 70% (ball park without looking it up right now) and so presumably Netp will see some proportionate revenue. I believe Lycos is like this too, so presumably revenue based on click-through volume will increase. I'm guessing here, but if anything this is a positive force pushing revenues up with no incremental effort on the part of Netp.
Plus the interest income should be pretty good. Netp's sitting on a much larger pile of cash than last quarter. If Netp makes an additional $1M there that's an extra 10% or so of additional revenue growth.
Plus I think KM sales should grow at a very rapid rate, ie if we get four new customers that's 200% growth (assuming we had only two customers last qtr.)
And sales in Europe seemed to be picking up last qtr, so I'd expect more progress there. And don't forget that they snagged Sony as a customer so that gives them credibilitiy in Japan and Asia. So growth in international sales could conceivably be a big revenue kick.
Plus we could be hearing about how big Oracle, SBC, and HP deals might be (right now they're just normal customers in my book). These deals may be quite a bit bigger than they seem at first glance (on the other hand they may just be window dressing sorts of deals with little revenue involved, I dunno.)
On the downside, the company itself hasn't had much visibility. So probably not a lot of walk-in, no-effort customers.
And e-advertising and e-tailing have been soft, so revenues from these sectors likely not spectacular.
But I add it all up, and I'm pretty optimistic. That's why my numbers (-0.14 $16.60M 47 Intentional ) represent a 75% increase in sales and a 45% increase in expenses to get to -.14 in earnings.
On the expense side, Netp's still presumably hiring like crazy, but I know they're planning a move, which would mean that the increase in employees and expenses is gated physically by their need for expanded facilities. So maybe expenses will be lower than expected because of the constraint.
I don't have much insight to the mix of direct & indirect customers, where we stand on gross margins, and whether there's a real focus within the company to reduce expenses to get to profitabiilty quicker. If the revenue growth is great AND expenses are held in check, then earnings improvement could be phenomenal. I haven't personally given much thought to how much of expenses are fixed and how much variable. With huge software gross margins, I know there's a lot of opportunity to grow revenues fast without much variable expense. Also Oracle is proving that operating a business over the web helps keep expenses way down too. So I'd bet Netp will adopt best practices from companies like Oracle, Cisco, and Msft to assure that operationally the company is well run.
As for my customer estimate, I don't have a feel for how many they might land this quarter, other than to say "a lot," which is why the 47 number. Nobody else is guessing that high, but if you believe a company's growing at 75% and has a significantly larger sales force selling than the previous quarter, then maybe the number isn't so outrageous. We'll see. |
