Dain Rauscher Part 1
Thanks for the Dain Raucher's review.
His notes follow my notes of the CC faithfully, with one or two additions and two apparent mistakes. I assume he got the additional information from private conversations.
- higher interest income favorably impacted EPS
this was $1.2 million - if it was calculated as part of the EPS, then the revenues from operations compared to last quarter were that much less: last quarter the interest was on about $30 million:
- and cash and equivalents totaled $82.2 million:
he appears to have made a mistake here, as I understand it; the cash was $82.2 million but the short term securities (which are cash equivalents) were $33 million: so cash and equivalents were $115 million:
- Repeat customers generated 53% of total revenue (vs. 37% last quarter): considered on it own, this is a healthy figure showing that the company has developed strong renewable sources of income: but in full context, it is not as favourable as it first appears: part of the increase in percentage is due to the fact that sales to new customers was down:
- International revenues were 16% of total sales, vs. 36% last quarter, mainly due to a slower-than-expected ramp-up of joint ventures in Japan: this was not mentioned in the CC. In 1Q there were 3 big wins in the UK, as well as wins in Asia. It would appear that in 2Q both geographies were sluggish. Most were expecting strong progression in international sales and this figure is disappointing and contributes to the "shortfall" in some of our expectations: I would have appreciated a comment on this in the CC. For example, is there a strong pipeline?
- Net Perceptions added 22 new license customers, bringing the total to 210; an apparent mistake based on the CEO's statement that there were "more than 210": the 22 were added to 191 bringing the total to 213:
- ASP revenues represented only approximately 2% of this quarter’s business, but a higher percentage of bookings. this appears to be his way of making the point made by the CFO using different language - that the 6 new ASP customers were not fully reflected in the revenue numbers: I did not fully understand this point, and in context, took it to mean that because of the way in which the ASP is priced, the revenues for some of the initial installations would show up in 3Q and, in addition, each of these 6 (and all ASP customers) will be paying a monthly fee for 6-12 months:
- Three partners (i2, Xchange, and Vignette) accounted for the bulk of indirect sales from among 31 total resellers. In the 1Q VIGN represented 7% down from double figures. It would be interesting to know where it is now: the strong upward trend in percentages from indirect is very healthy, but it is a potential cause for concern that only 3 out of 31 partners contribute the bulk: it does reinforce concerns that most of the partnerships are not yet productive:
- Going forward, we expect the company to continue this effort (indirect), especially as it broadens its focus to non-retail markets. This was not discussed in the CC. However, the company did talk about seeking acquisitions to diversify away from customers in retail. But the analysts comment could be interpreted to mean that NETP is strengthening its focus on indirect (or wholesale sales): I think this is a very progressive step in the business model.
- We see two near-term product catalysts for Net Perceptions. First, we believe the recent introduction and quick customer wins of the ASP-based Intelligence Channel offering bode well for revenue growth and visibility during the next several quarters. Targeted at small- and
medium-sized businesses without analytical infrastructure, Intelligence Channel is expected to begin generating recurring revenues in earnest in the September quarter. this was not explicitly discussed in the CC: although the CFO and CEO made two or three remarks to the effect that the "pipeline" was very strong: also,the ASP's just got going in 2Q and not for the whole quarter. A large part of its target market is small dot.coms or small retailers, and many of them will be gearing up for the Christmas season:
- Second, the upcoming product Personalization Manager, is on track for a December-quarter release. We expect this
product, designed for multi-channel retail operations and targeted at senior product managers, to provide incremental revenues beginning in the March quarter. this amounts to an "announcement" - the company has never given any news of this product and it was not discussed at the CC: while the revenues will not happen until 1Q, news of any new product is well-received by the market because it shows the path to continued growth in the sources of revenue: I suspect it will be announced in 3Q and revenues will flow in 4Q: |
