Just finished listening to the cc and mgmt made a reasonable case that they were really moving forward. Tone was a little defensive, same thing with the Q&A. They did say they expected s/w sales to increase something like 20% in coming quarter(YOY), but, this would be pretty much flat sequentially. They considered this a very "conservative forecast" and were doing so because of uncertainty about the economy and the exposure that so many of their customers and prospects have to the retail/consumer sector. They were forecasting a mild recessionary environment through mid-year with a pick-up in economic activity in the 2nd half(every cc I've listened to so far this month has had the same story, they must all read the WSJ and take their economic forecasts from its editorial pages).
At any rate, the frustrating part of the cc was their continued references to "driving the company towards profitability" rather than when they would actually be profitable. This has been the line from the company for more than a year. Given their s/w sales and the 96% gross margin they have on them(compared to 8% on platform sales) its pretty incredible that they would still not be profitable. This past quarter they had $62M in s/w sales which means $59M in gross margin. But, expenses keep ramping faster than GM. When are they going to get a hold of this?
Also, the refused to answer any questions about sales productivity, number of reps at quota or productivity of all the new hires in sales this past year. Since this has added a huge expense to the company I really don't understand why they won't talk about how effectively its been going.
They did say that all the financial problems at QNTS have been helping them as prospects worry about QNTS viability.
Overall, I'm not quite sure how these folks make out as a standalone company. Presumably, they have somebody in charge who can do a little math and figure out that they've got to get expenses throttled down. They just can't keep having them exceed GM growth.
On the other hand, when you look at their balance sheet and you look at the level of s/w sales that they have they would seem like a very tempting takeover target for somebody bigger. The stock is $8, they've got $4 cash, book value of $6.5 and with $300M in s/w sales next year that's almost $6 in s/w per share. It seems to me that a larger company would be able to leverage their existing sales force, reduce ASPT's overhead in sales, admin, marketing, etc., and quickly turn that $6/share in s/w sales into a very nice profit center. A buyout at $15/share would come out to about $12 after cash and debt were minused out. This is only 2/x their s/w sales and gives no value to the rest of their business(which could be spun off).
Bottom line to me is that ASPT seems iffy as a standalone, but, very attractive as a buyout. |
