Thanks Tom. That's a great article. I'm posting it in full here in case it winds up disappearing from the URL you gave and also for the convenience of others (assuming there are any).
Best,
-KGO
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August 20, 2001
Investing
Ahead of the game
Software provider Basis100 beats expectations
By ANDY HOLLOWAY
More than a few eyebrows were raised when Basis100 Inc., the provider
of e-commerce software for financial institutions (FIs), unveiled a
one-year corporate scorecard at the start of 2001. After all, tech
companies rarely meet expectations these days—and previous missed
product releases, cranky investors and a general market slump had all
conspired to cut the stock (TSE: BAS) down to size. Trading at about $25
in early 2000, Basis100 bottomed out last December at a paltry 82¢.
But the unusual approach seems to be working. The Toronto-based firm
has managed to meet or exceed its own revenue and product rollout
expectations since the release of its quarter-by-quarter scorecard. Gary
Bartholomew, chairman and CEO, says the list of accomplishments and
goals was created to give investors and analysts some guidance and
confidence. It also helped focus the firm on building out its core
transaction fee-based platform, PowerBase.
During its second quarter, Basis100 finally managed to commercialize its
BasisXpress mortgage processing software, with the new BasisXchange
fixed-income trading system ready to go this quarter. In June, the
company added the only major Canadian FI it was missing as a customer,
when Royal Bank of Canada signed to use its HomeBase mortgage
technology. And the firm has also scored big in the US, signing some
1,070 customers to use its automated property valuation technology that
was acquired from California tech firm Solimar.Net last year. As a result,
in Q2, Basis100 achieved its first operating profit, one quarter ahead of
schedule. It earned $100,000 on a record $7 million in revenue—and
reduced operating expenses. The stock also rebounded, climbing to
about $3.50 by the end of July.
But there's still some more game to be played for those keeping score.
Bartholomew says the firm is tracking ahead of its Q3 and Q4 projections,
and he estimates revenue will grow 15% to 20% per quarter until the end
of 2002, which would put annual revenue at about $50 million and cash
earnings in the $8-million area. Basis100 is also now ready to hit up
fixed-income traders through an equity position in CanDeal, whose
shareholders are two tech companies and six FIs that control 80% of all
such trading in Canada. CanDeal members will use BasisXchange as a
trading mechanism, effectively freezing out potential competitors.
Basis100 will also expand its major platforms: BasisXpress will become a
complete consumer credit package; BasisXchange will add other asset
classes such as commercial paper to its T-bills and government bonds
trading capabilities.
Still, investors should keep in mind that the company has failed to deliver
the goods in the past. That led Joey Roa, an analyst at Lightyear Capital
Inc., to initially give it a speculative buy rating, which he upgraded only
after seeing its Q2 results. "It looks like they've turned the corner going
toward profitability," he says. "Basis100 is the only company that has
demonstrated that the transaction processing revenue model works."
On the other hand, Roa doesn't expect the firm to be profitable until fiscal
2003 because of writedowns related to the $24-million acquisition of
Solimar.Net (and the large start-up costs of PowerBase). Roa says wary
investors should look for Basis100 to sign larger Canadian FIs to use
BasisXpress (so far only small firms are using it) and to make some more
headway in the US with the software. But while Basis100 is still a long way
from winning the game, the right players seem to be signing on. If that
continues, the scoreboard might just light up. |
