Number 7494161 Feb 28/04
Now that SAMsys has reported it's first quarter with the deferred
product development costs completely amortized and in the year it
is (again) predicting profitability - it's probably worth a quick
run through to look at what that means.
Several people did that calculation reverting Q1 to profitability
leaving the GP and costs the same which comes out in the $2.74
million area. That is, if SMY had had sales of 2.74M in Q1 with
the same GP and expenses they would have made a profit of a few
hundred dollars.
Two of us posted rough estimates which were higher in the 3.8 - 4.3
million range in sales for Q4 (in order to achieve profitablility).
Both of us ratcheted up the expenses and took down the GP rate in
anticipation that SMY would not retain such a rich GP with bigger
volume and that getting the bigger sales would also involve spending
more on expenses.
Here's an interesting issue surrounding revenues. Exchange rates
and selling prices. It's important to understand how SAMsys is
handling this. It's unlikely that the readers are priced for the
Canadian market and readers are billed either Cdn funds or the
exchange equivelant in local markets. It's also unlikely that SMY
has different prices for the different markets. I think it's more
likely that prices were targeted for the US or UK market on an
initial basis. I'm talking readers. For consulting I would think
it's always quotes in local funds.
So in my mind there are exchange elements here; but, it's difficult
to try to estimate their impact with material accuracy.
Here's an example:
The exchange rates in this weeks economist for Cdn funds is:
UK sterling - 2.50
Euro - 1.68
US - 1.31
If you assume 30% of business Q4 is UK, 60% is US, and 10% is EU,
then the blended exchange rate would be 1.7. This is likely
overstating since the effects of local market rates isn't pure.
These customers aren't stupid or new at this game. However - there
definitely will be some exchange effect. Now that we are moving
closer to where it counts I'll refine the original 130% number I
was using and move it up to 140% strictly for Q4 2004 and Q1 2005.
The GP rate however will remain in the 40+% range for my estimates.
I believe when the big OEM's are finally decided and public, a
material volume component of total sales will stream through them
and I do not see a 50% plus GP from this area.
So to tie it together now that Q1 is in the can of the same year I
am trying to estimate Q4 I'll go with these numbers:
Actual billings to customers in local value: 2,800,000
Revenue reported as a result: 3,920,000 Cdn.
GP: 1,803,000 (46%)
Interest income: 110,000
Expenses: 1,790,000
Net profit/loss: 123,000
Income taxes: 0
Agree with that or not, I now have what I need to slice up the
growth to profitability for the interim two quarters.
The revenue grows 14.35 times in my estimates from Q1 to Q4. Looking
for an equal growth rate I find what 3 numbers multiplied by
themselves gives me this growth rate and it's close enough to 2.44.
(2.44 x 2.44 x 2.44 = 14.52)
So Q2 revenue would be 2.44 times Q1, and Q3 would be 2.44 times
Q2, and Q4 would be 2.44 times Q3. Expense spread differently taking
the 1,665 and growing it linearly to 1,790 in the estimate.
That would look like this with the 3 numbers SAMsys flashes out:
Q1
Revenues: 273
Gross Profit: 147
Net Income (loss): (1,464)
Q2
Revenues: 655
Gross Profit: 353
Net Income (loss): (1,021)
Q3
Revenues: 1,572
Gross Profit: 847
Net Income (loss): (437)
Q4
Revenues: 3,920
Gross Profit: 1,803
Net Income (loss): 123
The last thing that falls out of this is the most basic measure of
cash needs for 2004. Add up all the NP/NL's and you get 2.8 million
of which 1.464 million is already in the can.
So of the cash SMY now has it should only need about 1.3 million to
finish funding the window of net losses ahead before that (supposedly)
closes and becomes a source of cash accumulation over time.
Dissenting opinions are welcome. |
