Here are my notes from the 2/28 conf call FWIW:
New customer in Qtr: Philip Morris
Expenses are up approx 500K on an annual basis due to buildup of sales & marketing infrastructure, including the Gartner Group which costs 150K annually but is well worth it. Sales commissions were also unusually high this quarter due to Int'l vs Domestic split.
Blockade acquisition will positively impact cash flow in the next quarter.
Revs of 4.1M for 6 months reflects 30% growth over prior year.
They ackowledged the quarter "disappointed" but insist they have not lost momentum. A few large sales did not close in the quarter but they expect these to close in the current quarter, and insist the sales have not been "lost."
Profits in Q2 were adversely affected by the Blockade acquisition, by about $50K. Blockade will add $2M Revenues annually, and approx $300K income. However, GAAP will not allow PRGF to fully reflect the benefit of the acquisition during the first year (something about having to reflect the presumed cost of the acquired sales).
They had their first sale by partner Microsoft, of a product developed with Microsoft for single-sign on capability. MSFT has been slow to roll it out, but appears to be pushing it harder now.
Overall, employees at PRGF have never been more optimistic or enthusiastic.
Questions came from Iroquois Capital, Malt(?) Partners, Merrill Lynch and others.
Licenses were 70% international this qtr, which led to the higher commissions. Domestic licenses have 10% commissions, Int'l have 50% commissions. The usual mix is about a 50% split Int'l vs Domestic.
Average sales size this year will be approx 2x avg sales size last year, which is where much of their organic reveue growth is coming from.
Presenting at Wall St Analysts Forum March 1.
Government is difficult to sell to, but has an incredible need for security software.
PRGF has rec'd excellent feedback on their products. Gartner Group says PRGF is one of the best-positioned companies in the managed file transfer space, which is in significant demand. There are many companies who have a need to become an alliance partner with someone like PRGF (ie imbed PRGF's software products). Expect no deals until Aug/Sept however.
PRGF wil be on Gartner site in late March. They expect good exposure and better quality of customer prospects from this investment.
One single sale that didn't close in the past qtr could have changed the qtr completely. PRGF can ship a $10 CD and receieve $500K, ie margins are very good.
Believes the stock could easily trade 2x to 3x its present price based on today's fair value.
Avg size of software sales: New $75K, Add-on $15K. Expect new sales to average over $100K this Qtr.
Still expect $9.6M revenue for year ($4.1 first 6 months) including Blockade. Expect $600K or better for net profit for year (note: they show $88K for the first 6 months, so to meet projections the last 2 quarters will have to be substantially better ).
Cash flow remains very strong, well over $2M annually.
Key milestones investors should watch for:
Accretive acquisitions
New version of SIFT with strong control capabilities for the customer
Close some large license agreements, much larger than average. The license oportunities on the table are substantial.
R&D will decrease 40% this year, since the product is mature and stable.
Expect 50% revenue growth organically, 100% including acquisitions and alliances. |
