Conference Call Notes - 02/12/98
The Solomon Page conference call was upbeat and very positive. Mr. Lloyd Solomon started the call off by welcoming all participants and proceeded to explain that these forums were established to forge strong communication ties with shareholders, analysts, investment bankers and interested investors. He set the stage to review the quarterly results and growth initiatives that will have a profound impact on revenue.
1st Quarter 1998 Results
Eric Davis, CFO, reviewed the financial results for the 1st quarter. The actual numbers may be found in the recent news release dated 02/10/98. The previous quarters must be restated due to the adoption of (SFAS) No. 128. The effect of this change will improve past eps performance and allow meaningful comparative analysis. Mr. Davis revised his revenue projections for 1998 upwards. Due to internal growth initiatives now underway and a larger tax liability he reduced net revenue projections modestly.
1998 Original Pro-forma
Revenues - $40-$42 Million
Net Income - $1.7-$1.9 Million (After Tax of 40%)
EPS - $0.33-$0.37
1998 Revised Pro-forma
Revenues - $42-$45 Million
Net Income - $1.5-$1.7 Million (After Tax of 45%)
EPS Basic - $0.29-$0.33 (5,129,285 Shares)
EPS Diluted - $0.25-$0.28 (6,137,667 Shares)
1999 Pro-forma
Revenues - $55-$60 Million
Net Income - $2.4-$2.7 Million (After Tax of 45%)
EPS - Unknown due to effect of warrants, options and weighted average of shares calculation.
Internal Growth Initiatives
1) SOLP has added 17 new staffing consultants which are expected to positively impact revenues in 4-6 months. No actual revenue projections were made.
2) The new office located in San Jose is expected to expand staffing segments and grow the Northern California region.
3) Increase market share and account penetration geographically in major markets by adding new clients through solicitation efforts. i.e. direct mail, additional staffing consultants, etc.
4) Improve communications and information systems network to enhance profitability.
5) Provide training for new recruiters/staffing consultants.
Warrant Purchase Program
As announced SOLP has completed the warrant repurchase program by buying 1 million warrants via private and open market transactions priced from $0.70-$1.00 utilizing a line of credit which conserves cash. The total cost of this program was slightly greater than $1 million. This line will be repaid over the next few years. IMHO
the line may be repaid through the eventual warrant conversion once the stock price hits $4.50 or above.
Dilution
The success of the warrant repurchase program has lowered the effect of any such dilution. There is still some possibility for dilution if the stock price remains at or above $4.50 for some period of time. I believe that period to be 30 or 90 days. Of course any warrant conversion would mean more capital for SOLP so that they can grow the
business and pay down the line of credit.
Full NASDAQ Listing
SOLP meets all listing requirements for full NASDAQ listing except the $5.00 stock price qualification. Once the stock trades at $5.00 or above the listing request will be filed.
Institutional & Inside Ownership
Lloyd Solomon addressed this issue in his opening remarks. He indicated that an aggressive institutional investor marketing campaign has been initiated. Specific steps were not given. Emphasis is placed on buy side investors and sell side analysts. Additionally he stated that Solomon Page management will be encouraged to purchase
SOLP stock. IMHO this would have a positive affect.
Mr. Solomon stated that in his opinion the stock is undervalued based on industry valuation of peers and revenue/earnings growth which is 20%-25%.
I believe that I heard at least two institutional investors represented. If my notes are correct they were Brewster Asset Management and Newberger. The questions asked be each of these individuals focused on future growth and clarification of the eps
calculation.
Note: Insiders own approximately 35% to 37% of the company's stock.
SOLP Web Site
Mr. Solomon was congratulated on the update or enhancement the corporate web site with respect to investor information, etc. solomonpagegroup.com
I have verified that the site now includes links to financial information providers such as Datek. There has not been any major overhaul of the site.
Author's Unsolicited Opinion
IMHO, Solomon Page appears to be a healthy growing franchise that is adding business lines, exploiting opportunities, building internally and forging relationships that should continue to improve revenues and earnings for many years.
Regards,
Tom |
