ALL: Earnings page for RACE updated. Loss of $.36 assuming that there are $1.0 million in Be There sales Jan-Mar. Subtract $.01 from earnings for every $100,000 below this mark.
**** 3rd Q 1998 Earnings estimates. *****
See my previous posts at:
exchange2000.com
exchange2000.com
exchange2000.com
The problem with the computations for 3rd Q 1998 (end Mar 31, 1998) is the figure which gets put in for revenues. After that it is relatively easy. So the estimates will be computed based upon a given revenue base and subject to changes in the Be There! revenue estimates.
The company has warned that the custom modem business contracts are expiring and that its expenditures on the Be There! product line are (and must be) out in front of the corresponding revenue. Sales will be the key. Here are my new earnings estimates for the 3rd Q.
This number crunching is based upon the companies press releases, recent 10Q and 10Ks. As always- I welcome critical analysis and discussion of my estimates. It is the only way to improve upon them. My most recent updated earnings estimates are based upon the following formula- checked against the recent earnings reports:
Gross profit margin has been approx 30% for the recent quarters. We will assume a historical 30% profit margin on network multiplexers and traditional modem business.
The equipment used by individuals accessing the Be There! system (except for the servers which have had a significant price reduction) will probably have a profit margin comparable to other unique technology- ie approximately 70% gross margin. Hence, for Be There! system sales- it is likely that the overall gross profit margin will be about 50% (until ramped up to a decent volume) rather than the 30% which they have been achieving in the traditional business.
The efforts to initiate BT! sales are likely to be successful enough to make $1.0 M in sales this quarter. The sales have been slowly increasing in recent quarters and they had approached $150,000 last quarter before the resellers took over.
During recent quarters, operating expenses were about $3M. I would expect that item to remain in that range due to costs associated with the launch of the Company's new Be There!(TM) Personal Multiplexer product line. Although some of the sales costs have now been transferred to third party vendors of the product, it is likely that operating expenses will still come in at about $3,000,000 per quarter.
l.) $1,000,000 sales * .30 - the historical gross margin (before SG & A)
$ 1,000,000 sales * .50 - the Be There! estimated gross margin. Hence,
3rd Q $2,000,000 total sales...with a gross margin of $800,000.
2.) Subtract SG & A ($3M)
Estimated loss = $2.2M
3.)Tax rate 0%- see 10K for year ending June 30, 1996.
4.) Divide by 5.9M shares (gone up).
3rd Q 1998 loss is estimated to be $.36 per share.
These will not be bad earnings, if acheived. They will show progress in sales and earnings. The company has delayed its financing package of $3.0 million because they anticipate improvements to the share price. (See most recent 10 Q). The company's prospects, the sales trends of the company's products and the quality of the company's management play a large part in the stock price of an emerging company.
The SCREAMING BUY rating is reiterated on RACE. A loss of the total investment is possible- should RACE not succeed, but the risks are offset by the prospects of a 1000% (or greater) advance. (Still ONLY 6 million shares will exist even after the recent financing agreements).
WHL |
