My estimate for earnings. I am using a very rough method.
Considering all the variables and how little we know it seems to me this is best.
Also since this is rather long, I want to emphasize what to me is probably the most significant fact below.
That is the number of engineers working on year 2k.
This is my estimate of course, based on figures provided by the company, but it clearly shows that impact of year 2k revenues has only just begun.
Here are the figures I am working from.
ÝQtr 3 97 ÝQtr 2 98 ÝQtr 3 98 ÝQtr 4 98 ÝQtr 1 99 ÝQtr 2 99 Ý
------+---------+---------+---------+---------+---------+---------+
T Ý 11.183 Ý 10.484 Ý 11.667 Ý 17.390 Ý 25.020 Ý 25.890 Ý
M/S Ý 5.300 Ý 4.200 Ý 3.200 Ý 3.200 Ý 3.200 Ý 3.200 Ý
Eng Ý 0.000 Ý 40.000 Ý 60.000 Ý 132.000 Ý 240.500 Ý 248.000 Ý
2k-1 Ý 0.000 Ý 1.500 Ý 2.230 Ý 5.870 Ý 10.690 Ý 11.240 Ý
2k-2 Ý 0.000 Ý 0.240 Ý 1.300 Ý 3.420 Ý 6.230 Ý 6.550 Ý
Core Ý 5.883 Ý 4.500 Ý 4.900 Ý 4.900 Ý 4.900 Ý 4.900 Ý
T=total revenues
M/S = Materials/subcontract.
Eng = est. avg # engineers working on year 2k. (slightly revised from previous post on this issue.)
2k-1 = year 2k service revenues.
2k-2 = year 2k CD/database reports
Core = core service revenues.
Qtr 4 98 and on = estimated.
I have somewhat explained elsewhere how I made the revenue estimates.
Since I have assumed core-m/s to be constant the only increase in revenues is coming from year 2k. For 2k-1 I figured it out by using estimated year 2k billing rates x estimated number of engineers per qtr working on year 2k problems And then assumed that 2k-2 would equal the same proportion to 2k-1 as it had in the Qtr. 3 98.
(This is a big assumption.)
Since Tava basically broke even last quarter, in order to figure additional earnings I am going to just look at additional revenue compared to qtr 3 and make a few adj. to figure additional income.
I want to reiteriate that I think the above is a pretty optimistic scenario. (However I have compensated below.)
For qtr 4 98 2k-service revenue estimated increase of 3.64 million.
And 2k-CD/Database report revenue estimated increase of 2.12 million.
According to the company avg. gross margin on core service revenues is around 50%. Since previously I have estimated that billing rates are 27,600 per quarter for core engineers and about 44,000 per quarter for year 2k, I am going to assume a far higher gross margin on year 2k service work. Figure 27,600/2=13,800 cost per qtr. for an engineer. Figure 13,800/44,000=.31.
So I'll figure about 70% gross margins on year 2k service work.
This assumes of course that year 2k engineers are paid the same as core engineers.
.70 x 3.64=2.55 million additional gross income from year 2k service work in qtr 4.
For the CD/Database report I am going to use 80% gross margins.
(This is a guess since I have no idea what the margins are on the database report aspect or what proportion it is of the total.) .80 x 2.12 = 1.7 million additional gross
income.
Add them up and you get 4.2 million additional gross income.
Since Tava has also added some additional sales and administrative people and there will be some training and hiring expenses we need to hack down the gross income some. I would think this would be a relatively small % but lets hack it in half. That would yield 2.1
million/25 million shares =8.4 cents + 1 cent made in base qtr 3 =
9.4 cents.
Now I would think that Tpro must have some tax loss carryover credits so this 4th qtr. would not have to worry about taxes.
If we make this same analysis for the qtr 1 99 I figure.
8.46 * .7 = 5.92 over base qtr 3, 98.
4.93 * .8 = 3.94 over base qtr 3, 98
5.92 + 3.94 = 9.86 total additional gross income over qtr 3.
9.86/2 = 4.93 net income.
.66(after taxes)*4.93=3.25 (I think even here Tava will still be protected by loss carryovers. This is a good question for Scott.
i.e. how much does Tava have in tax loss carryovers.)
3.25/25 = 13 cents + 1 cents = .14 eps. for 1st qtr 99.
When I look at the above I think the year 2k service revenue estimates are pretty good.
I have no idea how to predict the growth of the CD/database report category. If my estimate there is correct, then I would think I have underestimated Tava's earnings since I believe hacking 50% off of gross income on the incremental year 2k revenues is a little harsh and compensates for any overestimate on CD/Database reports.
Please remember this is all just a rough estimate intended to develop a feel for what is possible for Tava.
RS
|
