Listened to the conference call - reasonably informative. As usual for Ault, more open than most companies. They answered almost all of my questions (even when I didn't ask them). The bottom line is that things look pretty good for sequential growth, but not phenominal:
1) High margin switching power supplies (used for cable modems) and battery chargers grew from 44%(?) of revenues last year to 54%(?) of revenues in the last quarter.( '?' indicates the numbers are ball park since I was busy writing and so didn't get the numbers exactly)
2) Low margin transformers dropped from 39%(?) to 29%(?) of revenues over the last year Q/Q.
3) Expect LZR electronics to be immediately accretive, and partly via sales through the Ault channels, expect to increase its revenue to $10M in 99 (wasn't clear whether this was fiscal or calendar, but either way that is a good acquisition since they had revenues in the $6M range before acq.).
4) Although Ault is hoping for more acquisitions, they are being picky. Many of the companies out there lack special technology, good customer accounts, ... .
5) Even though revenues and gross margins are up from last year's Q2, the earnings were down because in part they are spending more on developing relations in China, (which they expect to become useful relatively soon - they said when, but I couldn't write fast enough.)
6) Cable modems are continuing to ramp up and are now at 5 or 6 thousand per week (scribe's note - at about $17 per modem from past press release). Their customers are forcasting 11 thousand per week in Ault's Q4 (which is as far out as Ault thinks is being forcasted by them).
7) ASDL modem power supplies shipment are negligible right now, but are expected to become meaningful in Q4.
8) The reason for the sequential fall in Q2 revenues was primarily that the cable modem customers pulled a lot of Q2 orders into Q1, but did not do the same this quarter. (Scribe's notes - This is, of course, a double whammy. It lowers Q2 and boosts Q1. Also, although it wasn't said, this may have been due to a need to build an inventory at what was essentially the start of new product line?)
9) Expected EPS for next quarter is between 0.13 and 0.15.
In conclusion, things are still pretty good, although not quite as good as I had hoped. Note that by the end of the calendar year for cable modem sales alone they will probably be shipping in excess of 15 thousand cable modems per week which adds up to $3.3M per quarter of higher margin items. That is is more than 25% of current sales. Not too bad.
Clark |
