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Strategies & Market Trends : Gorilla Game Investing in the eWorld -- Ignore unavailable to you. Want to Upgrade?

To: Bruce Brown who wrote (477)	10/20/1999 11:57:00 PM
From: James Sinclair	Read Replies (1) \| Respond to of 1817

Would you mind running the following criteria from the 10-Q on Checkfree for us just so we can get in the habit of looking at actual financials of Godzilla candidates for comparison's sake? OK, here goes. I'm going to have to bend some of the definitions a bit, keeping in mind that Checkfree doesn't really SELL anything, it gets paid by subscribers and billers for processing transactions. BTW, I'm going to be working from data provided in their annual report that just arrived in my mail box this week. They have an earnings release coming up in the very near future, and if we decide I interpreted the measures correctly, I'll try to update at that point if folks are interested. 1. Sales growth in excess of 15% over the previous year. Rather than sales growth, I will look at revenues from processing and servicing, which seems to me to be the closest analogy in this business model. 1998: $159M 1999: $201M 26.4% growth 2. Gross margins above 50% (and holding steady or rising). Looking for a good margin analogy, the report lists the 'cost of processing, servicing, and support'. Seems like if I compare this to the revenue generated by said processing, I should having something close to gross margin. 1998: ($159M-$130M)/$159M ---> 18% "gross margin" 1999: ($201M-$147M)/$201M ---> 27% "gross margin" Perhaps a comment here. Checkfree has been investing very heavily in building up its infrastructure to support very large volumes of transactions. With somewhere between 3 and 4 million current customers, they have resources in place sized to support 30 million. I think if you look at the trend from 98 to 99, you see that as the company is able to spread its fixed infrastructure costs across many more transactions, the "gross margin" figure can move up pretty quickly. 3. Cash savings that amount to 5 times more than long-term debt. Cash and cash equivalents: $12.4M Current portion of long term obligations: $ 1.6M Ratio: 7.75 4. Inventory that is not growing as fast as sales over the past year. I'm stumped on this one. I have no clue what category in the financial report would correspond to inventory. I'm going to have to settle for an 'N/A' here unless someone else has a suggestion. 5. Receivables that are not growing as fast as sales over the past year. 1998: $33.0M 1999: $45.7M 38.5% increase BTW, almost all of the receivables are listed as 'trade account receivables'. If there are any accountants in the audience who wouldn't mind helping out an uneducated engineer, can you tell me what a 'trade account' represents so I know if I really care that its growing faster than sales? Scorecard? 1. Yes 2. No, but very fixable 3. Yes 4. 'N/A' (Seriously, give me some help here!) 5. No Actually, the metric that the company seems to focus on is subscriber growth. They've gone from 225K in '95 to over 3M in '99, with a goal of reaching 5M by the end of next year. What will be really interesting during this month's conference call will be if they're able to talk about how many new subscribers have been brought in through Yahoo! since it went live earlier this quarter.

To: Bruce Brown who wrote (477)	10/22/1999 11:12:00 AM
From: gdichaz	Read Replies (3) \| Respond to of 1817

Bruce: Re B2B: Seems like many of us here suffer from the flip side of Peter Lynch's idea of investing in what we know. Many of us do not know much about or have personal experience with Business to Business e commerce. Therefore while it is possible to run the Icarus numbers and check Fool criterea on B2C stocks such as EBay and Amazon as you have done so carefully and thoroughly, this is more difficult for B2B companies. Many of us are just not familiar enough with them to be comfortable doing that in the case of individual B2B companies. So far I have stuck to the incubators such as SFE, and ICGE primarily for the reason that this means I can ride on their expertise so to speak. What do you suggest we can do here to stimulate more Icarus scoring (and checking against Fool criterea) for B2B companies? Cha2