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Technology Stocks : EXLN - Excelon -- Ignore unavailable to you. Want to Upgrade?

To: Bob Trocchi who wrote (400)	4/12/2000 11:56:00 AM
From: Bob Trocchi	Read Replies (1) \| Respond to of 811

I did not realize it, but I scooped off with a double 00 post number. That means good luck doesn't it??? Go EXLN Bob T.

To: Bob Trocchi who wrote (400)	4/12/2000 9:11:00 PM
From: hasbeen101	Respond to of 811

Bob, your post was right on the money. The picture painted 1000 words. Of course investors view EXLN and VSNT as giving them exposure to the same economic factors. If we ignore the ODBMS side of the business (which a lot of people seem to wish we could do), we have a very small startup with great technology and experiencing high growth from a zero base on B2B tools trying to compete against 800 lb gorillas like Oracle. And as you very rightly point out, the street needs to see real growth (eg. 80% for the whole company revenues) and/or real earnings (eg positive and growing earnings over 12 months).

To: Bob Trocchi who wrote (400)	4/14/2000 3:06:00 PM
From: Bob Trocchi	Read Replies (1) \| Respond to of 811

Just think some more abut EXLN's valuation now that we have some solid Q1 data. I have taken some time to digest the latest Q earnings and have drawn a few conclusions. I would appreciate others to comment on my analysis. I really wish I know more about their business model and pricing to be able to do a better job however, people ?on the street? I suspect will look at EXLN in a way very similar to what I have done. I will also first state that the Q1 results are good, not GREAT, but good. My objective in looking at these results are to come p with a potential full year projection for 2000 and from that try and determine a potential stock price/valuation. My comparisons were with Q1, 99. If I find the time I will make a comparison with q4 99 and see if I draw any different conclusions. Some people will object to looking at Q1 99 because this is a new company now BUT, the BULK of the revenue and associated expenses are from the ?old? company. Thus, comparing with q1 99 isn't such a bad idea. Comparisons and Conclusions? Revenue: SW Revenue up 20% Service Revenue up 41% I am assuming that a big portion of the Service Revenue is consulting based. Service revenue does not carry a good margin when compared with SW revenue and if consulting revenue keeps growing faster than SW revenue, this will hurt margins and profits in the long run. Note that the Cost of SW is only 6% of rev. and Cost of services is 54% of Service revenue. If Service Revenue keeps growing faster than SW revenue, the current 74% Gross margin for the company as a whole will drop. This will demand that expenses drop or there will never be a profit! On the positive side, the cost of services as a % of service revenue has dropped from 61% in Q1 99 to 54% Q1 00. I will look for them to continue to drop this number in the future however Consulting Services being a people oriented business, it is very hard to scale and achieve increased margin leverage. Operating Expenses: 80% or Rev. in Q1 00, 90% of rev. in Q1 99 The trend is great but the overall totals are awful. Included in the operating expenses are R/D which remained at the 18% of Rev. and G/A which was held flat in real dollars and dropped to 9% from 11% or sales in 00 vs 99. The marketing and sales costs are the ones that are a problem. I know that you need to build a sales force, I know that you need to increase marketing. This however is the area that will be the biggest problem to achieving sustained and growing profitability. With the potential of Gross Margins going down from the current 74% and Operating expenses at 80%, well you see you have a 6% negative contribution! Today, the stock market wisdom is ?Reality Based Expectation.? Translated that means predictable earnings. IMO, however, this is the area that offers some real hope. As Revenues grow, Marketing costs can be scaled and will drop as a % of total revenues. It will not happen overnight however. I have taken all this data and put it into a spread sheet and tried to project full yr. 2000 results. I will not bother to put this all in here but I have come up with following end targets: Revenue. $77 M This would represent a 28% yr. over yr. growth. The split I have forecast is SW revenue at $45 and Services Revenue at $32. I have forecast some improvement in gross margin in the Services area over the next three Q?q such that the full yr. GM for the whole business comes out at 77% I am hoping they can reduce the full yr. marketing expenses to 52% of Rev. and total operating expenses at 68% of Revenue. These are all HARD management execution issues IMO. If they can achieve all that I have forecast, the earnings for the full yr. will come to 0.25/share. So I really think they can do this. Not really but I would love to believe they can. If and that is a big if, they achieve an earnings of $0.25/sh. a stock price of 10 would give a P/E of 40. Perhaps not unrealistic in today?s environment. I expect however that a full yr. of earnings or $0.15 will become more realistic and a P/E of 66 based on forward potential earnings. I fully expect others to believe that a stock price of 20+ is shortly in the cards. I truly wish it happens as I am long and am staying until this plays out with some clear direction. Bob T.