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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: Ben Wa who wrote (5289)	6/25/2000 3:04:00 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 19428

Amzn can't deliver u that "data", right? I have a small native slave who reads and tells me the stories when I'm getting blind (that's the result from using CRTs for the last 20 years....).

To: Ben Wa who wrote (5289)	6/28/2000 10:53:00 AM
From: Sir Auric Goldfinger	Respond to of 19428

POSO: Auric Versus the August Research firm of Sanders Morris Harris: 02:35pm EDT 6-Jun-00 Sanders Morris Harris (Research epartment 800/423-96) PROSOFTTRAINING.COM: STRONG 3Q RESULTS; RAISING ESTIMAES; REITERATE BUY ProsoftTraining.Com (POSO/NASDAQ): Strong Third Quarter Results; Raising Estimates For Fy2000 & 2001; Re-Iterate Buy David Yuschak (713) 250-4234; David.Yuschak@smhhou.com June 5, 2000 Industry: e-Learning Recommendation: Buy ------------------------------------------------------------------------------- Price: $13.3/8 Price Target: $22 Type: Operating Results ------------------------------------------------------------------------------- Estimates (July) 1999E 2000E 2001E Curr Prior Curr Prior Curr Prior Investment Profile: ---- ----- ---- ----- ---- ----- -------------------------- EPS (Diluted) (0.91) $.06 $0.03 $0.23 $0.11 Share Base(MM): 21.6 P/E: NM NM NM Market Value($MM): 289.0 % EPS Change Cash($MM): $4.5 Div. Rate: 0 0 0 Lg Term Debt($MM): 0.0 Div. Yld.: Nil Nil Nil Preferred: 0.0 Ent. Value($MM): 289.0 % Leverage: 0.0 Inst'l Ownership: 32.5% Dly Trading Vol.: 140,000 Price Range (52 wks): $29.88-$2.00 Erngs./Share 1999A Prior 2000E Prior 2001E Prior ----- ----- ----- ----- ----- ----- Q1 (0.25) 0.00A $0.04 $0.01 Q2 (0.23) 0.00A $0.04 $0.01 Q3 (0.39) 0.02A $0.01 $0.07 $0.04 Q4 (0.03) $0.03 $0.08 $0.05 ------------------------------------------------------------------------------- KEY POINTS: * Better than expected sales and earnings led by strong top line growth for certifications. * Certification revenue for the quarter is at level we had not expected until the fourth quarter of fiscal year 2001. * Better than expected sales and earnings led by strong top line growth for certifications. * Receivables up sharply reflecting strong April; payments from three major blue-chip accounts not received until early May; but down sharply since the end of the quarter. Third Quarter Results Continuing the trend of strong sequential quarter-to-quarter growth, ProsoftTraining.com reported fiscal third quarter results that were better-than-our forecast. Total revenue increased 136.5% from a year earlier and was up more than a $1.0 million from the second quarter. Sales were almost $0.3 million higher than our forecast with certification revenue accounting for the difference. Certification revenue of $0.9 million was up 545.0% from a year earlier. We did not expect certification revenue at this level until the fourth quarter of fiscal year 2001. Test re-takes were high in the quarter. Sales training revenue, up 87% from a year earlier, was $0.2 million higher than our expectations but was offset by lower than expected sales from courseware. Gross profits were $.2 million higher than our forecast with certification sales accounting for an important part of the higher-than-expected results. Improved productivity in training sales also aided the gross margin, which was 150 basis points better than our projection. SG&A expenses were modestly lower than our forecast. The combination of these factors produced operating profits that were $0.27 million better than our expectations. The only negative to the quarterly results was a $1.5 million increase in receivables over the second quarter. The company indicates receivables were down to 58 days at the end of May as three large payments from blue chip quality companies were received earlier in the month. A strong April was also a factor in the increased level of receivables. The Outlook Based upon the better than expected third quarter results we are raising our estimate for fiscal 2000 (from $0.03 to $0.06) and 2001(from $0.11 to $0.23). We are raising our sales forecast by almost $4.0 million, lowering our gross margin expectation from 54.1% to 50.1% and lowering our ramp-up of sales and marketing expenses. The difference reflects a faster build up of courseware spending which is reported in the company's cost of goods. POSO's spending for courseware, although less than 10% of sales, still represents a significant percentage of the company's sales. It is the company's research and development expenditures. As sales build up the gross margin has the potential to reach 55%. Excluding courseware expenses from the cost of goods sold would produce a gross margin that more closely resembles a software company's gross margin. Valuation It will take time for valuation benchmarks to develop for emerging growth investments, including ProsoftTraining. A couple of key variables (namely sales and operating margin increases) however, should help boost the POSO share price as it establishes operating and valuation benchmarks of it own. Free cash flow should also boost valuation over the next eighteen months. We believe that revenue growth will come from its channel partners as they boost CIW product sales. Currently, sales productivity is low at most channel partner outlets. At the same time, demand for Internet-trained individuals is increasing exponentially. In addition, with Y2K issues no longer a spending problem (it has been estimated that over $200 billion was spent for that event), IT managers are now faced with recruiting and retaining qualified IT individuals in a very tight labor market for these skills. Spending, particularly for training, will be increased to help solve the problem. A preview of that potential surfaced in January when POSO produced a record month. The strength of POSO's sales in the third quarter suggests that spending for IT training remains high. The gross margin is expected to climb sharply as more courseware, as a percentage of sales, is sold through POSO's B2B channel. The gross margin on these sales is in excess of 90% -- akin to software gross margins. Our fiscal 2001 model has the operating margin reaching 16.2% in the fourth quarter. While we do not have a 2002 model, we believe the operating margin should climb further as sales and marketing expense growth abates from its rapid 2001 rate. Longer term, the operating margin has the potential to reach the 25%-30% range, in our opinion. Finally, with more than $5.0 million of earnings in 2001, we believe POSO will begin to benefit from its $50.0 million federal tax loss carryforward. With no long-term debt and little capital spending to support its infrastructure, ProsoftTraining should produce operating cash substantially greater than its current internal needs. Investment Rating and Target Price We like companies that demonstrate the ability to come back from adversity. Management is much stronger for the test. ProsoftTraining is such a company. Management was long a strong believer in its product line. Its only fault was the distribution system it was using to bring the product to market. With that issue settled, we believe the company has positioned itself for several years of strong sales, earnings and cash flow growth. Our target price of $22 is based on the level the stock reached when it made several announcements earlier this year. Recovery to that level should come, as those contracts become productive. We are initiating coverage of ProsoftTraining with a BUY rating and a target price of $22. Copyright 2000 Sanders Morris Harris. The study herein is not a complete analysis of every material fact respecting any company, industry, or security. The opinions expressed here reflect the judgement of the author at this date and are subject to change. Sanders Morris Harris is a market maker of ProsoftTraining.com. Facts have been obtained from sources considered to be reliable, but are not guaranteed. Sanders Morris Harris, its officers, directors, and/or employees may have an interest in the securities of the issue(s) described herein and may purchase, sell, trade or act as market maker while this report is in circulation. 600 Travis Suite 3100 Houston, Texas 77002 (713) 250-4263 First Call Corporation, a Thomson Financial company. All rights reserved. 888.558.2500