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Technology Stocks : APSG - Applied Signal -- Ignore unavailable to you. Want to Upgrade?

To: hoopsville who wrote (783)	5/10/1998 8:33:00 AM
From: Mark	Respond to of 884

Mark, I won't be happy with $18+ million revenues. Did you mean $28+ million? Regards, Tom Tom, Ooops ! Yup, well spotted...... I did mean 28. That would be about 17% above the year ago quarter, and would keep the running averages nicely on track. My (corrected) hope is therefore to see - Revenues at > $28m GMs > 37% I hope I didn't give anyone a heart attack :) Mark

To: hoopsville who wrote (783)	5/15/1998 7:22:00 AM
From: Mark	Read Replies (1) \| Respond to of 884

I've now had a chance to crunch the latest Quarter's numbers, and to get my thoughts together about them. Some comments and observations - 1) revenues at $27.7m were right on the button. This maintains APSG's current revenue growth target of 17%. (The TTM value is 4% up compared with last quarter, and compounds nicely up to the stated target !). 2) gross margins were 37.5% and slightly lower than previous quarters. However, this is again right on the button compared with management's previously stated objectives of between 37% - 38%. (The TTM value is 38.7%). 3) net margins (profit margin) were 9.2%, and again better than my hoped/expected target. (The TTM value is 9.4%). 4) commentary was positive in all respects except order levels (more in a moment). 5) inventory levels are up. They are now at about 40% of their "contract cost" level (compared with 28% for a year ago). This in itself may not be an issue (it might, for example, simply mean that APSG were gearing up to make substantial shipments at the start of this quarter, or were launching a new product). However, if anyone gets the chance to answer this in the CC then I'd appreciate some feedback. So, all things considered, it seems pretty positive. However, the market has again panicked. Why ? Well probably because of that order situation. Should we be worried ? Well, here are some specific thoughts about that - 1) APSG's sales cycle is very lumpy - i.e. big orders with infrequent timing. Statistically speaking, a couple of lower than average quarters are NOT in themselves significant. 2) APSG started the year with a stated order backlog of $83m. They also stated that most of this was due for shipment in the current year. 3) If we subtract from this what has shipped so far this year - $52m, and add in the new orders in the same period - $26m, then the order book should now be around $57m. Provided most of this can be shipped this year (it may or may not be due to), then we already nearly have enough sales revenues to complete the year at the target growth rate. 4) Management stated in the commentary that order levels have recently been affected by "budget uncertainties" and "delays". Neither of these sound like permanent problems, and neither sounds like there's any concerns about APSG's products/roadmap. (It would be very interesting to know whether the inventory build up is somehow related to a particular order delay, and whether this situation could soon be resolved). This aspect obviously needs further discussion in the conference call, but may not yet be worthy of the market hysteria ! Mark