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Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: JDN who wrote (18673)	6/17/1998 4:47:00 PM
From: RAVEL	Read Replies (2) \| Respond to of 31646

JDN...Looks nice! Here's what I got....very conservative: Y2K revenues 116.6 Core revenues 35.0 Cost of sales 68.7 Gross Margin 82.98 Gross Margin% 55% Operating expenses SG&A 40.0 SG&A% 26% Depr&Software Amort 2.0 D&A% 1% Total Operating Exp 42.0 Total Operating Exp% 28% Operating Income(Loss) 40.95 Operating Income% 27% Interest & Other income .6 Earnings before taxes 40.385 Income Taxes 15.4 Tax Rate 38% Net Income 25.1 Net Margin 17% EPS 1.00 Shares Out 25 million Looks like we have a difference mainly in SG&A---I built it up for expenses relating to the new consulting practice. I think with all the bright people out there, we could try to put our heads together and hammer our 1 model for the thread. Who knows, maybe First Call will pick us up. RAVEL

To: JDN who wrote (18673)	6/17/1998 7:35:00 PM
From: Richard S. Schoenstadt	Read Replies (1) \| Respond to of 31646

JDN, Having just worked out my own estimates on the revenue side, let me say that I think you are overestimating avg. billing rates. Here is how I figured avg. billing rates. I started with the base revenue in the 3rd quarter of 97. This was 5.88 million. I then used the employee figures in the 10K for the 4th qtr of 97 (figuring little change in that short time period). This showed the following. >>>From 10k --At June 30, 1997, the Company had 318 full-time employees. That number includes 179 engineers, designers, and project managers; 43 wiring, assembly, and fabrication workers; 30 sales persons; 24 service and other technicians and 42 administrative personnel, including its Executive Officers. <<<< I figured that 179 engineers etc. ; 43 wiring etc. workers; and the 24 service and other technicians generated the core revenue for the company. And I figured the engineers earned twice what the others did. (A guesstimate of course.) Adding everything up and dividing I figured that the avg. engineer brought in around 27,600 per quarter and the avg. tech worker 13,800. Now if you take your 1800 hours a year estimate, that's 450 per quarter, divide that into 27,600 you get only $61 dollars an hour. And this is for engineers. The avg. billing rate per all technical employee including the lesser skilled workers would be less. (5.88/246/450 = $53 an hour core business.) I then used these figures to guess how many workers were transferred to the year 2k work. If you look, the drop in core service revenues between qrt 3 97 and qtr 3 98 is just about a million bucks. So I figured that was roughly 40 (36 actually but I used the round number) engineers at 27,800. I also figured based on statements by the company that Tava had added roughly 20 new engineers - i.e. average contribution for the period - during the 3rd qtr. So this totaled roughly 60 engineers working on year 2k in qtr 3 - Jan 1 to March 31,98. Total year 2k service revenue was 2.23 million for that time period/60 engineers = 37,200 per engineer per qtr. Divide this by 450 hours per qtr. and you get $82.7 on avg. per engineer working on year 2k in the 3rd qtr. Since I believe Tava said they were raising rates for year 2k work in future qtrs I mulitiplied by 1.2 (purely a guess) which would equal about $99 per engineer. (This is a question that should be asked of Liolios. I.e. what is the avg. % increase in yr 2k rates for qtr 4 vs. qtr 3. Also what is ratio of year 2k vs. core. Also it would be nice to whether a labor component was involved with the database reports. If so how much. Assuming the total number of engineers was accurate that would increase avg. billing rate.) I didn't do any earnings calculations but my revenue calculation came out to 17.4 million in the 4th qtr and 25. million in the first quarter of 99 and 25.9 million in the second qtr. The small difference between the last two assumed the impact of hiring an additional fifty workers in July but no more beyond that. I used Nachates figures and others. Using that I used the April 30 figure of around 400 as the base on which Tava planned to add another 150 people. I figured 500 by the end of June and another 50 in July. Obviously if Tava continues to hire the revenue could be higher. I also assumed that the CD/database reports category will increase proportionally with yr 2k service revenues. I don't know if this is true or not - it would be nice to get some additional info from the company on this point. But based on this I estimated about 6.25 million in combined CD/database report revenue per quarter for 99. And I assumed core business to be constant. This includes core service, subcontracting and materials. I didn't include any licensing fees. Nor did I include any revenue from subcontracts on year 2k work - which seems to me a possibility. Since I have in the past always overestimated Tava's revenues, I wouldn't be surprised if I have done so again. Nonetheless we should see considerable improvement over the next 2 qtrs - at least. I guess I'll have to do some sort of rough earnings estimate next. RS

To: JDN who wrote (18673)	6/18/1998 8:34:00 AM
From: Richard S. Schoenstadt	Read Replies (1) \| Respond to of 31646

My estimate for earnings. I am using a very rough method. Considering all the variables and how little we know it seems to me this is best. Also since this is rather long, I want to emphasize what to me is probably the most significant fact below. That is the number of engineers working on year 2k. This is my estimate of course, based on figures provided by the company, but it clearly shows that impact of year 2k revenues has only just begun. Here are the figures I am working from. ÝQtr 3 97 ÝQtr 2 98 ÝQtr 3 98 ÝQtr 4 98 ÝQtr 1 99 ÝQtr 2 99 Ý ------+---------+---------+---------+---------+---------+---------+ T Ý 11.183 Ý 10.484 Ý 11.667 Ý 17.390 Ý 25.020 Ý 25.890 Ý M/S Ý 5.300 Ý 4.200 Ý 3.200 Ý 3.200 Ý 3.200 Ý 3.200 Ý Eng Ý 0.000 Ý 40.000 Ý 60.000 Ý 132.000 Ý 240.500 Ý 248.000 Ý 2k-1 Ý 0.000 Ý 1.500 Ý 2.230 Ý 5.870 Ý 10.690 Ý 11.240 Ý 2k-2 Ý 0.000 Ý 0.240 Ý 1.300 Ý 3.420 Ý 6.230 Ý 6.550 Ý Core Ý 5.883 Ý 4.500 Ý 4.900 Ý 4.900 Ý 4.900 Ý 4.900 Ý T=total revenues M/S = Materials/subcontract. Eng = est. avg # engineers working on year 2k. (slightly revised from previous post on this issue.) 2k-1 = year 2k service revenues. 2k-2 = year 2k CD/database reports Core = core service revenues. Qtr 4 98 and on = estimated. I have somewhat explained elsewhere how I made the revenue estimates. Since I have assumed core-m/s to be constant the only increase in revenues is coming from year 2k. For 2k-1 I figured it out by using estimated year 2k billing rates x estimated number of engineers per qtr working on year 2k problems And then assumed that 2k-2 would equal the same proportion to 2k-1 as it had in the Qtr. 3 98. (This is a big assumption.) Since Tava basically broke even last quarter, in order to figure additional earnings I am going to just look at additional revenue compared to qtr 3 and make a few adj. to figure additional income. I want to reiteriate that I think the above is a pretty optimistic scenario. (However I have compensated below.) For qtr 4 98 2k-service revenue estimated increase of 3.64 million. And 2k-CD/Database report revenue estimated increase of 2.12 million. According to the company avg. gross margin on core service revenues is around 50%. Since previously I have estimated that billing rates are 27,600 per quarter for core engineers and about 44,000 per quarter for year 2k, I am going to assume a far higher gross margin on year 2k service work. Figure 27,600/2=13,800 cost per qtr. for an engineer. Figure 13,800/44,000=.31. So I'll figure about 70% gross margins on year 2k service work. This assumes of course that year 2k engineers are paid the same as core engineers. .70 x 3.64=2.55 million additional gross income from year 2k service work in qtr 4. For the CD/Database report I am going to use 80% gross margins. (This is a guess since I have no idea what the margins are on the database report aspect or what proportion it is of the total.) .80 x 2.12 = 1.7 million additional gross income. Add them up and you get 4.2 million additional gross income. Since Tava has also added some additional sales and administrative people and there will be some training and hiring expenses we need to hack down the gross income some. I would think this would be a relatively small % but lets hack it in half. That would yield 2.1 million/25 million shares =8.4 cents + 1 cent made in base qtr 3 = 9.4 cents. Now I would think that Tpro must have some tax loss carryover credits so this 4th qtr. would not have to worry about taxes. If we make this same analysis for the qtr 1 99 I figure. 8.46 * .7 = 5.92 over base qtr 3, 98. 4.93 * .8 = 3.94 over base qtr 3, 98 5.92 + 3.94 = 9.86 total additional gross income over qtr 3. 9.86/2 = 4.93 net income. .66(after taxes)*4.93=3.25 (I think even here Tava will still be protected by loss carryovers. This is a good question for Scott. i.e. how much does Tava have in tax loss carryovers.) 3.25/25 = 13 cents + 1 cents = .14 eps. for 1st qtr 99. When I look at the above I think the year 2k service revenue estimates are pretty good. I have no idea how to predict the growth of the CD/database report category. If my estimate there is correct, then I would think I have underestimated Tava's earnings since I believe hacking 50% off of gross income on the incremental year 2k revenues is a little harsh and compensates for any overestimate on CD/Database reports. Please remember this is all just a rough estimate intended to develop a feel for what is possible for Tava. RS