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Technology Stocks : Hello Direct (HELO) - an overlooked internet beneficiary -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Bob who wrote (142)	4/15/1999 4:43:00 PM
From: Sid Turtlman	Respond to of 153

Dr. Bob: 1) If HELO sold through dealers then yes, a rise in A/R faster than sales could well indicate "stuffing the channel". But there is no channel to stuff here. HELO sells direct ot the end user. In the case of sales through the catalog and the internet, people pay with a credit card. The ratio of A/R to sales should stay constant there. Outbound telemarketing, though, does create a receivable, because those customers are corporations who pay a month or so later. If you note the press release, sales from outbound telemarketing grew especially fast this quarter, and that should explain the growth of A/R. 2. Yes, options do cause dilution, and the company has been criticized for giving out too many of them. I will probably vote against the option plan on my proxy. Since I own considerably less than 51% of the stock, I fear my vote might not be decisive. 3. I think the company is finally focusing on what I have suggested all along, to work on sharply reducing catalog mailings relative to sales. Each catalog costs a good $0.50 to produce and mail, so at a 28 million of them per year rate, HELO's income statement is whacked with an expense of more than $2.60 per share. Every catalog now blazons the website address all over it, to help drive people to the site. Internet sales tripled in the quarter. I can easily see a few years from now that expense down to maybe $1.00 per share, with the difference going into operating earnings. That would create tremendous earnings growth, even if there weren't good top line growth. Toss on the likely growth in sales, and you get some pretty fancy EPS estimates, even with all those options outstanding. In the mean time, SG&A will actually rise some more first, as the company is spending heavily on upgrading its infrastructure and systems. At some point reasonably soon the benefits of this spending had better manifest itself. If, by the end of this year we don't start to see some noticeable drops in SG&A in dollars, not just percentage terms, then management is not doing its job right.