Yesterday EIN reported revenue of $6.2 million, up slightly from $6.0 million reported for the previous year Q2.
More importantly, Management has re-adjusted its cost structure, reducing overall expenses by 19.1% compared to Q2, 2008. For H1, 2009, the total cost structure has been reduced by 16.3% compared to H1, 2008, while total revenues for the same period have remained relatively flat, with a 3% YoY decline. Cost cutting measures have resulted in positive EBITDA of $0.34m for Q2, 2009 versus a $1.12m loss for the previous quarter, representing a $1.46m YoY improvement. Most of the expense reduction has come in the sales and marketing area.
Investors would typically view cost cutting in sales and marketing as a yellow flag for future sales growth. However, management believes that it has a robust pipeline for H2, 2009 with prospects for another Q4 sales record (for the past 3 years, Q4 has delivered sales and earnings records). With a honed down marketing budget, this is a testament to the quality of Nstein's solutions. According to Management, nearly all of the current pipeline is a direct result of referrals from its current client base. Essentially, Nstein has gone viral among at the "C-level" in its market niche. Investors should view this condition as positive.
Here is a great example of an innovative use of the Nstein platform from the Financial Times Group: Newssift
A robust pipeline does not represent robust sales, it needs to be converted. Macro-economic conditions appear to be aligning to Nstein's benefit. Some of the pipeline is pent-up demand from earlier in 2009, when capital budgets were frozen as the world economy cratered. Feedback from the market suggests more confidence in the economy, and some urgency among major news/information publishers to maximize digital revenues. Capital budgets are un-thawing and digital revenue is a priority. As the economy begins to recover from the world recession, publishers almost universally believe that the print-based advertising model is irreversibly impaired. This belief should benefit EIN in Q4, with some carry-over to Q1 2010 and beyond.
Among the public companies that I follow, Nstein has been one of the most "at risk" in relationship to the world economic recession because its client base was highly sensitive to the downturn, and dependent upon capital budgets. The company entered 2008 with approximately $6.5 million in cash, and appears to be exiting the recession with about $6.0 million in cash. Investors may take comfort that the Company has successfully navigated the recession, and has the resources to continue thrive even if the world is experiencing a false recovery.
To be profitable on a NI basis, the company probably needs to generate about $26 million in sales for the year. It will be close. However, the outlook for 2010 could infer more profitability.
Disclosure: I do not own shares of EIN.
Showing posts with label CMS. Show all posts
Showing posts with label CMS. Show all posts
5/15/09
Customer Pain Seeps into Nstein (EIN.TO) Q1 Results.
First of all, even as its recurring revenues continue to expand as a portion of the total, Nstein generates most of its quarterly revenues from large enterprise licenses. As a result, quarterly results are sensitive to the buying decisions of its prospective customers. During Q4 2008, the company beat expectations as major implementations were initiated, while Q1 2009 is likely to be considered by analysts to be a miss. The lumpiness makes it difficult to forecast results and future earnings performance. This is why analysts prefer stocks with recurring revenue models.
Nstein's Q1 results are impacted by delays in purchasing decisions by its publisher market niche because the sector is under extreme financial stress due mostly to the cratering of CPM rates, and a significant decline in advertising campaigns by marketers. Essentially, publishers were conserving cash during the quarter. In the future, economists are likely to identify Q1, 2009 as the bottom of the recession, which is good news for Nstein, and may result in some performance recovery in the latter half of FY 2009.
As the world economy begins to recover during the last half of 2009, investors may see some pent up performance as delayed CMS investment decisions pile up, especially during Q4, 2009. During the past two years, Nstein's Q4 has consistently performed ahead of expectations.
The Company has $6.7 million in cash and only $0.4 million in long-term debt, so it has adequate balance sheet strength for the remainder of the recession. A focus on recurring revenue by Management, either through business model tweaks, or via acquisitions would also help to smooth out quarterly performance and help to improve predictability on future cashflows.
Nstein's Q1 results are impacted by delays in purchasing decisions by its publisher market niche because the sector is under extreme financial stress due mostly to the cratering of CPM rates, and a significant decline in advertising campaigns by marketers. Essentially, publishers were conserving cash during the quarter. In the future, economists are likely to identify Q1, 2009 as the bottom of the recession, which is good news for Nstein, and may result in some performance recovery in the latter half of FY 2009.
As the world economy begins to recover during the last half of 2009, investors may see some pent up performance as delayed CMS investment decisions pile up, especially during Q4, 2009. During the past two years, Nstein's Q4 has consistently performed ahead of expectations.
The Company has $6.7 million in cash and only $0.4 million in long-term debt, so it has adequate balance sheet strength for the remainder of the recession. A focus on recurring revenue by Management, either through business model tweaks, or via acquisitions would also help to smooth out quarterly performance and help to improve predictability on future cashflows.
3/19/09
Nstein Reports a Good 4th Quarter.
I suppose this is an adjunct to the post that I completed last night and thank you Nstein management for making me look prescient. Nstein (EIN.V) reported its 4th quarter and full-year results. In particular, the 4th quarter results were substantially higher than expectations, probably a full $2 million ahead of my forecast. Net Income was strongly positive for the quarter at $1.35 million or $0.03 per share.
More importantly, the Company was able to generate $0.03 per share in free cash flow. The Company now has $7.4 million in cash along with $6.8 million in receivables and very little long-term debt exposure at $0.5 million. The NAV of the Company could be inferred at $21.9 million or $0.41 per fully diluted share based on the balance sheet ending Dec 31, 2008.
Earlier in the year, performance was a little dicey due to market uncertainty. There was some concern that Nstein's newspaper clients would delay investment decisions as balance sheets were eroded. It appears as though many decisions were delayed until the 4th quarter when a lot of publishers were probably reacting to the freefall in print advertising dollars. Nstein appears to have benefitted directly from "Yikes...do something now!" reactions throughout the industry.
Last year, Q4 performance was also a positive surprise to the market. Big 4th quarters should be better modeled into future forecasts because there appears to be bias towards 4th quarter buying decisions, probably correlated to budget cycles. Notwithstanding, it was a great quarter for the market conditions. Based on reported A/R, Q1 2009 should show some strength as well.
Market conditions should remain very positive for EIN.V for another 4 quarters as its clients scramble online (see previous post). The Nstein semantic content management suite is also well aligned to the next stage of the Internet, which some are calling web 3.0, or the contextual web. So, the longer-term outlook may be considered positive as well, especially as the Company leverages favourable R&D tax credits offered by the Province of Quebec. With a pretty outstanding world-wide client base, a well positioned and patent protected solution, and a proven growth profile, EIN.V may be an interesting target to a larger middleware, content management, or infrastructure player.
With over $7.0 million in the bank, there is a chance that EIN.V itself could begin to roll-up some complimentary solutions providers that can extend its own solutions.
Although Nstein is clearly well positioned, there should be some investor caution. Nstein's client base still prefers to acquire perpetual license software. Although the Company's revenue streams are becoming more recurring in nature, the Nstein still suffers from lumpy quarterly performance, and the quarterly live/die sales cycle due to the perpetual licensing model.
Notwithstanding, investors may still view EIN stock as being currently undervalued and we may see a continued run up in the share price for the next few days. The stock has performed well since the beginning of the year with a 116% increase in the stock price since January 6th.
More importantly, the Company was able to generate $0.03 per share in free cash flow. The Company now has $7.4 million in cash along with $6.8 million in receivables and very little long-term debt exposure at $0.5 million. The NAV of the Company could be inferred at $21.9 million or $0.41 per fully diluted share based on the balance sheet ending Dec 31, 2008.
Earlier in the year, performance was a little dicey due to market uncertainty. There was some concern that Nstein's newspaper clients would delay investment decisions as balance sheets were eroded. It appears as though many decisions were delayed until the 4th quarter when a lot of publishers were probably reacting to the freefall in print advertising dollars. Nstein appears to have benefitted directly from "Yikes...do something now!" reactions throughout the industry.
Last year, Q4 performance was also a positive surprise to the market. Big 4th quarters should be better modeled into future forecasts because there appears to be bias towards 4th quarter buying decisions, probably correlated to budget cycles. Notwithstanding, it was a great quarter for the market conditions. Based on reported A/R, Q1 2009 should show some strength as well.
Market conditions should remain very positive for EIN.V for another 4 quarters as its clients scramble online (see previous post). The Nstein semantic content management suite is also well aligned to the next stage of the Internet, which some are calling web 3.0, or the contextual web. So, the longer-term outlook may be considered positive as well, especially as the Company leverages favourable R&D tax credits offered by the Province of Quebec. With a pretty outstanding world-wide client base, a well positioned and patent protected solution, and a proven growth profile, EIN.V may be an interesting target to a larger middleware, content management, or infrastructure player.
With over $7.0 million in the bank, there is a chance that EIN.V itself could begin to roll-up some complimentary solutions providers that can extend its own solutions.
Although Nstein is clearly well positioned, there should be some investor caution. Nstein's client base still prefers to acquire perpetual license software. Although the Company's revenue streams are becoming more recurring in nature, the Nstein still suffers from lumpy quarterly performance, and the quarterly live/die sales cycle due to the perpetual licensing model.
Notwithstanding, investors may still view EIN stock as being currently undervalued and we may see a continued run up in the share price for the next few days. The stock has performed well since the beginning of the year with a 116% increase in the stock price since January 6th.
11/12/08
Nstein lands a big'un
Today, Nstein (EIN.V) announced that Hearst Newspapers has contracted the Nstein platform for its entire content supply chain - representing 16 newspapers. This is Nstein's largest single deal - probably worth over $1.5 million in licensing alone. Services could be valued at twice that.
During 2009, Hearst Newspapers could represent more than 10% of revenue streams to Nstein. In the meantime, it is my understanding that the Company could recognize revenue from licensing during Q4, 2008. This would mean that there is a greater than 50% chance that the Company could exceed my expectations for Q4 in terms of sales and profitability.
More importantly, this transaction reduced balance sheet risk. The Company likely has sufficient funds to be able to survive the current downturn in the markets. However, I think that it would be an excellent time for the Company to more aggressively look to offering some SaaS licensing options to its client base. Although revenue ramp may not be as fast, NStein would not lose many clients to "stand-pat" decisions used to preserve weakened balance sheets. A subscription or user-based licensing solution would probably entice reticent prospects to more aggressively adopt Nstein's content management solutions during 2009. The cost/benefit equation tips dramatically towards deriving more revenue when capital is preserved.
During 2009, Hearst Newspapers could represent more than 10% of revenue streams to Nstein. In the meantime, it is my understanding that the Company could recognize revenue from licensing during Q4, 2008. This would mean that there is a greater than 50% chance that the Company could exceed my expectations for Q4 in terms of sales and profitability.
More importantly, this transaction reduced balance sheet risk. The Company likely has sufficient funds to be able to survive the current downturn in the markets. However, I think that it would be an excellent time for the Company to more aggressively look to offering some SaaS licensing options to its client base. Although revenue ramp may not be as fast, NStein would not lose many clients to "stand-pat" decisions used to preserve weakened balance sheets. A subscription or user-based licensing solution would probably entice reticent prospects to more aggressively adopt Nstein's content management solutions during 2009. The cost/benefit equation tips dramatically towards deriving more revenue when capital is preserved.
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