The Company continues to show exceptional margin growth. Gross margins increased for the the fifth consecutive quarter to 70%, up 5% from Q1, 2009. Increasing gross margin should be considered a good indicator of the health of the business. Adjusted net income margin for the quarter, a proxy to EBITDA, was reported at 27%, at the high-end of the range that management typically guides for. This beat mean analyst expectations of approximately $0.06 per share. Sales came in at $17.4 million, a 6.7% improvement over Q1 2009 performance of $16.4 million, and 10.8% increase sequentially over Q4, 2009 revenue reported at $15.7 million. Sales in the 4th quarter of 2009 were impacted by the recession.
Gross margins should continue to improve into the mid-70 percentage range as services continue to increase as percentage of total sales, while the company further leverages its messaging platform as it scales with the integration of new acquisition of Oceanwide Logistics and Scancode. The 10 + 2 reporting regulations should also help contribute to both scale and gross margins as more of its clients adopt DSG's electronic solution.
The company exited the quarter with $46.9 million in cash and equivalents and no long-term debt. Cashflow from operations was $4.4 million for the quarter, or $0.09 per share.
The outlook for the company should be considered by investor to be strong. With the un-thawing of credit, the beginnings of an upturn in durable goods shipments, and increasing regulatory regimes, Descartes Systems Group is positioned to experience an uptick in traffic on its messaging network. At the same time, the recent acquisitions add more services to its platform and increase its overall footprint as the economy begins to improve during H2, 2009.
DSG is a well operated, well positioned SaaS vendor in the global supply chain. The company should see an acceleration of organic growth in revenue as the world economy grows and margins are likely to remain robust. Investors should expect Descartes to continue to look for more strategic acquisitions during the last half of the year, possibly within the European market.
Analysts are likely to increase their forecasts and 12-month targets for this stock after results from this quarter.
Disclosure: I own shares of DSG
5/27/09
MicroCap Tech Earnings May 09: VIQ Solutions (VQS.V)
Positive outlook for company remains intact
See the April post related to FY 2008 results for this Company. The fundamental outlook for this Company has not changed. The performance outlook for VIQ Solutions should be enhanced by the rollout of various national infrastructure stimulus plans announced by governments throughout Europe and North America.
Sales results weak for Q1; but as expected
Q1 results (which are typically the weakest seasonally) reflect the pre-stimulus challenges the company has faced, particularly in the United States. The previous US Administration and Congress had dramatically cut back funding for courts during the 2008 budgets. Election year uncertainty, combined with a deepening recession, made the situation worse. As a result, US contracts all but dried up for VIQ Solutions, reflected in Q1 2009 sales, which were $2.5 million, down from $2.8 million for the previous year Q1.
Margins improve for Q1
Management cut input expenses, and signed more software contracts, resulting in gross margins improving to 39% up from 37% for Q1 2008. Management expects gross margins to continue to improve going forward as the company continues to sign more software deals. EBITDA loss increased to $0.14 million for Q1 2009 versus $0.12 million loss for the previous year, although it should be considered virtually unchanged. Margin performance improved even as the company increased activity related to major signed contracts and ramped up sales execution during the quarter to take advantage of the more positive market conditions. Net loss for the quarter was virtually unchanged at $0.24 million loss, or $0.00 loss per share versus a $0.25 million loss for Q1, 2008, $0.00 loss per share.
Management drove positive cashflow; should stay that way
Despite a $0.3 million quarter-over-quarter decline in sales, the Company was able to report positive cashflow from operations of $0.06 million for Q1 2009 versus a cash outflow of $0.23 million for the same quarter 2008. The company has accelerated cash by reducing expenses, and by negotiating better terms on newer deals, resulting in DSO (Days Sales Outstanding)declining from nearly 70 days previously to approximately 40 days now. Investors should be pleased with management activities related to maximizing cashflow. Management has stated that it expects to remain cashflow positive for the foreseeable future.
Major contracts from Q1
During Q1, the company announced major contract signings in the UK (3.3 million Euro over 8 years) and in Australia (AUT$2.5 million over 3 years), which should begin to positively impact performance for Q2 2009 and onward. According to management, a majority of the revenue associated with new software-oriented contracts is recognized within the first year of multi-year contracts.
Subsequent events
Subsequent to Q1, the company has been active signing and deploying new contracts and contract extensions with undisclosed clients. Revenue associated with these transactions should positively impact performance for Q3 and Q4 2009 and beyond. The stimulus funds are starting to flow through the system from various governments worldwide including the United States. As a result, the company is beginning to see large opportunities for bid, which could positively impact performance as early as Q4, 2009.
Positive outlook enhanced by management's focus on cashflow
Notwithstanding the positive market outlook for the company, investors should be pleased that management has been able to generate positive operating cashflow for a weak sales quarter.
See the April post related to FY 2008 results for this Company. The fundamental outlook for this Company has not changed. The performance outlook for VIQ Solutions should be enhanced by the rollout of various national infrastructure stimulus plans announced by governments throughout Europe and North America.
Sales results weak for Q1; but as expected
Q1 results (which are typically the weakest seasonally) reflect the pre-stimulus challenges the company has faced, particularly in the United States. The previous US Administration and Congress had dramatically cut back funding for courts during the 2008 budgets. Election year uncertainty, combined with a deepening recession, made the situation worse. As a result, US contracts all but dried up for VIQ Solutions, reflected in Q1 2009 sales, which were $2.5 million, down from $2.8 million for the previous year Q1.
Margins improve for Q1
Management cut input expenses, and signed more software contracts, resulting in gross margins improving to 39% up from 37% for Q1 2008. Management expects gross margins to continue to improve going forward as the company continues to sign more software deals. EBITDA loss increased to $0.14 million for Q1 2009 versus $0.12 million loss for the previous year, although it should be considered virtually unchanged. Margin performance improved even as the company increased activity related to major signed contracts and ramped up sales execution during the quarter to take advantage of the more positive market conditions. Net loss for the quarter was virtually unchanged at $0.24 million loss, or $0.00 loss per share versus a $0.25 million loss for Q1, 2008, $0.00 loss per share.
Management drove positive cashflow; should stay that way
Despite a $0.3 million quarter-over-quarter decline in sales, the Company was able to report positive cashflow from operations of $0.06 million for Q1 2009 versus a cash outflow of $0.23 million for the same quarter 2008. The company has accelerated cash by reducing expenses, and by negotiating better terms on newer deals, resulting in DSO (Days Sales Outstanding)declining from nearly 70 days previously to approximately 40 days now. Investors should be pleased with management activities related to maximizing cashflow. Management has stated that it expects to remain cashflow positive for the foreseeable future.
Major contracts from Q1
During Q1, the company announced major contract signings in the UK (3.3 million Euro over 8 years) and in Australia (AUT$2.5 million over 3 years), which should begin to positively impact performance for Q2 2009 and onward. According to management, a majority of the revenue associated with new software-oriented contracts is recognized within the first year of multi-year contracts.
Subsequent events
Subsequent to Q1, the company has been active signing and deploying new contracts and contract extensions with undisclosed clients. Revenue associated with these transactions should positively impact performance for Q3 and Q4 2009 and beyond. The stimulus funds are starting to flow through the system from various governments worldwide including the United States. As a result, the company is beginning to see large opportunities for bid, which could positively impact performance as early as Q4, 2009.
Positive outlook enhanced by management's focus on cashflow
Notwithstanding the positive market outlook for the company, investors should be pleased that management has been able to generate positive operating cashflow for a weak sales quarter.
5/26/09
Job losses feeding Tucows? Others feasting, too?
Tucows (TC:TSX) is a pretty familiar brand to many and an influential Internet pioneer. The Ultimate Collection of Winsock Software (TUCOWS) was established in 1993 by Scott Swedorski, a library worker in Flint, Michigan as a way for people to easily download software at little or no cost. Essentially, Tucows invented shareware or freeware, which is the root concept for Open Source software (like Linux) and could be a conceptual ancestor to emerging concepts such as "cloud computing".
However, since the beginning of this decade when Internet Corporation for Assigned Names and Numbers (ICANN) agreed to break Network Solutions domain name registration monopoly, the company has essentially been a wholesaler of domain names along with some of the peripheral services around it such as email and security. Since then it has exhibited steady, albeit unspectacular, growth while being eclipsed by younger start-ups like GoDaddy.
Interestingly, recently reported Q1 performance shows 17% growth in its domain business over the previous year, while the rest of the business remained flat or contracted. Total sales for the quarter were reported at $20.1 million, or 7.4% ahead of last year's performance. Reported earnings for the quarter were $1.0 million, or $0.01 EPS versus a $1.1 million loss, or $(0.01) loss per share last year. In the depths of a significant recession, investors may find this surprising.
However, as more people get laid off from "jobs", many are likely to begin new careers as self-employed contractors. And, as during past recessions, laid-off skilled workers are establishing start-up businesses in their fields of expertise. The numbers may support this trend now. According to StatsCan "The surprising rise in the number of people working in April in Canada was the result of an increase in self-employment, the federal government agency said. Self-employment rose by 37,000 in April, while there was little in public- and private-sector employment". These trends are likely to strengthen elsewhere in the world where entrepreneurship is encouraged.
The rise of the independent contractor is good news for Domain registrars. Through various blogging applications, it is easier and more cost effective than ever for people to create a web presence with an individual domain. Cha-ching for domain registrars!
Many of the new businesses are likely to fail in the short-term, or become abandoned as the economy picks up and independent contractors begin to get hired by larger entities. All of this potential future volatility means domain names do not renewed, which means that they get recycled and resold. Cha-ching for domain registrars!
The domain-name game is boring, and margins are pretty thin through commoditization. However, we should see a continued resurgence in the business for the next few quarters as the employment markets become more volatile. In its quarterly results press release, Elliot Noss, CEO of Tucows appears to confirm the trend. "During the first quarter of 2009, we saw continued strength in domain registrations through our OpenSRS wholesale services business, marked by the highest number of new registrations since the second quarter of 2000 and strong year-over-year growth in renewal transactions." The stock is trading at 8x FYE runrate EPS.
Are there other technology vendors that could benefit from this emerging self-employment trend? Besides online employment services like MonsterOnline, investors should look at specific SaaS software verticals such as accounting, converged communications including VoIP, email, and calendaring solutions that start-ups may need. OpenSource word processing, spreadsheet and presentation software may be popular as long as they integrate with MSOffice formats.
Social networking sites should benefit from increased self-employment, but not in a way the media seems to expect. For sustained value creation over time, investors may find an IPO from LinkedIn could be more interesting than one from Facebook. Independent contractors are likely to spend more time on LinkedIn, and find value that they are more likely to pay for (in comparison to Facebook).
On the downside, mobile susbcriber churn may be higher as people migrate off corporate mobile plans to personal plans with more modest rate plans. Vendors with giant corporate clients may be hurt, while SME specialists and low-cost VMOs may benefit.
I do not own shares of any of the Companies mentioned in this post.
However, since the beginning of this decade when Internet Corporation for Assigned Names and Numbers (ICANN) agreed to break Network Solutions domain name registration monopoly, the company has essentially been a wholesaler of domain names along with some of the peripheral services around it such as email and security. Since then it has exhibited steady, albeit unspectacular, growth while being eclipsed by younger start-ups like GoDaddy.
Interestingly, recently reported Q1 performance shows 17% growth in its domain business over the previous year, while the rest of the business remained flat or contracted. Total sales for the quarter were reported at $20.1 million, or 7.4% ahead of last year's performance. Reported earnings for the quarter were $1.0 million, or $0.01 EPS versus a $1.1 million loss, or $(0.01) loss per share last year. In the depths of a significant recession, investors may find this surprising.
However, as more people get laid off from "jobs", many are likely to begin new careers as self-employed contractors. And, as during past recessions, laid-off skilled workers are establishing start-up businesses in their fields of expertise. The numbers may support this trend now. According to StatsCan "The surprising rise in the number of people working in April in Canada was the result of an increase in self-employment, the federal government agency said. Self-employment rose by 37,000 in April, while there was little in public- and private-sector employment". These trends are likely to strengthen elsewhere in the world where entrepreneurship is encouraged.
The rise of the independent contractor is good news for Domain registrars. Through various blogging applications, it is easier and more cost effective than ever for people to create a web presence with an individual domain. Cha-ching for domain registrars!
Many of the new businesses are likely to fail in the short-term, or become abandoned as the economy picks up and independent contractors begin to get hired by larger entities. All of this potential future volatility means domain names do not renewed, which means that they get recycled and resold. Cha-ching for domain registrars!
The domain-name game is boring, and margins are pretty thin through commoditization. However, we should see a continued resurgence in the business for the next few quarters as the employment markets become more volatile. In its quarterly results press release, Elliot Noss, CEO of Tucows appears to confirm the trend. "During the first quarter of 2009, we saw continued strength in domain registrations through our OpenSRS wholesale services business, marked by the highest number of new registrations since the second quarter of 2000 and strong year-over-year growth in renewal transactions." The stock is trading at 8x FYE runrate EPS.
Are there other technology vendors that could benefit from this emerging self-employment trend? Besides online employment services like MonsterOnline, investors should look at specific SaaS software verticals such as accounting, converged communications including VoIP, email, and calendaring solutions that start-ups may need. OpenSource word processing, spreadsheet and presentation software may be popular as long as they integrate with MSOffice formats.
Social networking sites should benefit from increased self-employment, but not in a way the media seems to expect. For sustained value creation over time, investors may find an IPO from LinkedIn could be more interesting than one from Facebook. Independent contractors are likely to spend more time on LinkedIn, and find value that they are more likely to pay for (in comparison to Facebook).
On the downside, mobile susbcriber churn may be higher as people migrate off corporate mobile plans to personal plans with more modest rate plans. Vendors with giant corporate clients may be hurt, while SME specialists and low-cost VMOs may benefit.
I do not own shares of any of the Companies mentioned in this post.
5/20/09
Route1 (ROI.V) Q1 Results Do Not Yet Reflect Milestone Order.
Actually, a small percentage of Qwest's (Q) 30,000 unit order have been reflected in Q1 results. We estimate that several hundred units were shipped ahead of the precursor DEFIMNET deployment, which was completed subsequent to quarter end. Even with a small number of shipments, revenue for the quarter jumped by 124% to $0.44 million from $0.19 million for the same period for the previous year.
Gross margins were reported at 73%, which Management believes to be a typical range going forward. This is good news for investors as the Qwest deployment begins to take off. Management expects that a vast majority of the Qwest's first order should be shipped by the end of the summer, with close to 10% of the order already shipped only three weeks subsequent to completion of the DEFIMNET roll-out.
An Interesting Market Development: The Swine Flu Pandemic has created more urgency among U.S. government agencies to get government employees set up to work from home. The TruOffice deployments on the DEFIMNET fits under several "emergency preparedness" initiatives that have become more prominent as the cases of Swine Flu have increased. Route1 should benefit from increased velocity of deployment, as well as from more potential demand from U.S. Government agencies thoughout the year.
Don't Forget Europe: The Company has had a couple of reference deployments operating in Europe for several quarters. Subsequent to Q1, we may see a marked increase in activity from Europe as governments in this region begin to deploy relatively significant numbers of units. There may be a possibility of regional distribution agreements (similar to Qwest) by the end of fiscal 2009.
Fly in the Ointment: The Company has reported a skinny balance sheet at the end of Q1, with $0.75 million and a high quarterly burn of over $1.4 million. Of the $1.4 million, approximately $0.5 million could be categorized as one-time expenses, leaving $0.85 million of operating burn. Notwithstanding, this presents forward risk. Offsetting the future burn is a portion of cash received from the approximately $2 million DEFIMNET deployment, along with cash received from the rolling Qwest purchase order. In the short-term Management will be required to manage cash diligently as shipments ramp.
Bottom Line: The Company is finally now in the middle of the ramp that investors have been waiting for patiently for many quarters. The new challenge is that growth will need to be managed with a skinny balance sheet.
Disclosure: I do not own shares of Qwest or Route1.
Gross margins were reported at 73%, which Management believes to be a typical range going forward. This is good news for investors as the Qwest deployment begins to take off. Management expects that a vast majority of the Qwest's first order should be shipped by the end of the summer, with close to 10% of the order already shipped only three weeks subsequent to completion of the DEFIMNET roll-out.
An Interesting Market Development: The Swine Flu Pandemic has created more urgency among U.S. government agencies to get government employees set up to work from home. The TruOffice deployments on the DEFIMNET fits under several "emergency preparedness" initiatives that have become more prominent as the cases of Swine Flu have increased. Route1 should benefit from increased velocity of deployment, as well as from more potential demand from U.S. Government agencies thoughout the year.
Don't Forget Europe: The Company has had a couple of reference deployments operating in Europe for several quarters. Subsequent to Q1, we may see a marked increase in activity from Europe as governments in this region begin to deploy relatively significant numbers of units. There may be a possibility of regional distribution agreements (similar to Qwest) by the end of fiscal 2009.
Fly in the Ointment: The Company has reported a skinny balance sheet at the end of Q1, with $0.75 million and a high quarterly burn of over $1.4 million. Of the $1.4 million, approximately $0.5 million could be categorized as one-time expenses, leaving $0.85 million of operating burn. Notwithstanding, this presents forward risk. Offsetting the future burn is a portion of cash received from the approximately $2 million DEFIMNET deployment, along with cash received from the rolling Qwest purchase order. In the short-term Management will be required to manage cash diligently as shipments ramp.
Bottom Line: The Company is finally now in the middle of the ramp that investors have been waiting for patiently for many quarters. The new challenge is that growth will need to be managed with a skinny balance sheet.
Disclosure: I do not own shares of Qwest or Route1.
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.
5/13/09
Redknee (RKN.TO) positioned well to benefit from emerging mobile markets.
RKN.TO is a bit "under-the-radar" because it has only recently began trading on the TSX (October 21, 2008). It has good operating fundamentals with consistent earnings, and a little over $20 million in cash and equivalents with zero debt, although it retains an unused USD$10 million credit facility allocated for future acquisitions.
Headquartered in Mississauga, Redknee provides converged billing, rating, charging and policy solutions to tier 1 and emerging market mobile operators globally. Recently, it has introduced interesting prepaid billing solutions for the Blackberry, along with mobile payments solutions, which both play well in emerging markets such as Eastern Europe, Latin America, Middle East, Africa, and Southeast Asia. Prepaid services for smartphones should also be attractive to carriers in Europe, and even in North America where a major shift to prepaid accounts is occuring.
To provide some macro context, even as the current worldwide recession deepens, emerging economies represent nearly all of the current growth in mobile susbcriptions worldwide. For example, during 2008, mobile subscriptions in the Middle East grew by 47%. By several measures, Africa is beginning to emerge as the fastest growing market in the world. Additionally, in most regions, between 80% and 90% of subscriptions are prepaid. In some countries like UAE, total mobile subscription represents more than double the official population. This phenomenum is due to a significant population of foreign workers. Most of these workers do not have local bank accounts, and need to wire money home. As a result, there is significant demand for mobile money transfer solutions as mobile operators look to fill the demand gap by deploying technology similar to what RKN offers. In many emerging mobile markets, populations are far more likely to have a mobile subscription than a bank account. This condition is most acute where Redknee is having the most success; in Africa, the Caribbean, and Latin America where as high as 85% of the population remains unbanked.
Redknee reported financial results for Q2 2009 after markets closed yesterday, and conducted an analyst call at 8:30 this morning. Revenue for the quarter increased by 9% to $13.8 million versus $12.6 million for Q2 2008. The company reported EBITDA of $1.1 million for the quarter versus a loss of $0.6 million for Q2 2008, an increase of $1.7 million. Cash and equivalents increased to $20.3 million from $15.3 million for Q2 2008.
Since the beginning of calendar 2009, the Company has announced significant contracts with mobile operators in Africa, the Caribbean, and Latin America. Based on the conference call, investors should expect more contract announcements in these regions, along with others in the Middle East. Management has stated that it has a contract backlog of approximately $27.5 million, and that it anticipates recognizing slightly less than half of this revenue during Q3, which infers a revenue potential of approximately $13.2 million with gross margins of approximately $9.9 million. Cost containment should continue to reduce OpEx margin to around 70%, inferring an operating margin of approximately $0.6 million. Investors should be aware that typically Q3 performance is seasonally the weakest.
With $20.3 million in the bank, no debt, and consistent annualized growth in profitability, and improving margins, this is a stock to keep an eye on as it continues to benefit from worldwide trends in the mobile sector.
Headquartered in Mississauga, Redknee provides converged billing, rating, charging and policy solutions to tier 1 and emerging market mobile operators globally. Recently, it has introduced interesting prepaid billing solutions for the Blackberry, along with mobile payments solutions, which both play well in emerging markets such as Eastern Europe, Latin America, Middle East, Africa, and Southeast Asia. Prepaid services for smartphones should also be attractive to carriers in Europe, and even in North America where a major shift to prepaid accounts is occuring.
To provide some macro context, even as the current worldwide recession deepens, emerging economies represent nearly all of the current growth in mobile susbcriptions worldwide. For example, during 2008, mobile subscriptions in the Middle East grew by 47%. By several measures, Africa is beginning to emerge as the fastest growing market in the world. Additionally, in most regions, between 80% and 90% of subscriptions are prepaid. In some countries like UAE, total mobile subscription represents more than double the official population. This phenomenum is due to a significant population of foreign workers. Most of these workers do not have local bank accounts, and need to wire money home. As a result, there is significant demand for mobile money transfer solutions as mobile operators look to fill the demand gap by deploying technology similar to what RKN offers. In many emerging mobile markets, populations are far more likely to have a mobile subscription than a bank account. This condition is most acute where Redknee is having the most success; in Africa, the Caribbean, and Latin America where as high as 85% of the population remains unbanked.
Redknee reported financial results for Q2 2009 after markets closed yesterday, and conducted an analyst call at 8:30 this morning. Revenue for the quarter increased by 9% to $13.8 million versus $12.6 million for Q2 2008. The company reported EBITDA of $1.1 million for the quarter versus a loss of $0.6 million for Q2 2008, an increase of $1.7 million. Cash and equivalents increased to $20.3 million from $15.3 million for Q2 2008.
Since the beginning of calendar 2009, the Company has announced significant contracts with mobile operators in Africa, the Caribbean, and Latin America. Based on the conference call, investors should expect more contract announcements in these regions, along with others in the Middle East. Management has stated that it has a contract backlog of approximately $27.5 million, and that it anticipates recognizing slightly less than half of this revenue during Q3, which infers a revenue potential of approximately $13.2 million with gross margins of approximately $9.9 million. Cost containment should continue to reduce OpEx margin to around 70%, inferring an operating margin of approximately $0.6 million. Investors should be aware that typically Q3 performance is seasonally the weakest.
The company has focused on improving its gross margins and expects to report between 73% and 75% gross margins for upcoming quarters, depending upon how many hardware deployments are required. In addition, it has worked to reduce its total operating expenses as a percentage of revenue. During Q2 2008, expenses were repored at 71% of revenue, while gross margins came in at 79% of sales. Management expects operating expenses to decline marginally over the next few quarters to somewhere in the high 60s percentage range.
With $20.3 million in the bank, no debt, and consistent annualized growth in profitability, and improving margins, this is a stock to keep an eye on as it continues to benefit from worldwide trends in the mobile sector.
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