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GlobalSCAPE, Inc. Message Board

  • bigsaltydog1 bigsaltydog1 Nov 15, 2012 10:53 AM Flag

    Bottom line

    Bottom line no earnings. I am still holding but very dissapointed. Only short term hope is a buyout.

    Sentiment: Hold

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    • Hi Big Salty Dog,

      Salty Dog, that sounds like the name of a Hot Dog or something. Or a new brand of beer :).

      With TappIn on board now, I don't think about selling the company at this time. They are running a profitable business and adding to cash quarterly. Yes, the stupid deal of Coretrace, it means to have positive earnings on a 12 month trailing numbers basis that Globalscape has to produce more than that charge for CT in coming earnings seasons. Sour taste in our mouth or not, it's a coretrace issue, not a Globalscape operational issue.

      For instance, one short term hope that is reasonable is that they hit their $25 million. When I had talked with them before, they said they hadn't included anything from appShield in those figures, so it wouldn't be AS causing them to miss that figure. What they need to do so is $8 million in sales. Core business was expected and stated to be the key driver in the ramp up during the 2nd half, not anything else. I heard one time when they said about the 2nd half, "especially in the fourth quarter". So that says to me they expect a much better rampup in Q4 than Q3 was, and Q3 was the best core sales they ever had in the company history. The EFT which makes up 80% or so of sales was up 19.75% on the quarter year over year. And Q4 is expected to be better.

      Again, that's only one thing to hope for.

      I'm trying to shake the dust off and not be slanted opinionated by the CT sale, and think clearly. I believe we can also look for TappIn to be a short term hope as well, though Jim stated it wasn't material, we know they only started partnership sales during Q4, so what else is new. How could it be significant in Q3. With major partners like they have, Toshiba, Seagate, QNAP and ESET, they've got to take advantage of this great and wonderful opportunity and do it right, and garner market share and market sales. It IS a possibility they could earn their bonus for sales of Tappin, but as I said before, that's built on the subscription model with deferred revs so they'd need like $15 million in subscriptions booked in Q4 to accomplish that unless they worked some type of deal for an advance payment through or by one of the key partners.

      Since we know AppShield is now in the development stage, they should post job listings soon looking for someone who would answer the call with stunning qualifications to complete appShield soon enough. Don't kid yourself thinking only Coretrace knows whitelisting, or only who bought them out. That would be an illusion. If you find the right party to do that, just like you offered bonuses to TappIn for early development of the Pro version, I can see paying big bonuses to a software engineer who gets that job done. They will be able to offer the amount they were going to pay for Tappin's big 2012 sales (if those don't come through) to the AS development team, for instance; one possibility, right? right. Now, a truly sharp developer who can bring AS to market quickly and knows it, he could consider that bonus in taking the job with Globalscape rather than a bigger offer somewhere else. He could set up his stock buying plan to capitalize on shares that would increase on the news of the appShield release. You can see that opportunity for the right person who can do the job quickly.

      AS is icing on the cake for now. The cake is dessert, extra, the last course after we dine on the others, to be honest. The main course is Tappin is the big thing going on for them and also core rev growth. I expect they will have at least high 6's, say $6.8 million to $7.3 million for Q4 sales. If TappIn has success in Q4, then more. They mentioned Seagate news over the coming months, so we don't know if that's additional over what they are doing now with Tappin or building on it with more products. We could use some news that serves us guidance on future sales, on markets. The conference mentioned yet other unannounced deals already signd or in negotiations which they wouldn't talk about. Tappin deals. So there is good reason for short term and long term stuff to hope for, pull for. I prefer to say, to look for.

      The market always responds to their strong growth with strong buying. Historically.
      They must have had some high projections for Tappin sales when placing the figure at $3 million for 2012 (ie, $15+- million deferred sales in 2012). That would have meant aggregate contract value would have grown exponentially. No other way. Yet they never stated that possibility to us, but let it for us to do the math. Think about it. it's why they continue to say they emphasize looking at ACV and deferred among other key metrics in evaluating their progress. They have to use those since they are forced to defer those subscription revs. That would have put deferred revs total for 2012 into the $20 millions and sparked the view about 2013 based on those deferreds. They try to be so conservative that it ends up we don't have a clue about the possibilities. I will continue to monitor tappin traffic and countries coming online in Globalscape's top 20. If they gain heavy marketshare due to Tappin, it will be noticeable via traffic analysis.

    • Agreed. We need earnings for this stock to move higher. Agree with Greg too, the M&S is a positive, but does not make much of a difference now with meager earnings. I think today's selloff was a bit overdone. But this is an illiquid stock and when an investor gets disgusted and sells, this is what happens.

      • 1 Reply to go_big_or_gohome
      • "Agreed. We need earnings for this stock to move higher." Like in any other stock, you need the earnings for the price appreciation. Unfortunately, you will be waiting a long while still for that to GSB to show earnings, imo. There is another $1.5M payment this quarter being released to the TappIn investors. I did not do the full research as to how said payment will be accounted for but, nonetheless, it will come to affect the balance sheet.

        "Agree with Greg too, the M&S is a positive, but does not make much of a difference now with meager earnings." Unfortunately here as well, it is not something to cheer about. Basically, M&S revenue is taken from one pocket to another. In other words, to a great extent, the EFT license revenue is affected accordingly by those sales because they go from a one-time revenue recognition to a monthly revenue recognition. I agree it has been growing but the growth is nothing that should get you excited. It boils down to relatively small growth of one product that comes in different flavors while at the same time the other products continue to show a decline in revenue. And, it has been for some time.

        Management just caused $3M plus to disappear from the balance. All they got is a source code for a product that is yet to be completed, tested, marketed, manufactured, and distributed. A product that, imo, has proven is not even to be considered since the mother product proved to be a disaster. Mind you that GSB had a seat in the Board of Directors so they new how badly Coretrace was doing. I, myself, stated that they must not have been doing well given all the loans GSB was issuing to Coretrace.

        One other unfortunate thing is that the Board of Directors is very reliant on the current Management. The Board has no experience whatsoever in software. Hence, we have seen the failures of investments in Availl, Coretrace, and, imo, TappIn. Yes, TappIn is working with Seagate, et al in distributing the product and, I would agree that since they have to do something to get the product to market, it is a wise thing to do. It might be too early to judge the results, but the 10Q has shown that they did not do good in TappIn sales this last quarter.

        The current Management has performed below average, imo. (We can say they have performed average just to be a little more kind so to speak). I remember November, 2009 or some date back when Morris projected they would do $25M the following year (2010). That year came without the execution of that goal. In 2010, he also carried that projection to 2011 and failed. He made the same projection for this year, and yet again, he will fail.

        It is so difficult to sell the losers. Believe me, I have a lot of experience with that. We are seeing the fall in price that I projected some time back for the reasons I have stated. Management has failed and TappIn will also be proven a failure, imo. TappIn cannot compete with the gorillas under the current business plan.

        Jus a one man's opinion.

 
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