Of course, it's not the penny in hoped-for profits that has Foolish investors interested in the company -- it's the cash. At last report, Sycamore had $954.5 million in cash, equivalents, and short-term investments on its books, but no long-term debt whatsoever. With 276 million shares outstanding, each of those shares is therefore 92% "green" -- backed up with $3.46 per share in cash.
The key factor we have historically monitored at Sycamore, therefore, was cash burn. Sure, Sycamore has lots of moola today, but how quickly is it burning that cash stash away on unprofitable business lines? The answer, historically, has been "very quickly." Over the past three years, Sycamore has burned through over $100 million in free cash flow. But that might finally be a thing of the past.
The firm's last 10-K, which was filed with the SEC after the close of its fiscal year 2005 just last month, shows a company on the upswing. Revenues have grown consistently over the past three years: $38.3 million in fiscal 2003, $44.5 million in fiscal 2004, and $65.4 million in fiscal 2005. Even more significantly, the cost of those revenues has declined. Respectively, the company spent $35.2 million to capture its fiscal 2003 revenues, $29.2 million the year after that, and $33.9 million last year.
As a result, Sycamore has been able to steadily stem the flow of red ink onto its income and cash flow statements. Its fiscal 2003 net loss was $59.9 million, falling to $44.8 million in 2004, then to $23.8 million last year. Likewise, free cash outflows have declined from $53.4 million to $37.5 million to $12.5 million. The icing on the cake: You'll notice that the company's "real cash" losses in each of the past three years have been far less than its accounting losses. If that trend holds true when we see the company's numbers tomorrow, why, we might even discover that the company has started off this new fiscal year with positive free cash flow.
Fool contributor Rich Smith holds no position in Sycamore.
Rich, thanks for the input. Are you really a Motley fool contributor? (Or just funnin with us as a "fool" contributor?)
You post strong buy but have no position?
What numbers are we supposed to see tomorrow? 2q/06 expected about 2/29/06 I think. (1q/06 was on 11/29/05).
I agree wth your overall assessment. Option expenses will impact eps but not cash flow. I expect to see a steady build in cash and equiv's from here on out on balance. Minus 2 mil q2 but plus 8 mil 3q etc.