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Infosonics Corp. Message Board

  • maxilivermore maxilivermore Jan 1, 2014 4:11 AM Flag

    IM margins

    Well lets focus on the Margins infosonics will be making on the IM sales. 5% - 10% ? Anyone has some insight what is normal in this kind of distribution?

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    • they normally get 20% or a little more but that is in 3rd world countries. They should get over 30% in the US with IM sales as the mix will be much higher margin high end phones.

      • 2 Replies to anabolic44444
      • Ana,
        That is probably not logical. Again, there's "pumping" and there's rational research. There are opposing factors one could name to make a case that margins would not be increased in the U.S like you surmise.

        The good thing, is that the company does not need any hyping here whatsoever. It had 54 employees in 2007 at the zenith of its revenues. It was simply a pass-through (middle-man) then for manufacturers of phones. Even with a skeleton staff, margins were razor thin and the more competitive phone prices became, the more IFON got squeezed. Its sales in the U.S. went from a significant percentage of total sales to a miniscule percentage....emphasizing the competitiveness/advancement of phones, and the need to cut out the middle-man.

        So, IFON wisely became the designer of new phones and clearly has met with success. The IM deal is a major affirmation of this. Even with 103 employees today on 35 to 40M annual sales, almost twice the number of employees it had at well over 200M in distribution sales in 2007, IFON is now cranking a big bottom line effect out relative to what it had done before. All it needs is more revenue. Until the IM, agreement, investors have remained leery....again, the big thing about the IM deal is it's an AFFIRMATION that IFON has arrived and a turnaround has been established, IMO.

        We don't need to pump the company. We can be conservative and still recognize the big potential for super-growth (with company and with stock price). Ironically, the market "wants" what IFON is making today....moving away from long-term high-ticket contracts where you get an overly-sophisticated free (pay through the nose on contract) phone toward pay-as-you-go service on a "good" phone (i.e. like a verykool one). Yes, IM's agreement affirms that IFON is in the right place at the right time, IMO.

        Hopeful

      • and by the way that is why we did the IM deal was to move higher end phones in the US market.

    • Max,
      I believe closer to 10% or the lower teens. If IFON can do 20% or better on its competitively priced phones on its own....how much of that margin must be surrendered to IM for opening up its shelf space to verykool phones. IM would have minimally increased variable costs for selling IFON phones, IMO. I think the agreement is minimally accretive to IM (since IFON is so small), but nonetheless accretive while taking up to half the gm for its distribution service.....yet will be significantly accretive to IFON (since IM is so large) JMO.
      Hopeful

    • I think that would be way too conservative. In looking at IM's Q3 report, they earn margins of 6% on their sales. IM is simply the middle man between the developer and retailer/wholesaler and thus their business model dictates such low margins. I don't see why IFON wouldn't achieve the same 20% margins on product sales that they have in the past year. More importantly, IM's COGS over a rolling 12 months is roughly $40B!! If IFON is able to grab a small .25% (quarter of 1%) of IM's sales this would translate to $100M in added revenue to IFON or an increase to gross profit of $20M. I think an eps of atleast $.50 and possibly much greater is in the cards for next year. The added volumes are also likely to bring down IFON's avg product cost which is difficult to measure at this point but will only become cheaper.

      Sentiment: Strong Buy

      • 2 Replies to peteg626
      • An increase to gross profit to $20 mil or of $20 mil?.. Either way it's a Big increase! If they achieve that from the INGRAM MICRO MOBILITY distributions agreement, $20 mil GROSS PROFIT would easily equate to $10 mil to the Bottom line!...($10 mil NET) if 14 mil's outstanding, equates to an EPS of .71 cents. That's a lot of money!

      • 100 million would mean 5 million units sold in the US in one year. That would mean that 1.5% of the americans would walk around with a verykool phone? That would also mean a HUGE increase in cash needed to keep the inventory on track.

        You were right with the margins. I read the IM Q3 numbers and it has been around 5-6%.
        This would mean margins for around 10-15%. Most margins they make from private label selling of the 18,6 mentioned in Q3

        I am not so entousiastic for predicting a 100 million revenue add next year from US sales only. I think a total revenue for next year of around 60-70 million would be a good result.
        a 5 million increase in sales each quarter for US sales and a 12 million sales per quarter outside US.

        In my opinion it is necessary that they develop some models which can compete with more expensive models in the US. Its a totally different market with much more capability of the consumers to spend a higher amount of money. The S 470 is a good step towards this point and certainly this model will sell good in the US but in my opinion they need more and better phones in their assortment for the US market even if this means they cost a little bit more.

        if they manage to do that the sky is the limit. Also i am not so happy with the name verykool. If i was Joseph i would not put verykool on the phones but VK or something. Just like LG does. The verykool writing on the phone is for allot of younger people not so cool as ive been told.

        I keep enthousiastic and i am expecting a nice net income starting from this Q4 on.

 
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