These are snippets from the preannounce CC--may ease worries?
I clipped these from the preannounce CC back in October. It explains why the guidance was lowered but also indicates quite a few positive trends and expectations It says that orders were delayed, not cancelled. their order intake at the end of the third quarter was higher than last year, they have an order backlog that will either be shipped in 2012 or not until 2013, and they don't expect to see a drop in margins:
"We believe that the shortfall and order intake is primarily related to timing of the receipt of orders from the banking market. We do not believe that the shortfall and order intake reflects a fundamental weakening of either the global banking market or our competitive position in that market. Many of the purchase orders our sales organization had expected to receive from the procurement departments of our banking customers, failed to materialize during the third quarter. We believe that they were delayed for a number of reasons including but not limited to the unanticipated delays and increased complexity of the procurement processes of our customers.
It is important to note that, we have not received cancellation of the orders, just delays.
We expect that most if not all of the delayed purchase orders will be issued either in Q4, or early in 2013. That said, given the limited time remaining in the year, such delayed orders, even if received in Q4, may not result in Q4 revenues.
Notwithstanding this immediate disappointment, our pipeline of new orders remain strong and we are encouraged by the fact that, we continue to participate in a number of significant RFPs and expect to win many of these opportunities.
Entering 2012, we had a backlog of about $33 million, so about a $23 million deficit compared to the year earlier. Comparatively though, our order intake was stronger and we reported that every quarter. And by the end of the second quarter, it was the highest order intake in the company’s history. And in fact, because of the so high, even at the end of the third quarter, order intake was higher than last year.
So we really needed to see the full quarter numbers for Q3 and the comparisons before we knew where we would be for the full year. So the answer specifically is Q3 is when we thought at the end of Q3 year-to-date, our order intake is about 18% stronger than it was last year, but at 18%, it’s not enough to overcome the backlog deficit entering the year that Jan or Ken mentioned.
Also, the pattern of delivery was different this year than last year. As I said a few minutes ago a great percentage of the backlog going into 2011 was shipped in 2011, the patterns are little different, has evolved to be different in 2012. A lot of the backlog that we have, a lot of the RFPs that we expect to get before the end of the year won’t be shipped until 2013 and beyond.
Joe Maxa - Dougherty & Company LLC
Then I got one more based on that. So does that suggest that there have been a little bit more strict on terms and getting the best deal, should we be looking at your margins as potentially coming off a bit?
T. Kendall Hunt - Chairman and Chief Executive Officer
Cliff, I don’t see it. Our business is evolving into more software. The transactions that drive our margins down are the really, really large transactions, where we get volume discounts. As we do smaller deals, the gross margins are going to be a little higher as we do more software, that’s very high margin blending together, we’re probably in the mid 60 range.