for the past four quarters will put Q3 revenue over $9.5 million. I'll be happy with $9.0 million. If the recent sequential revenue growth trend holds continues for Q3, I think we could see a 5% Net Profit Margin for Q3.
I qualify this with the statement by CFO Mark Ties in the Q2 press release: "Although I would like to say that profitable results will continue, we still will require additional quarters for our cost control measures that we have implemented over the last year and our new model built around XATANET to take hold before we can finally say that quarterly losses are behind us."
My guess is that sales of XATANET are running even stronger than anticipated due to high fuel prices. I believe the XATA story is going to be very exciting for investors going forward - it just might start with Q3 earnings release!
It is really interesting to consider the implication for revenue growth, and as you point out, there appears to be indications of strong revenue growth here.
I guess I am trying to put together a few items, and wonder if there is any connection. Why did Xata come out a week or so before earnings release next week, to indicate sales for the quarter? Do they always do this? I don't think so. There could be a variety of good reasons for this, but, I don't understand. And what do you make of the sales announcement? Unit sales of 3,000 � doesn�t Xata have about 45,000 units in the field currently? So while it is encouraging to see the growth, it is a relatively modest increase, compared to the installed base. In other words, while the announcement confirms sales, it doesn't seem earth-shattering.
I have been also trying to make sense of CEO Fawcett's actions. I don't blame him for leaving. He has done a wonderful job of taking of a very challenging assignment, and maintaining and building this business. It would seem though, that if this were an emerging opportunity, he would stay the course. There obviously can be many reasons for changes, and I might be misreading this. But it does seem odd that Fawcett chooses to leave now, and there is no replacement yet identified.
It also is curious about Fawcett's exercise of stock options. This seems easy to misunderstand, so I might be missing this, but it looks as though he is exercising a bunch of stock options here at slightly above the strike price, earning a measly 40-50 cents a share on 80,000 plus shares. Why would you sell all of these options in mid-June? You would think Xata has a pretty good idea of how the quarter is shaping up in the last couple weeks of the quarter. If things are really on the upswing, wouldn't you hold off at least until some of this good news came to light? And with Fawcett returning to Deere, I would think short-term money is not the primary motivating factor here.
I keep thinking this might be a point to add Xata shares, but I am beginning to wonder if this is just a "bridge too far" in the short term. Thoughts?
Good Post..My little voice says all is not well. You put out a little good news to deflect the bad news(CEO leaving & selling options for very little profit). Then again maybe they are going to blow away the numbers, and they needed to warn the street.
Do you leave the top job for a John Deere staff job?
Stock options are like hitting the lottery Why sell? Does he want a new car?
That said I like the model and have added a few shares. When does XATA report? I hate ignoring that little voice
Agree with your comments exactly. The CFOs qualifing statement is alittle worrisome. Not sure if they were just being very cautious, or if they have a fundamental problem with growing sales profitably. Time will tell I guess. One other concern I have is the amount of stock hanging out there with Trident in the form of warrents to purchase. This will be highly dilutive and will impact the ability of the stock to move upward. Any thoughts?
I talked to the CFO early this spring (before Q2 earnings release) about the marginal profitability of Xatanet. I also had urged him in an email to release this information on a per Xatanet truck. My concern was that the Xatanet revenue was a breakeven proposition in Q1. He explained that this expense was for the "IT backroom and employee support" infrastructure which would support a very large number of new trucks. This was proven in the Q2 numbers released soon after which showed stable costs with sequential revenue increase of over 30%. He also stated that Xatanet had now developed the volume of business needed for Xata to re-negotiate contracts with wireless and satelite service providers (which was done in Q2). The target for marginal profitability of each truck is 50% and the sequential revenue growth reported in Q2 showed that they are very close to that - over 43% of the revenue growth dropped to the bottom line.
A PDF of the Annual Meeting presentation is available on Xata's website with a very good slide showing the cost of Xatanet for a customer truck and the associated customer savings - a 500 truck fleet will save over $1 million per year after paying Xata $80 per truck per month. This explains why demand for Xatanet is exploding! The value to the customer has increased further with rising diesel fuel costs - the PDF example uses $2.50 per gallon fuel cost.
The warrants are a good point. However, the warrants cannot be exercised for free. When exercised, a per share price must be paid (going from memory I think this is around $3.60 per share). When exercised there will be some dilution because the stock price will no doubt be substantially higher. However, I do not believe the stock price will be hurt, but actually helped by exercising the warrants because it will increase the tiny float at a time when Wall Street is becoming interested.
Trident Capital, Deere, and employees control any vote. My only concern, which I also expressed to the CFO, is that the company could be "taken private" pretty easily now that Xata business is exploding. He made me feel much more comfortable about this possibility. Trident and Deere's JDSTG invest in many companies and they really don't want the reputation of a killer shark. All Xata shareholders will soon begin to prosper.