Can be profitable in one part of the world and lose money in others. Also some taxes have adjustments (non-deductible expenses), like maybe adding back wages, amortization, etc. They do business all over the world.
My guess is that they owe taxes in India but it is impossible to say for sure unless you are on the inside.
Obviously, if sales decline in the next fiscal year and margins don't improve they would begin to generate material losses but this is roughly a break-even business. I don't want to say that things can't go bad, they can but there are material assets here.
You are wrong about generating cash at these revenue levels. These levels are high enough to generate cash once the accounts receivable cycle runs.
They were roughly at break even in third quarter weren't they? $1 million loss ignoring the finance expense, $4 million including.
The margin guidance wasn't a real problem in the fourth quarter IMO although it was certainly disappointing to hear that gross margin percentage will decline. Dollar amounts will likely be flat to up. The big risk is FY15 as you indicated.
Agree although maybe there are cash basis deals to be done. I made it sound like they were doing deals there last quarter and wanted to say that wasn't the case.
Not selling at a loss. They are able to cover their manufacturing costs with the exception of Venezuela and Argentina where they did indeed lose money due to exchange rate losses on accounts receivables. They just aren't able to cover their operating costs. If someone wanted to say they are not viable on a long-term basis, I'd say there is a good chance they are right but still, the business is worth something.
Depends on how you look at it. Overall margins (dollar terms) were around where I expected. What I didn't expect was the percentage to decline by around 4% and that was substantial. It is even more substantial if you factor in that they discounted some AR (shown in financial expense) and as they didn't provide enough detail on this one can reasonably speculate that it might be 10-15% which is obviously very bad, like Dragwonwave bad.
I'm pretty confident they did the discounting thing very early in the quarter prior to the stock issuance but that is just a guess because they didn't provide the data and that reflects poorly on them. Fudged a bit too much and that plus the comments about walking away from deals probably destroyed confidence of investors and Needham. Needham has never really understood their balance sheet risks in my opinion.
Very lucky that the sales were there because without them it would have been grim. In the end though, it was an economic loss for the quarter of probably around $1 million. That isn't that bad provided sales don't collapse. Next quarter should be break-even to mildly profitable if they don't have to discount any more receivables. After that, it will start to get tough if they don't pick up some new deals.
I can see an argument for it trading slightly below book value but book value is above $2. I've been buying a lot of shares this morning.
They will be able to drum up some interest in the shares when they visit the U.S. in a couple of weeks but in the mean-time I'd say there is a chance Needham walks away if they have not already.
Can't believe they had another $3 million in currency losses. I just don't see how this occurred and it needs to be asked about. The Real declines should have gone through equity as the local currency is the functional currency.
Currency rates can and do fluctuate but when you have inflation rates as high as South American countries do they are inevitable. They just weren't thinking or were simply desperate for those sales in previous quarters. When you operate in inflationary economies margins tend to be overstated with losses coming in subsequent quarters. They need to begin providing disclosures on this.
Well, guess we'll see what guidance is. Imagine it will be o.k.
Whatever drives efficiency needs to be done. ANR should even finance deals like this if necessary. Raise equity capital if it has to be done.
Of course, probably not possibe.
Is there any real news here?
I liked the proposed sale of Amfire. The industry needs to do everything it can to drive up efficiency. Of course, it will take far more than a small deal like Amfire and it probably still wouldn't be enough.
Another good question is whether or not they got any of the Megafon deal in Russia or if it all went to Huawei.
Being an Israeli company was something of an advantage on that deal but I just have a feeling Huawei got everything.
A good question to ask in the call is whether they are billing in USD across all of South America and what sorts of taxes do they face when they pull money out. More specifically, I want to know if the price lists are fixed in Reals because if they are not, they are carrying more than just accounts receivable risks and currency risks for the 160 days the receivable is outstanding, they carry risk for the time the price list is in existence.
No idea how they price in Brazil but I do know they bill in Reals.
My wild guess is (on a non-GAAP basis).
$93 million revenue.
Margin $26 million
Loss from ops $1 million
Finance exp $1 million
Tax exp $.5 million
Loss of $2.5 million. Predictions of profitability for 4th quarter although how long that will last I dunno.
Still up 20% over 52 week lows. Didn't buy then, pretty unlikely they buy now. Not to mention that they have raised capital at prices well below current price within the last couple of years.
They have much more debt and generate lower returns than others. Doesn't mean it is a lousy company.
I'm impressed they survived and are thriving to an extent.
They are generating decent returns and operating the business fairly well.
They didn't mention what their accrual for Tessera was did they? Going to wait until the 10-Q is filed. That is a bit of a crock. Also, there were several one-time items that went in their favor. Pricing with Apple must be really tough as their production volumes were way up without much of a corresponding revenue bump.