Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
This isn't just the company firing up the printing press off the books like you see with many OTC companies. These are strategically placed sales to institutional buyers @ a 25% discount to where the stock was trading just two days ago.
And, again, including the warrants, this is a weighted avg. sales price of 0.13, about in line with current prices.
I'm actually thrilled to see the institutional interest here. It's a qualitative consideration, for sure, but someone must see potential here. Chasing 25% with a 6-month lock-up on a volatile microcap stock doesn't exactly sound like something an institutional buyer would waste time with unless they felt shares were worth significantly more than where they currently trade.
It's a weighted average price of $0.13 when you account for the warrants.
Historically, the company offered shares and warrants at the same price, each of which were typically well below the current trading price.
While $0.09 is below the current price, the warrants are well above it.
So either someone thinks they got a good deal with warrants at a strike of $0.20, or the company got a good deal receiving partial consideration for warrants that will never be exercisable.
I tend to believe the former, but I'll leave you to come to your own conclusion.
This private placement is not bad at all. The fact is the company is currently completely financed via new equity. The difference between this private placement and prior ones (usually at $0.05), is that this sets a new floor at $0.09 and the warrants aren't exercisable until $0.20. I'm fine with shareholder financing as long as it's at progressively higher prices. The company gets to use that capital, the shareholders are locked up for 6 months, and they have a cost basis that is progressively higher.
Hopefully, they'll be doing another offering at $0.20 soon because the share price is at 2x that amount :)
Check out the company's 8-K filed today.
They made a presentation to investors and disclosed full-year 2013 revenue of $4M+, meaning 4Q revenue exceeded $1M for the third straight quarter.
More importantly, they disclosed 2014 projected revenue of $7M-$8M.
After three years of revenue in the $3M range, they grew it to $4M in 2013, and are now projecting to grow it as much as 100% in 2014 alone.
That's pretty solid progress. The market should be happy once it digests this.
They also mention plans to eventually be sold to a strategic buyer.
First take on the 10-Q:
Looking only at revenue numbers, it looks to have been a solid quarter.
Total revenue was up 15.5% y/y.
Total MESH category sales were down 7% y/y. But that category also includes Freedom sales, which were up 261% y/y. So Freedom has been able to make up some, but not all, of the decline in the other products within the MESH category.
Support and Maintenance Services was up 57% y/y. While this category used to include only the legacy Enterphone contracts from Telus, I believe it now includes services contracts for the company's new products. Those new contracts likely drove the substantial y/y increase.
"Other Revenue," which is a catch-all category I use that includes everything other than MESH (and Freedom) and Services Contracts was up 19.7% y/y. That's that line item's second straight quarter of substantial growth, so the company must be seeing demand for non-MESH, non-Freedom products, too.
As revenue can be lumpy quarter-to-quarter, I think it makes sense to look at total revenue on a four-quarter rolling average basis to smooth things out. Doing that, total revenue was up 6.5% y/y, an acceleration from the 2.5% growth rate in the March quarter.
So while legacy products, it appears, continue to lag, Freedom is still experiencing rapid growth to the point that total revenue is now starting to grow pretty substantially.
This is a very solid report, in my opinion, and confirms my view that the company is slowly making its way towards profitability and positive cash flow.
I sure am. I didn't respond to your PM earlier because I'm just a lowly free member. I'll get in touch via email soon and give you an update on my goings on. I believe I have your email, but if you want to PM it to be just to be sure, that would be great.
All well on your end?
I'm starting to get excited about Viscount. I had it tucked away on a dusty shelf of my portfolio for a while but decided to give it a deeper look after 4Q12 revenue showed an inflection. After looking through everything, this is the first time in a while I can actually see a path to profitability if management does the right things and makes efforts to further align their interests with shareholders. I see no reason not to - Pineau owns a decent amount of shares and I believe he can get them north of $0.40 over the next year if he gets us profitable. Longer-term, there's significantly more value than just that.
Board member Robert Liscouski was just on CNBC talking about security and the Boston situation. I'll try to find a replay.
http://www.businesswire.com/news/home/20110914005981/en/Robert-P.-Liscouski-Joins-Viscount-Systems’-Board
A few comments about margins:
The services segment is actually profitable, which many of you have probably noticed. It's done between 10-30% operating margins in each of the last fours years, though if you look at a longer time sample, it's normalized closer to a median of about 12%.
This is significant for a couple of reasons:
(1) Services has been relatively flat as a percentage of revenue in each of the past three years. I believe this segment could begin to start comprising a greater percentage of revenue as MESH/Freedom revenue continues to eclipse Enterphone revenue. A lot of these service contracts appear to be based on Enterphone, but hopefully new contracts from MESH/Freedom will be enough to offset that decline, allowing this profitable segment to become a greater contributor to the business mix. Of course, service contracts are only as good as the products they're based on and without increasing product sales, service contract revenue will decline. But things appear to be on the up-and-up on the product front, so hopefully we begin to see the benefit of this higher-margin segment soon.
(2) This segment also still carries heavy amortization (all of the company's amortization is from this segment) due to the old (impaired) service agreements acquired from Telus. The current annual amortization expense of 20,892 drops to 5,224 in 2015. That adds an additional 15,668 to this segment's profitability, bringing it's operating margin up from a normalized 12% to about 14% based on 2012 figures. This segment has no depreciation associated with it, and currently carries a normalized EBITDA margin of 15% plus.
As for MESH/Freedom gross margins, if you go back and read the 2009, 2010, and 2011 10-Ks, management indicates a target margin range for MESH of 50-60%. Given they started talking about this range before Freedom was even released, I think it's safe to say the contribution of Freedom to this segment should make this gross margin range even higher over time.
Taken altogether, in a couple years, we could be looking at a business with a core revenue segment posting 60%+ gross margins and a complementary services segment doing 15%+ EBITDA margins. I think this makes way for a clear path to profitability and no more need to pursue heavily dilutive equity financing.
The company's margin structure is actually very solid when looking at it on a gross margin basis. We've just got to continue to grow revenue against relatively fixed costs to get above the current wall of operating expenses that is currently standing between us and profitability.
Annualizing 4Q12 SG&A and R&D expense levels, if the company can do 5mm in revenue and 60% gross margin, you're looking at an oh so slight EBITDA loss of 57k. But at 65% gross margin, that jumps to a gain of 193k. At 70% (really assuming here Freedom packs a lot of margin), you get up to an annual EBITDA gain of 443k. If you assume stock-based compensation (included in EBITDA but a cash inflow on the cash flow statement) and investments in working capital (not accounted for in EBITDA but a cash outflow on the cash flow statement) roughly offset each other, the aforementioned numbers should almost mirror the company's cash from operations. 193k-443k per year in cash from operations may not fully satisfy the company's financing needs, but it could come pretty close and help ease the need for equity financing. In addition, with numbers like that, we could perhaps instead opt for some decent-rate debt to finance operations.
Thanks ted, all. I still have some work to do. I'm a long-time holder but have been meaning to give things a fresh look for a while. I've covered the operating section of the income statement and am pleased with the trend towards positive EBITDA. Positive net income will come with time - interest expense is relatively de minimis, D&A isn't too burdensome and will decrease markedly when the company is through amortizing its acquired Enterphone intangibles after 2014 (also, it still has over 7 years of depreciation life on its computer equipment and over 6 years of depreciation life on its office furniture and equipment; assuming the lives of these items are accurately matched with their depreciation schedules, the company shouldn't require any significant capex investment (and, thus, more depreciation expense) in the next few years), the company should have virtually zero tax liability in the next few years given its history of losses, and the derivative adjustment "expenses" should become less severe as profitability nears. For one thing, management should be able to get better terms on future equity financings as its risk levels will have reduced. Eventually, however, once the company is cash flow positive, hopefully it can fund operations internally and no longer enter into such creative equity financings.
One question I do have is whether 4Q12 expense levels are sufficiently high enough to fund a growing revenue base or if they are expected to ramp up, and to what degree. Even if opex does increase in absolute numbers, as long as it continues to decrease as a percentage of revenue, we're continually nearing positive EBITDA, the most important metric, in my opinion, given its rough estimation of operating cash flow levels. Management needs to come out and supply investors with its expense and margin targets for 2013.
I'd also like to see the margin levels for each segment of the business. How much better are Freedom margins relative to prior product lines? What are management's 2013 targets for MESH/Freedom as a percentage of total revenue? Will services revenue begin to uptick again concomitant with increasing MESH/Freedom deployment? If we can get some insight into margins by segment, we can really get a feel for what the company would look like once MESH/Freedom and Services comprise closer to 100% of revenue.
On my end, I still need to do some work on the BS and CFS. But I am confident things are moving in the right direction and am encouraged by management's recent efforts to increase transparency. Hopefully, they heed the inquiries I and some other investors still have. If they continue to reward shareholders with greater transparency (and can show a path to consistent revenue growth and profitability), I believe they'll be rewarded with a much larger and deeper-pocketed investor base.
Last thing, they've mentioned their "backlog" number. "Backlog," "pipeline," and the like are much more open to interpretation than are accounts receivable and deferred revenue. How does management define backlog and what are the chances it will convert that backlog to revenue?
In any event, here at 11 cents, the company has shown enough progress to date to make the risk/reward suitable enough for serious consideration, in my opinion. I think we could be looking at a 15-cent share price base or higher with one more quarter of sequential improvement (1Q13). And then if 2Q13 numbers again improve, people will start valuing the stock based on 2014 profitability potential. If, in that year, they can do 1 cent per quarter in EBITDA per share, a 10x multiple on that would get us to a price per share of 40 cents. That level could be reached as soon as the second half of 2013 when people begin looking to 2014 potential. With sluggish economic growth and a frothy looking market, a 300% return on investment is looking pretty nice. I know that's a big number to throw around, and certainly a lot still needs to happen before we can get to one cent per share of EBITDA in 2014 - all I'm saying is that it's starting to look possible.
Disclaimer: Some of these questions may have been addressed on the recent conference call. I still haven't had the time to give it a listen.
Why I am still holding my VSYS shares:
(Note: As of the time of this post, all images were working and visible. If for some reason the image host zaps the images, I will try to link them to a more concrete hosting provider.)
In short, given the underlying fundamentals of the company, things are looking better now than they have in a number of years. This is in large part due to the higher revenue levels and margins associated with the company's partial transition to a software-based product model via Freedom. It's also good to see the numerous recent press releases met with an actual increase in revenue in 4Q12. I believe this is the beginning of a brighter future for VSYS shareholders.
In using the following model as a starting point, a number of things stand out (I apologize for the blurriness; it is due to the image host site I used):
First, it should be noted that I'm only looking at operating data. Practically speaking, the derivative liability restatements have only been reported on a full year basis for 2011, and I'm really trying to get a feel for the quarterly trends since Freedom's launch in 4Q10. More importantly, I'm more interested in the company's core operating results, and am therefore less concerned with the largely de minimis impacts of interest income/expense and the intricacies associated with derivative accounting. Along those lines, and given that the company's quarterly D&A appears both reasonable and consistent, I believe EBITDA is the most important operating metric to look at.
We can see the company's total revenue has been uptrending over the past 8 quarters, albeit only modestly:
However, when we look at revenue by segment, we can see that the company's MESH/Freedom segment is exhibiting a clear and identifiable uptrend. Indeed, this segment grew by a CAGR of 5.2% over the last 8 quarters, which accelerated to a CAGR of 10.0% over the 4 quarters of 2012. This is faster than both U.S. GDP growth and expected 2013 Enterprise IT growth of 6.0% (I believe it is proper to consider VSYS an "IT" company now given their focus on software-based premises security.)
It should also be noted we can see from the above that the company's Enterphone segment has been in a steady decline, though management has clearly telegraphed these expectations. Further, given much of its services contracts involved Enterphone deployments, the company's Services segment has also more or less flat-lined. That said, as MESH/Freedom becomes a greater proportion of the company's overall revenue mix, the company's total revenue growth rates will begin to reflect that of MESH/Freedom which, at 10.0% (2012 CAGR), is quite attractive (without even considering the potential for this segment's growth to continue to accelerate). Below we can see that MESH/Freedom is steadily comprising a progressively greater share of total revenue, growing from 50% in 1Q11 to 62% in 4Q12.
This all said, though VSYS shareholders will probably be the last to complain about increasing revenue growth, revenue is only as good as the profit that can be generated from it. In some cases, greater revenue can even be bad if it is outsized by the expense base required to generate it. If revenue fails to generate positive cash flows, a company like VSYS will be required to tap the equity markets in order to maintain operations, something VSYS shareholders have all too often come to expect. However, as long as the increasing revenue base is generating higher margins, we continue to inch closer towards profitably, at which point we can hope that management will stop issuing shares and instead support operations from its own positive cash flows.
We can see from the below chart that the company's gross margin trend has indeed improved over the last 8 quarters. I believe this is likely due to the company's switch to focusing more on software-based products, which carry higher margins than hardware-based alternatives.
More importantly than gross margin, however, we can see the company's EBITDA margin, though negative, has shown substantial improvement in recent quarters. This is due to both higher revenue levels and lower expense levels as management has now made much of the necessary SG&A and R&D expenses to support their Freedom rollout and the company's remaining expense base is relatively fixed. Indeed, 4Q12 operating expenses were the lowest they've been in the history of the above dataset both on an absolute and percentage of revenue basis. As revenue levels continue to increase, we should get progressively closer to positive EBITDA margins, which I expect will be matched by positive cash from operations and a reduction in share issuance.
By that point, shares should be significantly higher based on the company now having exhibited it has "turned the corner" and thereby attracting a new class of investors who otherwise remained sidelined until management was able to prove it can run a profitable business. In the interim timeframe, I expect shares to progressively melt higher and am confident an entry at current levels will be met with respectable gains in as little as 1-4 months. While there is still substantial risk associated with this company (and any micro-cap company), I firmly believe the risk/reward profile today is as favorable as it's been in years (and significantly more favorable than the large majority of other micro-cap OTC companies).
Holy crap. There's still a ton of room for DatPiff to grow. We could potentially see millions in traffic on a daily basis.
Looking good here today minus the spread.
And there's bid support.
Nice choppers. Only 10k shares are showing on ask below .24.
Someone isn't scared of the wall.
I'll do that. Thanks, wadi. I don't know what this board would do without ya. ;)
They need to launch a sister-site for electronica mixtapes, you know, techno, trance, and the sort.
You only thought the mixtape market was huge in the hip-hop space... It is gigantic in the electronica market and on a worldwide scale.
There are a few who have done something similar, but with Marcus' knowledge and talent derived from DatPiff under his belt, he could kill the competition. He could also use his DatPiff following as kindling to get the train started as I'm sure you'll have some overlap between folks who like both electronica and hip-hop.
If we do that, I will call your local bar, give them my credit card number, and order you your drink of choice.
This is unbelievable. Not only has our daily traffic jumped to its highest level ever, but it's now at double the level of its average over the past few months.
Double traffic probably translates into something near double revenue I'd have to imagine.
If we can keep this up, this will be a blowout quarter!
I got 1k 9c shares today. I was shocked to have gotten them considering I was bidding .1011.
That's exactly right which is exactly why ad agencies have moved towards that technology.
Yeah, most now provide for directed advertising using your cookies.
Only 5k at .1285, 5k at .14, 5k at .19
Under 500 ... wow! I'd not realized that.
I'm still here, BTW. Holding all my shares. Extremely busy.
That one does look good. Thanks, RHINO.
Thought y'all would enjoy this:
50 Richest Members of Congress in 2010:
http://www.rollcall.com/features/Guide-to-Congress_2010/guide/-49892-1.html?zkMobileView=true
In Chart Format:
http://innovation.cq.com/media/50richest2010/?ref=rc
Top 15 Stocks Held by Members of Congress:
http://www.businessinsider.com/15-top-congressional-stocks-2011-6?op=1
ADZ is a short ETF. It contains equal weightings of corn, wheat, soybean, and sugar futures contracts.
AGA is a double-short ETF with the same weightings.
AGF is a long ETF with the same weightings.
DAG is a double-long ETF with the same weightings.
DBA is a long ETF similar to AGF.
GRU and JJG track grains as a whole.
Currently, there are no wheat-specific ETFs, but I think DBA gives you the most wheat exposure.
BTW, FINVIZ has all of these futures charts. Here is wheat's:
http://finviz.com/futures_charts.ashx?t=ZW&p=d1
Wow, this is unbelievable stuff, aurora. I'm not nearly as educated on commodities as you are. Please continue to contribute here when you find the time.
The reason I had asked about wheat was because I had read it's a replacement good for corn in many respects. Thus, an increase in corn prices would cause more folks to shift towards buying wheat, thereby making both investments attractive as a result of corn being attractive.