NewMarket Technology, Inc. Releases Progress Update on $50 M in Revenue Anticipated in 2005 Report, Plans for $500 M and Future of Shareholder Dividends
March 21, 2006 11:01:03 (ET)
DALLAS, Mar 21, 2006 (BUSINESS WIRE) -- NewMarket Technology, Inc. (NMKT, Trade) today released a letter to shareholders from CEO, Philip Verges. The communication provides an update on the Company's recent progress including the anticipated $50 million in profitable revenue in the upcoming annual report for 2005 to be filed March 31st. The CEO elaborates on the Company's goals to continue rapid growth to $500 million in profitable revenue. The regular issue of shareholder dividends is a key aspect of NewMarket's overall business plan of building enterprise and shareholder value. Mr. Verges explains how shareholder dividends fit into NewMarket's plan and what shareholders can expect in regard to the issue of dividends.
The letter to shareholders is included in its entirety in this release:
Dear Fellow Shareholders,
NewMarket has posted exceptional growth over the past three years reporting $2.3 million in revenue in 2003 with an anticipated $50 million in revenue to be reported in the upcoming annual report for 2005 due out March 31. I believe shareholders will be pleased with the Company's improving profits.
As many of our shareholders know, the Company's success to date has been recently recognized by ranking as the 13th fastest growing technology company in North America in the Deloitte Fast 500. However, management believes Wall Street has not yet rewarded our shareholders with an increasing share price in the ultimate recognition of NewMarket's undeniable fundamental success of three years of substantial revenue, income and shareholder equity growth.
Management is confident in gaining Wall Street's attention with continued growth, the issuance of shareholder dividends and the continued addition of notable clients. Management plans to aggressively continue the Company's rapid growth from $50 million in revenue to $500 million with multiple equity dividends issued concurrently. Management contends that the Company's first quarter 2006 financials will reflect continued progress towards meeting NewMarket's goals.
NewMarket's High-Tech Research and Development Vision
High-Tech company profit margins are shrinking as a result of growing global competition from nations with lower labor costs. Reduced profit margins in-turn reduce the capital available for investment in ongoing research and development (R&D). Smaller R&D budgets negatively impact the development of future high-tech features and functions. The vision and objective of NewMarket is to evolve current R&D initiatives to compensate for shrinking R&D budgets and the resulting impact to future high-tech products.
NewMarket's strategy is to introduce a new R&D methodology that combines:
1. traditional systems integration services with
2. the incubation of emerging technologies and
3. a plan to monetize the appreciation of the emerging
technologies
NewMarket's successful growth to $50 million in profitable revenue is the result of only the systems integration and incubation functions of the Company's overall business strategy. The plan to monetize the appreciation of incubated emerging technologies has yet to be demonstrated. The potentially significant equity appreciation of incubated emerging technologies represents the most profitable aspect of NewMarket's overall strategy. In short, the best is yet to come.
Revenue Growth through Large Long-Term Contracts with Notable Clients
Approximately 50% of NewMarket's revenue growth through 2005 has come through acquisitions. Beginning in 2006, shareholders can expect ongoing revenue growth to be bolstered by larger and longer-term contracts with a client list that will include more well-known companies.
To date, the majority of NewMarket's organic revenue growth has resulted from foreign clients. Understandably, NewMarket's largely North American shareholder base is generally unfamiliar with the names and operations of NewMarket's foreign clients.
Management has recently concentrated efforts on signing large long-term contracts with North America clients, with an emphasis in our own corporate backyard of Texas. While NewMarket ranked as the 13th fastest growing technology company in North America in the Deloitte Fast 500, we ranked 2nd in Texas in the local Deloitte Fast 500 competition. We are knocking on the doors of multibillion dollar corporations headquartered in Texas offering our services as a sister Texas Corporation. We are receiving a warm Texas welcome.
Our concentrated efforts in Texas are not at the expense of our sales initiatives in foreign economies. Our aggressive efforts locally are in addition to our foreign sales initiatives. Combined, management believes NewMarket could attain $500 million in revenue in the next three years.
Shareholder Dividends
The most profitable aspect of NewMarket's overall strategy is the plan to monetize the appreciation of incubated emerging technologies. As an integral facet of building shareholder value, NewMarket houses each of its emerging technologies within independent subsidiary corporations. As subsidiary technology companies establish sales traction sufficient to validate an emerging technology's marketability, NewMarket will publicly list the subject subsidiary, while remaining as the majority shareholder.
he public listing of subsidiary technology companies enable:
1. concentrated capital formation to support continued subsidiary
growth,
2. dividend issue of publicly traded subsidiary stock to NewMarket
shareholders,
3. and enhanced NewMarket profits through the monetization of
subsidiary stock,
4. along with a strengthening of the company's balance sheet
through the company's ownership of marketable securities.
As the majority shareholder, NewMarket can monetize subsidiary stock by selling a fractional minority interest on the public market. Accordingly, NewMarket can substantially enhance its profits by combining technology product and service sales with equity income from the monetization of subsidiary stock.
In addition to facilitating enhanced profits, NewMarket can deliver direct value to shareholders through the dividend distribution of publicly listed subsidiary stock. NewMarket has a number of subsidiaries in the process of establishing independent public listings.
Management had planned to realize the first dividend distribution in 2005 with the independent public listing of its Homeland Security subsidiary achieved through a reverse merger with Defense Technology Systems, Inc. (DFTS, Trade). The dividend distribution was unfortunately delayed by unforeseen complications that are currently being addressed. Management still intends to issue the DFTS dividend, however another equity dividend may be issued prior to the originally planned first dividend of DFTS stock.
Management believes the initial dividend issue of publicly listed subsidiary stock will capture Wall Street's attention and play a key role in finally achieving a valuation more consistent with the Company's revenue, profit and shareholder equity growth demonstrated over the last three years.
Management considers the Company significantly undervalued today by most financial metrics used by investors. National exchange listed companies with comparable revenue are trading at a Price to Sales ratio of more than two times revenue while NewMarket, with better than comparable average earnings, is trading at a Price to Sales ratio of less than one times revenue. Management is confident that continued success in the execution of NewMarket's plan will result in erasing this disparity from industry comparables. A recent independent analyst report by Tri-State Capital recommended a target share price for NewMarket common stock nearly three times yesterday's average share price.
Progress in the first quarter of 2006 is consistent with the Company's 15% compounded annual growth forecast for the year. An upward revision of the forecast following the first quarter financial report is likely. The soon to be released 2005 annual report will reflect our anticipated 100% revenue growth over 2004 to $50 million in revenue with an even more substantial growth in income as a percentage of revenue. Progress toward subsidiary public listings is also likely to be evident prior to the filing of the first quarter financial report, as well as, the related disclosure of a reduced NewMarket fully diluted issued and outstanding.
Management believes that the benefits of the Company's recent steps to deepen the management team and broaden the experience and expertise represented on the Board of Directors will be apparent in the first quarter financials and further elicit confidence in realizing NewMarket's potential to reach $500 million in revenue within the next three years with multiple dividends issued along the way. We look forward to sharing the Company's progress in more detail in the upcoming annual and quarterly reports.
Best Regards,
Philip Verges
AI
