The best part about today's news was the significant ramp in gross margin vs. last quarter. That tells us that the legacy FTE business must be ramping up by more than the Benchmark business. The FTE business has a lot higher margins so growth in that business would have the most impact on the bottom line.
The most recent See Thru Equity update had projected a 22% gross margin for this company for this year. They are now up to 20%, not too far away from that estimate.
The operating profit of $5M is impressive considering that (by my estimate) about $3M of amortization blew through the P&L last quarter due to the purchase accounting for the Benchmark acquisition. Without that non-cash charge the operating income would have been $8M for the quarter, not too shabby considering their quarterly interest expense is under $2M.
They are obviously generating cash at a good enough rate to get their senior debt refinanced at this point. The question is, do they do it now or wait a little longer and probably get even better terms on the new debt than they would if they refinanced now.
The only fly in the ointment that I could see is that backlog slipped a bit from last quarter, but I have a hunch that they will be able to beef that backlog back up now that they got this quarter announced. The large companies that they deal with will now be a lot more comfortable dealing with FTE and getting into deals that depend on FTE still being around 3 years from now to be available to service the work done today.
The timing of today's PR was interesting. The 10Q is due in just 3 weeks so they could have just waited for that before putting this out. Maybe they are attending an investment conference in the interim and wanted to be able to mention these results at that conference (in which case they would need to do a PR first, as they did). Their shareholders' letter said they intend to present at more investment conferences. Hopefully they keep us updated on that process via the IR calendar on their website.
Great to see the massive volume today. We don't need big price moves right now as much as we need big volume. In fact, the fact that the stock price barely moved on such massive volume may entice more heavy hitters to step in and start buying, knowing that there is some sucker to keep selling them shares. The big boys can build a big position in this thing at this point without having to bid it up to the moon.
The other thing that could happen is that we see some huge cross of 1M shares +, where the big seller(s) get taken out in a single shot.
