NewMarket Technology, Inc. Provides Business Plan Update for Projected 100% Growth in China to $40 Million in 2007 Revenue Reaching Profitability in 2008
Monday November 27, 11:56 am ET
CEO Addresses How Cash Generated by Operations is Best Used to Invest in Growth versus Reporting a Profit in 3rd of 3 Shareholder Letters Providing Detailed Operation Updates
DALLAS--(BUSINESS WIRE)--NewMarket Technology, Inc. (OTCBB:NMKT - News) today released a letter to shareholders from CEO and Chairman Philip Verges regarding detailed plans to increase revenue from its Chinese operations by 100% from approximately $20 million in 2006 to a projected $40 million next year. The forecasted increase in China accounts for a substantial portion of NewMarket's recently announced initial forecast to increase overall revenue to a profitable $120 million in 2007.
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NewMarket recently listed its consolidated Chinese subsidiary in a combined acquisition and reorganization transaction with Intercell International Corporation (OTCBB:IICP - News). Today, Intercell is majority owned by NewMarket Technology. The Intercell name will be changed to NewMarket China in the coming weeks.
The letter to shareholders explains the revenue expansion opportunity and details the current plan to achieve operational profitability in China in 2008 and maybe sooner. While currently profitability plans only include net income expectations from current operations, the CEO outlines how yet to be determined acquisitions could accelerate operational profitability. The letter is included in its entirety within this press release.
Dear Fellow Shareholders,
NewMarket recently announced a projected revenue increase of 100% within its Chinese operations from approximately $20 million in 2006 to $40 million in 2007. In 2005, NewMarket entered into an agreement with the Huali Company in China that has resulted in the majority of NewMarket's approximately $20 million in 2006 revenue. That contract is being expanded to include servicing an additional geographic region roughly equal in size to the existing geographic region. NewMarket's experience with Huali and familiarity with the expansion region gives us the confidence to forecast the revenue expansion potential. The current Huali relationship holds the potential to expand into yet another geographic region in 2008 to potentially triple the revenue anticipated this year.
First Build Financially Sustainable Customer Relationships, Then Build Profits
The bulk of the services are related to selling, installing and maintaining computer hardware and peripherals. Due to the nature of the business and the current sales opportunity almost being entirely within China, the profit margin opportunities are not initially particularly impressive. NewMarket plans to improve profit margins by increasing software development services to be a larger percentage of the overall services, in addition to opening up foreign markets. Additionally, as central to NewMarket's overall strategy, we also have plans to dramatically improve profit margins as the Company matures by acquiring early stage emerging technology companies specific to the Chinese market and pulling higher margin emerging technology sales through to the existing systems integration customers.
Practical Profit Expectations and Probable Profitability Upward Revisions
In conjunction with announcing the projected 100% increase to $40 million in revenue in 2007, NewMarket also announced that operational profitability is not expected until 2008. The profitability expectation is forecasted solely based on the potential of the current operation. The profitability expectation does not include any consideration of increased higher margin software development sales or increased higher margin sales outside China. The profitability expectations also do not include the acquisition of any emerging technology companies and the corresponding sale of any emerging technology products and services to existing systems integration clients.
Independent of the probable profitability upward revisions based on planning underway for software and foreign technology service sales, management considers the current profitability schedule reasonable and practical and well in line with early stage development plans.
Generating Cash and Sources of Investment vs. Net Income Contributions
NewMarket management considers cash produced from operations the best source of investment capital to expand operations. NewMarket and its subsidiaries all have fast growth business strategies and are likewise making regular investments in growth. Current plans in China call for all cash flow produced by operations in China through 2007 to be reinvested back into rapid expansion in China.
NewMarket is one of many companies vying for investor attention. Investors are hungry for profitable companies. One might argue that contributing generated cash to net income rather than investing all cash in a small businesses rapid expansion is a poor use of cash. However, I find it is more practical to demonstrate some profitability in order to draw investors' attention more easily to the fact that the Company is generating cash, though most of that capital is being reinvested back in support of our continued rapid expansion.
Increased Margins from Listed Subsidiaries Enabling High Margin Equity Income
Dramatic profitability from NewMarket and its subsidiaries will be realized as the business model matures and creates more independently listed consolidated subsidiaries. At that time, both NewMarket and its Chinese subsidiary will be able to derive high margin equity income from the fractional sale of equity in independently listed consolidated subsidiaries. Not to be overlooked is the eventual shareholder dividends to be distributed of the subsidiary stock when most advantageous to NewMarket investors.
Please consider attending NewMarket's Annual Town Hall Meeting in New Orleans on December 7th to learn more about our operation in China and our other soon to be independently listed consolidated subsidiaries. Come ask more questions about early stage profitability and hear more about our fast growth business strategies.
Philip Verges
CEO and Chairman
NewMarket Technology, Inc.
About NewMarket Technology Inc. (www.newmarkettechnology.com)
NewMarket has combined a traditional systems integration and support services capacity with a specialized asset-based approach to assisting its clients with the delicate balance between maintaining legacy systems and gaining a competitive edge from the latest technology innovations. NewMarket provides certified integration and maintenance services to support the prevailing industry standard solutions to include Microsoft (Nasdaq:MSFT - News), Cisco Systems (Nasdaq:CSCO - News), Hyperion Solutions (Nasdaq:HYSL - News), SAP (NYSE:SAP - News), Siebel (Nasdaq:ORCL - News) and Sun Microsystems (Nasdaq:SUNW - News). Concurrently, NewMarket continuously seeks to acquire undiscovered emerging technology assets to incorporate into an overall product portfolio carefully packaged to complement the prevailing industry standard solutions. NewMarket delivers its portfolio of products and services through its global network of Solution Integration subsidiaries in North America, Latin America, China and Singapore.
"SAFE HARBOR STATEMENT" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements that involve risks and uncertainties. The statements in this release are forward-looking statements that are made pursuant to safe harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results, events and performance could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause NewMarket's actual results in future periods to differ materially from results expressed or implied by forward-looking statements. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making investment decisions.
Contact:
NewMarket Technology, Inc.
Rick Lutz, Investor Relations, 404-261-1196
ir@newmarkettechnology.com
www.newmarkettechnology.com
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Source: NewMarket Technology, Inc.
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