NMKT End of Summer Update
Dear Fellow Shareholders,
Summer has come to an end andNewMarket is heading into its historically busiest season. Over the past three years, the second half of the year has accounted for 37% more of our annual sales than the first half of the year on average. Significantly, we anticipate a better than average performance in the second half of this year. In the past, as summer ends and investors come back to work, NewMarket management goes out on the road to present the Company's latest corporate developments and business plan to the investment community. With the recent progress achieved by NewMarket over the summer, this year's fall road shows will emphasize the Company's substantial growth in revenue and profitability attained in the emerging markets arena.
The purpose of my letter today is to provide shareholders with a preview of NewMarket's communication strategy for the fall and to highlight the Company's realized performance milestones to be featured in the fall communication campaign. Additionally, I have included some insight into the Company's trading activity over the year that may be of interest.
Going Forward Communication Strategy
History of Milestone Announcements: Over the last five years, NewMarket has erred on the side of over-communication. Five years ago, the Company had only $1 million in annual sales and most aspects of the Company's business plan were just that – a plan. Accordingly, our communication strategy was to extensively explain and re-explain our business plan to our shareholders and potential investors. One approach was to outline the company's planned milestones. As we fulfilled those corporate goals and forecasts along the way, we announced the milestones in a manner that demonstrated how the milestone fit into our plan and demonstrated the potential of our plan.
$1 Million vs. $100 Million: Until now, our communication strategy has changed very little. However, the Company is on track to achieve $100 million in annual sales this year. The investment community's performance expectations of a $100 million in annual sales company differs from those of a $1 million in annual sales company. The outlining of future milestones to explain our business strategy is no longer effective. The planned milestones of a developing business model have a certain degree of unpredictability. The investment community is more understanding of a $1 million company missing a planned milestone date than a $100 million company.
How Milestones can be a Problem: While future milestones can provide an effective illustration of an aspect of a business plan yet to be developed, at $100 million in annual revenue, the Company is held to a higher standard of achieving milestones within certain timeframe expectations. NewMarket has used subsidiary independent public listing and shareholder dividend milestones to articulate a key aspect of the Company's business plan still in development. However, we have not achieved all the independent listing and dividend distribution goals within previously anticipated timeframes. The benefit of communicating the milestone to explain a developing aspect of the business plan has been neutralized by not delivering all milestones with the anticipated timeframe.
Less Milestones; More Performance: NewMarket can do better. The Company has many exciting aspects of its business plan yet to be fully realized. However, the Company also has equally as many exciting aspects of its business plan that have been realized and continue to demonstrate ongoing performance. Our "going forward" communication strategy will continue to include aspects of our business plan yet to be fully realized, but will do so with a more careful approach to setting time frame expectations. In the meantime, the "going forward" communication strategy will emphasize those aspects of the business plan that have been realized and continue to demonstrate ongoing performance.
Realized Milestones and Continued Performance Highlights:
NMKT is on track to book revenue of $55 Million to $60 Million in the last two quarters of 2007.
Third Quarter financials expected to be released by November 15
NewMarket Latin America, Inc. (NLAI) on track to book revenue of $20 Million in 2007 (NMKT has a 90% equity interest in NLAI)
NewMarket China, Inc. (NMCH) on track to book revenue of $40 Million in 2007 (NMKT has a 60% equity interest in NMCH)
Fall Performance Highlights – Featuring Emerging Market Success
Awards: Having achieved almost 8000% growth in revenue over five years, NewMarket has been nominated for a number of nationally recognized business performance awards again this year. Over 60% of NewMarket's revenue comes from some of the world's leading emerging markets including China and Brazil, often referenced as part of the BRIC development block (Brazil, Russia, India and China). NewMarket has enjoyed the recognition of a number of business performance awards over the last few years and expects a strong showing again this year. We are attending a number of awards banquets over the next two months and anticipate corresponding announcements that will feature the Company's revenue and net income growth.
Conference Guest Speaker: NewMarket has speakers scheduled at a variety of emerging market conferences this fall to feature the Company's experience in China and South America. The conference venues are well recognized and, again, we anticipate corresponding announcements that will feature NewMarket's emerging market successes.
Recent Contracts: NewMarket has had tremendous success with its emerging market strategy which has resulted in a number of notable and significant contracts. As we begin work on these recent contracts, we also anticipate related announcements regarding the contracts with details dependent on client permissions. A recent highlight demonstrating the Company's emerging market progress is the very successful completion of our Latin American Project with the Academy for Educational Development (AED) and the United States Agency for International Development (USAID). Much information regarding the project is available from our website (see Project LAC on our homepage). The Latin American Project has generated a number of substantial follow-on projects to be announced before the end of the year as the new projects kick off.
Fundamental Financial Performance and Share Price
Stellar Financial Results: Over the past five years, NewMarket has continued to produce stellar financial results, but has experienced periodic share price volatility that has resulted in a less than awe inspiring share price and market capitalization. Many of these share price low points have been during the summer time as the trading volume on the OTCBB as a whole declines. As we end the summer of 2007, we are experiencing just such a low, even though NewMarket just reported 30% revenue growth in the 2nd quarter 2007 compared to the same period last year with 26% net income growth. Taking revenue seasonality into account, we are on track for $100 million in profitable revenue compared to our $77.6 million in 2006 revenue with over $5 million in net income. Another way of looking at our growth expectations for the end of this year is that we are on track to report revenue of $60 million over the next two quarters. We continue to have a backlog of business that could take us to as high as $120 million in revenue in 2007.
Good News: Though our current price is low, our volume weighted average price (VWAP) is over 10 cents higher than our current share price. Seventy-five percent (75%) of NMKT's trading volume year to date has been over $0.35.
Average Weighted PPS year to date is $0.37
184 million shares have traded year to date
138 million shares have traded above $0.35 (75% of total shares traded)
46 million have traded below $0.35 (25% of total shares traded)
Issued and Outstanding is 200 Million (Total YTD trading equals 92% of the I/O)
Total Trading Activity in dollars is $67 Million
Total trading activity in dollars above $0.35 PPS is $54 million
Total trading activity in dollars below $0.35 PPS is $14 million
78% of total trading activity in dollars has been above $0.35
* Detailed analysis on daily stock price and volume is available upon request to ir@newmarkettechnology.com
Long-Term Potential: Amex-listed companies in our industry trade at a Price to Sales ratio of better than 1 times (1X) revenue and NASDAQ listed companies in our industry trade at a Price to Sales Ratio of almost 4 times (4X) revenue. NewMarket is driving toward an upgraded listing in the future, at which time, in my opinion, we have the potential to see a valuation far above the current price. Available upon request is a spread sheet that demonstrates the comparative undervaluation of the company based largely on our OTCBB listing.
I thank you for the time and attention you have committed to reading my letter. I hope the information here has been of value. I encourage you to email us with any further questions and comments you may have at ir@newmarkettechnology.com. I thank you for your ongoing support of NewMarket's vision and on behalf of all the employees at NewMarket, I express our collective commitment to deliver on all aspects of NewMarket's business plan.
Philip Verges
CEO
NewMarket Technology, Inc.
