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SpongeTech
Posts Full-Year Numbers - What a Year! |
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I
was beginning to wonder when we'd see
SpongeTech's (OTCBB: SPNG) full-year (and quarterly) numbers. This
morning's release of them verifies that sometimes things really are worth
the wait. One word.
The
press release and 10-K focus on the full-year numbers, which is
fine. I also did a little algebra to dig out the last quarter's
numbers, as I think the rate of progress in just the last four quarters
is the real story.
Oh,
and you might be interested in getting an update on my take regarding the
whole dilution thing. I'll wrap up with that.
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It's
Still All About The Benjamins |
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Here's
the year in a nutshell....$5.6 million in revenue, $3.5 million in gross
profit, and $1.2 million in net income. All three are company bests.
However,
most all of us know by now the story here was and is a growth story,
though it was a story that was just starting. We wanted - perhaps needed
-
to see significant increases each quarter if this upstart was to be viable.
 With
that in mind, here are last quarter's numbers for the same categories...$4.0
million in sales (up from the previous quarter's $1.28 million), $2.2 million
in gross profit (up from the prior quarter's $1.3 million), and net income
of $1.2 million (up from the $188K in the previous period).
If
you're more of a visual person, the nearby charts show you the same thing.
See any trends there?
Now,
here's the part of the equation we all need to be reminded about, since
it wasn't explicitly stated in the press release... they've got $3.9 million
worth of near-term accounts receivable. That's for product that's already
been sold and delivered - just not paid for yet. Beyond that, the ordered-but-undelivered
backlog total (12 to 18 months) now stands somewhere around $35 million.
Why
do I bring it up? One of the questions I posed shortly after the company's
recent announcement about stock buybacks (of privately-held restricted
share as well as the plan to repurchase some publicly-held free-trading
shares) was this... where's the money going to come from?
If
you look at the balance sheet you'll see about $200K in cash, which isn't
a lot, but it'll help. What I'm eyeing is that $3.9 million in accounts
receivable. They've got less than $300K in accounts payable, so a big
chunk of that change could be pocketed, even if other expenses pop up in
the meantime. That cash, however, is likely to be part of the answer to
my question "where's the money going to come from?" They could probably
at least start taking care of any buyback with normal cash flow
now. Bear in mind there's still no legal requirement to complete or even
start either buyback. But, it could be done in the foreseeable future.
On
a semi-related note, I wonder if the cash flow is now strong enough that
they can ease up on issuing stock to finance their growth. Speaking of...
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To
Dilute, Or Not To Dilute |
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One
of the long-standing debates we've been hosting regarding SpongeTech's
capitalization has been what seems like incessant dilution. I'll
concede it was frustrating to see a lot more issued and outstanding shares
each quarter.
But
then, I started to compare the dilution side-by-side with the upside
of it. Though issuing more shares isn't the same as spending cash,
it has a similar bottom-line effect. Yet, I know you have to spend money
to make money. So, the question became...
 Are
shareholders better off with the dilution or without the dilution?
I've
got an answer, but let's look at the math first. Three quarters
ago they took a modest loss. Two quarters ago they broke even on
a per-share basis. One quarter ago they broke even again. They just
reported in their most recent filing they made 1 cent per share
for the entire year. What's not as clear is what they earned per share
for this past quarter on a fully-diluted basis at the time...it was about
$0.003, or 0.3 cents on May's 365 million outstanding shares.
That
doesn't sound like a lot, but look at it like this...at 4.5 cents per
share, the P/E ratio as of last quarter is now 15, fully diluted.That's
in-line with market averages.
In
the meantime, they've issued another 156 million shares to bring the total
I&O to 521 million. That's not the direction I'd like to see that number
go, though at this point that's hardly news. I still have to go back to
the over-arching question ... are shareholders better off with the dilution,
or
not?
There
were no earnings at all just a few months ago, so the answer (my answer
anyway) to the question is yes, the dilution was worth it
- SpongeTech got a great ROI on their fund-raising. Is more dilution
in store? I'm not sure, but probably - at least for the near-term. As before
though, if issuing shares benefits me more than it costs
me (net), I'm basically ok with it.
But,
here's the real point I need to drive home - do you think the most recent
quarter is what we can expect going forward, or do you think what we saw
three quarters ago is the norm? With a backlog of $35 million, I think
last quarter is more likely to be what we'll see going forward. In fact,
I think last quarter still understates what to expect in the future.
Think
about it like this ...assuming they don't sell one more sponge over the
next 18 months (which is unlikely), they've still got about $6 million
in revenue on tap per quarter ($35 million divided by 6 quarters is about
$5.8 million each quarter). Any one of those quarters could be better than
the company's entire previous year. Plus, they're now profitable.
The
numbers speak for themselves - SpongeTech delivered profitability to
shareholders. Even with the dilution; owners are better off
now than they were before. More importantly, there's a pretty clear
growth trend in place. See the chart above again as a reminder.
As
for the stock, it'll be interesting to see if investors see the glass as
half empty or half full. The company's getting the job done
and then some, more shares or not. Let's see if the market 'gets it'. I
hope they do, but we'll know for sure over the next couple of days.
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SpongeTech
Delivery Systems Inc. Reports Fiscal Year End Results
Company Reports
Robust Revenue Increase Topping $5.6M in Sales
Posts Increase
of $2M Dollars in Net Profits Year Over Year
New Product Offerings
Keep Company Poised For Substantial Growth
NEW YORK, Sep.
2, 2008 /PRNewswire-FirstCall/ -- SpongeTech(r) Delivery Systems, Inc.
(OTC
Bulletin Board: SPNG, www.spongetech.com),
a company which designs, produces, and markets innovative, cost-effective,
and environmentally sensitive packaging and product delivery solutions
through its exclusive patented packaging technology, today reported its
financial results for the twelve months ended May 31, 2008.
Management
Comment
"What a great
first year as a public company," said Michael Metter, Chief Executive Officer
of SpongeTech. "I'd like to take this opportunity to thank all our of shareholders,
my management team, our employees, and our vendors, for their support,
hard work, focus, and discipline in helping us to surpass our goals. Steven
Moskowitz and I have always realized that we are only as good as the people
with whom we have surrounded ourselves. We are determined to continue to
market and sell unique products that have great value as we continue to
build SpongeTech into America's Cleaning Company. We look forward to our
future."
Income Summary
(in thousands)
Fiscal Year
End Results
Revenues for the
twelve months ended May 31, 2008, were $5.6M dollars compared to $55,000
the prior year, this equated to a $5.5M increase year over year. This substantial
increase was due to the company marketing and distributing our products
regionally, nationally and worldwide.
Net Income increased
$2M dollars in 2008 to $1.24M compared to a loss of $817,000 in 2007. This
increase in net income can be attributed to a direct relationship to the
company's aggressive sales coupled with a focus on reducing costs.
Balance Sheet
(in thousands)
About SpongeTech(r)
Delivery Systems, Inc.
SpongeTech(r)
Delivery Systems, Inc., is a company which designs, produces and markets
innovative, cost-effective, and environmentally sensitive packaging and
product delivery solutions through its exclusive patented packaging technology.
These sponge-based products utilize SpongeTech(r)'s proprietary, patent
(and patent-pending) technologies involving hydrophilic (liquid absorbing)
foam and polyurethane matrices. The Company's sponges are specially configured
with an outer contact layer and an inner matrix, the latter of which comes
pre-loaded with specially formulated soaps and wax that are released when
the sponge is wetted and applied to a surface with minimal pressure. The
Company's current product line is designed for car care and pet care, however,
SpongeTech(r) is currently exploring additional applications for its technology
including an anti-bacterial, kitchen and bath cleaner, as well as a unique
"foaming" bath sponge for children.
For more information,
please contact Investor Relations at 1-877-SPONGE-T, and/or visit the Company's
website at: http://www.spongetech.com
Safe Harbor
Statement
Under the Private
Securities Litigation Reform Act of 1995: The statements in the press release
that relate to the Company's expectations with regard to the future impact
on the Company's results from new products in development are forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995. The results anticipated by any or all of these forward-looking
statements may not occur. Additional risks and uncertainties are set forth
in the Company's Annual Report on Form 10-KSB for the year ended December
31, 2005, the Company's Quarterly Report on Form 10-QSB for the first quarter
ended March 31, 2006. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof,
or to reflect the occurrence of unanticipated events or changes in the
Company's plans or expectations.
Contact:
SpongeTech(r)
Delivery Systems, Inc.
Investor Relations:
Bill Young, 1-877-776-6438
wayoung55@aol.com
or info@spongetech.com
The Investor Relations
Group
212-825-3210
Investor Relations:
Rachel Colgate or Michael Crawford
Media Relations:
Steven Melfi or Lynn Granito |
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Send 'em on over: Email
the Editor
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or inquiry, please send it to our physical address:
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