Thursday, February 16, 2006
CXTI press release... and Q3 results
has been awarded two e-government contracts respectively worth $679,000 and $664,000 for Jinjiang City and Dehua City, Fujian province to construct their 1st phase Unified Command System.We sorta already knew about these. Even in the press release, they said that the Jinjiang City project started in December. My notes show 3 phases for Jinjiang City, all of them started before June 2005. So maybe this is new. The Dehua phase 1 started in 2004 and was slated to end in Aug 2006 (phase 2 should be done already). All of these projects are for far more money than the ones listed in the press release.
I suppose that this counts as a distress release.
However, I did discover something interesting. I closed out the investment around Nov 11, 2005 but then jumped back in not much later. In the meantime, CXTI issued their Q3 results on Nov 16, which I never looked at. Oops. I looked at the results today and I'm happy with them. Here's the highlights (vs Q2):
The current ratio is up to 4.4
Cash is way up to $5.8 million (from $3.8 million). This is important because they need cash for any new contracts.
AR is down to $3.5 million (from $6.1 million) That's a relief
Cost and estimated earnings in excess of billings is way up to $11 million (from $5.8 million)
Former officer paid down only a slight amount of their debt.
Prepayments are down to $3.4 million from $5 million.
Total assets increased to $27 million from $24 million.
Income taxes payable dropped to $857K (from $2.5 million).
Equity is up to $21.6 million (from $18.1 million).
Revenue is up by 9% (which doesn't mean all that much) to $9.03 million.
Gross margin is 45% (up from 43% in Q2 and 41% in Q3 of prior year)
SG&A jumped up to $1.2 million (from $298K), due to a commission of $624K paid to an independent consultant for sourcing an e-Government contract with Huian County in Fujian Province.
Income tax expense is down to $335K (from $658K)
Net income is $2.5 million (down slightly from $2.6 million)
Comprehensive income includes $422K benefit from foreign currency translations. Ahhhh, the icing on the cake (but that's for 9 months).
23.6 million shares outstanding on Sept 30, 2005.
3 month net income is 10.6 cents per diluted share.
CASH FLOW STATEMENT:
Cash flow from ops is terrible (used $1.7 million) due to $11 million increase in costs and estimated earnings in excess of billings. We knew about this, that cash flow is late in the cycle on these projects, that adding big new projects would kill their cash flow, and it's why they raised all the money late last year, which the market hated, which allowed me to buy shares for 85 cents and sell them two weeks later for over $1.80. :-b
Incorrectly placed in the cash flows from investing is a repayment from director of $3 million (it should be in financing, I believe).
They issued 634K shares of stock for consulting services.
Costs and estimated earnings to date: $61.9 million
Billings: $50.6 million
remaining: the $11 million mentioned in cash flow
Company issued 1.06 million shares in July 2005 for compensation for consulting, causing $624K of recognized expense. The company cancelled 1.88 million shares.
Tentative Commencement Date
Target Completion Date
Outstanding contract value
Jinjiang (2nd Phase)
Jinjiang (3rd Phase)
Dehua (1st Phase)
Dehua (2nd Phase)
Based on this, it looks like revenues will be about $10.4 million per quarter going forward (revenue in Q3 2005 was $9.03 million). They'll need to add projects as these wind down starting in Q3 of this year. But the good news is that they'll have lots of cash at that point to fund new projects.
UPDATE Feb 19, 2006: "ms" pointed out the Licheng announcement that I had forgotten to include in the above estimate of revenues. It's in Fujian province, starts Nov 2006, revenues are expected at $35 million total, and lasts 3 years.
Great DD on CXTI (I have been long on the stock for approx 1 year). The PR release on the 2 very small projects makes me very concerned because the $35MM Licheng contract does not start until 12/06 and their other contracts are starting to wind down. Does this suggest problems in 2006?
It may mean they're concerned about a falling stock price. It's quite possible they'll need to tap the equities market for more capital and, in that case, they need to avoid a low stock price.