Thursday, February 08, 2007
BakBone Software (BKBO) update
Third quarter results for the period ending Dec 31, 2006. Bookings were $17.2 million, up 39% from the 2nd quarter and up 27% from the prior year. Strong demand from Linux environments.
Cash was down to $5.9 million vs $8.2 million at the end of Q2. $1.5 million costs for the continuing investigation to figure out the accounting issues they've been stuck in nearly forever. But I'm patient. $443K payment under the Constant Data purchase agreement.
The SEC has allowed them to file only a 10-K statement and not all the quarterlies that they've missed. The 10-K will cover the period ending March 31, 2006 and the prior year. The results for the three quarters beyond this will be available at roughly the same time. After all the filings, there will be a conference call.
It will take about 90 days to finish the 10-K, so this will all play out in May 2007?
As far as I know, it doesn't matter if the preferred is outstanding or converted. What does matter is if they've gone hog-wild with stock options during this blind period.
I have my own guesses about profitability of maybe mid-single digit millions of dollars per year, which is really just a guess. My estimate of the value of the company is really based on long-term stuff. Sometimes I'm really right about those things and sometimes the business just hits a brick wall or I'm just plain wrong. So far LiveWorld and Epolin seem to be in the latter category, so I wouldn't recommend trusting my judgement... although I still do for some reason.
Okay, revenue can be determined by applying a 1.1 revenue-to-booking ratio typical for a software company (see Bookings Note).
Thus, for the trailing 12 months we have for BakBone:
$52.6M booked <-11.5+11.5+12.4+17.2
$47.8M revenue <-$52.6M divide by 1.1
Now for a comparable company, I looked at http://en.wikipedia.org/wiki/List_of_backup_software
From the list, I ignored the private companies (duh) and I also excluded really large companies..
In the end, I picked Commvault Systems which was both public (NASDAQ: CVLT) and (only) 3x-5x BakBone's size with $141M revenue and net income of $12.5M. Note that unlike BakBone, CVLT has much more cash with $48M, audited financials and an actual known net income(!). Using Yahoo Finance, we find that CVLT supposedly has a forward P/E of 29.04 (which is a high but typical software P/E) and a trailing Price/Sales of 5.03. Oh, and did I mention - CVLT is currently trading near its recent (Fall 2006) IPO price?
In any case, taking this (IMHO) near *best case scenario* for BakBone as a comparable - let's multiply our calculated BakBone revenue by the 5x trailing Price/Sales and the guesstimate of shares to give us:
$2.65 <- $47.8M * 5 P/S divided by 90M shares
So, with BakBone trading at $1.50 that is a $1.50 / $2.65 = 56% discount from a very good (maybe even best case) scenario of assuming Mr. Market views BakBone as similar to CVLT (and ignores the balance sheet cash differences). Thoughts?
(Bookings Note: If you want to check the reasonableness of the 1.1 bookings-to-revenue ratio, take the reported bookings and assume they occur at the end of the reported quarter and take 12 months to be recognized. My back of envelope was quite close to the 1.1 bookings-to-revenue ratio.)