By CrossProfit March 18, 2007
Why have insiders sold over 1.5M and divested from another 1M shares, or 9.6% of the float, over the last 18 sessions?
2006 trailing earnings and 2007 forward figures, as provided by Omniture, are as follows;
"Full Year FY 2007: Revenue for the company’s full year 2007 is expected to be in the range of $128 million to $130 million. GAAP net loss is expected to be in the range of $0.15 to $0.13 per diluted share. Excluding the effect of stock-based compensation expense, the amortization of certain intangible assets, imputed interest expense and non-recurring acquisition related expenses, non-GAAP net income for the year is expected to be in the range of $0.07 to $0.09 per diluted share. Omniture expects to record positive adjusted EBITDA in the range of $16 million to $18 million."
Note that the GAAP loss projected for 2007 by the company is $0.13 and non-Gaap, meaning excluding primarily stock option compensation expense is $0.09 profit. OMTR doesn’t expect to post a profit in 2007. Frankly, OMTR won’t post a profit in 2008 as well.
Heavy Insider Selling
From 2/20/2007 through 3/08/2007, insiders sold 1,116,282 shares between $14.96 and $17.04. We wrote about this and lo and behold insiders deviously switched tactics. Not only has the selling continued it actually increased in pace. A whopping 456,299 shares were sold by insiders between a week ago Friday and last Thursday. This brings the total dump to 1,572,581 shares in less than a month! As for tactics; insiders are not selling direct. All insider sales since 03/09/2007 have been indirect so as not to put any downward pressure on the stock price. This is a phenomenal amount of concentrated insider selling that has been noticed by the street yet the ‘ratings game’ has called for an upgrade! Makes one wonder whose back the insiders are scratching.
In addition to the above there have been non open market acquisitions and dispositions. Take Director Mark Gorenberg for example. In the past month, non open market acquisitions amounted to 574,145 shares. Non open market dispositions totaled 1,613,435 shares for a net escape of 1,039,290 shares. Put the two figures together and you get 2,611,871 shares which is 9.6% of the float, unloaded by insiders.
May the (sales)-Force Be With You
OMTR has come out with a ‘new’ ingenious way of reducing its selling expense – charge salesmen. Until now training and certifying programmers to install their software was carried out through the conventional method of company sponsored training seminars. Now OMTR wants programmers to pay OMTR for this training! WOW – an Omniture certificate that allows me to sell their software! This has been tried before by several companies that are no longer with us – may they rest in peace.
Analysts Reduce Earnings Estimates
Out of the 12 analysts covering OMTR, all have reduced 2007 EPS estimates by at least 50% over the past 3 months. Since the IPO in June 2006 at $6.50, OMTR has not reported a profit. True to say that revenue has increased handsomely yet margins are pretty much where they were six months ago. Now analysts are looking for a profit in the second half of 2008. Notice how the time frame is constantly being pushed forward.
We doubt if OMTR will ever be capable of producing earnings of a dollar per share due to its business model relying heavily on sales expenses that erode margins. Projected revenue growth over the next five years is 37% though this is a guestimate at best. Even if the revenue growth is 50% over the next 5 years the profits simply won’t be there. This is NOT a Microsoft type of software where you install and go. Constant support, updating and fine tuning is needed.
The sell and good-bye version is being developed by Google (GOOG). GOOG has already begun to test the Google analytics software. GOOG can and will give OMTR a run for its money in this area. To quell any rumors; GOOG is not interested in purchasing OMTR as it has in-house technical capabilities and patents. Google does not wish to pay patent royalties or engage in unnecessary litigation, which is the case with the OMTR technology. GOOG has enough litigation issues on its plate with YouTube.
We are not concerned with the options based compensation for Officers and Directors as this is within the norm.
Disclosure: Originally a personal opinion of CrossProfit analyst and is now the consensus at CrossProfit.com. CrossProfit will most likely short for clients on Monday 03/19/2007 but will not chase down below $12.00.
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