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VTSS Investor Forum

VTSS Earnings Dec. 31, 2014, first fiscal quarter of 2015

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Just getting ready for the day.

Posted by dlog - 7 years ago

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Sleep time for me, hope I awake to great news from Cgr and gang. Absolutely that we need Q2 guidance into the 30's to have a shot at the lofty numbers we are hoping for this year.

May the force be with us!

Posted by GARIF - 7 years ago

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I agree with you 100% GARIF on the need for guidance in the $30million or above area for next quarter.

Posted by dlog - 7 years ago

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CRG- Please put a positive spin on things and if the only thing that is positive is design wins again, so be it. Talk about IoT and the Cloud.

Say the stronger dollar is helping the bottom line on foreign sales. Pump the fact new product sales are an increasing percentage of total revs.

Posted by Techinvestor - 7 years ago

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So much for guidance of $ 30 + mil for next Qtr:
=====================================
Financial Outlook For the second quarter of fiscal year 2015, ending March 31, 2015:

Vitesse expects revenues to be in the range of $24.0 million to $26.0 million and product margins to be between 58% and 61%. GAAP operating expenses are expected to be between $17.5 million and $18.5 million.

Posted by Techinvestor - 7 years ago

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Yea, I thought so. I didn't want to be too negative but this is EXACTLY what I expected. more of the same. Is there any real reason to listen to the conference call. We're looking at less than $50 million for the first half of the year.

Posted by dlog - 7 years ago

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I have long thought this "new product" revenue is very suspect. It is a number that is unaudited and "new product" can be anything management says it is. Of course it has been growing at very impressive rates. But not enough to over come the decrease in legacy products. But 82% growth year over year is extremely strong. It is my full expectation that when the new product revenue gets to about $25million per quarter the growth rate will mystically slow down dramatically to something like 10%, if it can even register that.

I am of the belief that these "new products" are doing nothing but replacing old products. There is no market expansion going on at all. I hope I am wrong. But don't think so.

Posted by dlog - 7 years ago

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Ah vtss, where the future gets ever-brighter, as the present gets ever-dimmer.

These numbers make no sense to me. I'm not saying that crg has found another way to channel-stuff, but he did learn his trade at the feet of Lou. In all fairness I have not listened to the call yet, but I'm not sure where the decline is coming from.

So in the second half we will have $30M+ quarters?

I don't get it.

The August call is my line in the sand. If that quarter is another $24M quarter, I'm done, and likely so is vtss.

Posted by phobos - 7 years ago

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"The second half is going to be strong." Gardner should be an academician. He is great on articulating theory. As a business man his most salient accomplishment is his solid record of destroying wealth.

Posted by dlog - 7 years ago

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...going to be strong? It's going to have to be strong just to meet the average analyst estimates and not have a big miss on the year.

I'll listen to what was said later.

Oo-fa!! ...where's the aspirin?

Posted by phobos - 7 years ago

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...going to be strong? It's going to have to be strong just to meet the average analyst estimates and not have a big miss on the year.

I'll listen to what was said later.

Oo-fa!! ...where's the aspirin?

Posted by phobos - 7 years ago

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"I have long thought this "new product" revenue is very suspect. It is a number that is unaudited and "new product" can be anything management says it is."

Damn! Damn!!!!! your read is on the money again and again dlog!
2015 like 2014 or 2013 or ,,, are regurgitation of the same freaking vomit. "NO CHANGE, NO CHANGE! said the Doctor in "eye of the beholder",
We(myself/phobos) are in the TWILIGHT ZONE following this outfit, dlog/tech and some who have moved on have this dog/pig understood much better then the few of us.

Is it insanity, where doing the same thing over and over and expecting different results??

Where to now, 3 bucks $2.50???

Posted by GARIF - 7 years ago

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The June quarter and the Sept quarter will have to be $30 million in revenue for the full year to be flat in revenue (actually I have it a $110 million versus $108 million). Guidance for the March quarter is $25 million. For some reason management thinks VTSS will have 20% more revenue in the 90 days after March 30 versus the 90 days ending with March 30. Given that Gardner has said this every year for the past 7 years and given the fact that it has never happened once I would hope management has some very good reasons why that would happen now.

I can't stop thinking about Ragin Billy. I just keep imagining him sitting in front of a prospective new client saying something like "let me manage your $100 million pension fund." And then having the client say something like "tell me about how that VTSS investment is working out."

I'm hoping he has an exit strategy that doesn't exclude all the rest of us.

Posted by dlog - 7 years ago | Updated 7 years ago

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I'm just mystified- Why doesn't Billy Martin (The largest holder) and the next 2 biggest (Kopp & Rima Senvest Mgt.) become proactive and demand change starting with replacing CRG.

Anyone who can be more objective and execute a business plan would give shareholders and probably employees a ray of hope. CRG has been given many years to start us on the path to success and actually turn a profit and increase sales.

Posted by Techinvestor - 7 years ago

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I am always AMAZED that any of the faithful that are still holding this turd - myself included, but I am not faithful - believe ANYTHING that flows out of the mouth of CRG. The guy is a clown, and has no business being the CEO of this company. VTSS is nothing more a shell semi company, that CRG and the BOD use as a personal piggy bank. Can you imagine what the work environment at that place must be like.

G

Posted by G - 7 years ago

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...to keep drinking the Kool-Aid:

Given that legacy will decline on average over the year at around 6%, and that new products will grow 50 to 75% in the year, which is about 14 to 21% per quarter, I'm seeing Q1 25M, Q2 26M, Q3 28M and Q4 33M. This adds up to 112M. The analysts project around 111M for the year.

I know, I'm drinking the Kool-Aid.

Also, vtss sees its total addressable market moving from $1B currently out to $3B near the end of the decade, which is what I saw when I plotted my "s-curve".

I still mean what I said about Q3.

Posted by phobos - 7 years ago | Updated 7 years ago

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i must be the only positive poster left - -BUT -- since i already value VTSS at $6.00 in any deal - -- and that gives no value to storage or IoT or IP - -just the barebones $100MM rev company at 4 times revs - - -that is 70 MM shares at $6 bucks - - that is cheap for VTSS - -$420MM for this gem.

you must see a bit further into the future - -

the deal with the major storage partner - -is most likely Seagate - -crg gave color but not substance to what is coming down the road - -he knows it is a bigger deal for 2016 - --but anyone who has worked in manufacturing knows that you only have about 180 days notice to gear up a line -- and since VTSS is a fabless outsource chip designer - -they now have knowledge of firm orders pending for delivery in the 2nd half of 2015 and running into 2016 - -add this to any real large orders from Seagate or other ethernet drive manufacturer in 2016 -- and you have the makings of $10.00.

$420 MM is cheap for a company with patents for devices that will flow into an ever-growing market - -with $17MM due late 2016. value VTSS the same as CSCO valued Meraki at $1.2 Billion. Robert Chapman said VTSS was worth $4.50 on eBay. that same $4.50 is $90.00 now post reverse split. i say VTSS is worth $6.00 today!! and will cross $10.00 on this run. i do expect one huge winner here at high margins to come from my as yet unvalued Storage Division. IoT will also deliver - -and the intellectual property will be worth a whole lot more in 2018 than it is today.

dW1

Posted by daWiley1 - 7 years ago

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...so why is vtss not at $6 at 4x revenue?

Meraki is probably not a good comparison. The market values future cash flows and the promise of future cash flows: it values both revenue and growth demonstrated over time. Right now vtss has neither (design wins and new product growth are unaudited and difficult to distinguish and track). csco probably saw a strategic fit, and not a price determined necessarily by the market.

First 2014 was to be the year, then it was 2015, then 2016. Now the year is 2018 (!). I'm just looking ahead to Q3'15. If vtss would make it's numbers and we believe the analysts' modest projections, vtss needs to have a $28M Q3 and a $33M Q4 (where they will become profitable). This modest achievement would push vtss over $5 in my humble opinion, but they need to execute.

Intellectual property is a valuable thing, but so is time: the longer this takes, the less it will be worth. How long ago did Bob Chapman, who I spoke to on the phone once (he seemed like a good guy strangely enough), utter those words? It's been a while, and time is money.

So, if vtss has all this value, and it doesn't appreciate, what is it worth? Is the market just that irrational? Who was it who said "the market can remain irrational longer than you can remain solvent"?

Where is the value?

Posted by phobos - 7 years ago | Updated 7 years ago

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PS -- did everyone hear the phrase "softness in China" again? I wanted to throw up. Europe is having a much rougher time than anywhere in Asia right now, but this phrase seems to be a "catch-all" meaning "declining revenue". What can you do?

Posted by phobos - 7 years ago

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VTSS burned $6 million in cash during the quarter. Only $33 million left on the books. At this rate they will be needing more cash within the next 12-18 months. Now that they have no problem with debt maybe they can negotiate a new loan?

Anyone notice the decrease in interest expense. The savings "will go directly to the bottom line." Funny how that works. The savings get spent on something else.

Gardner needs to be shown the door. He has run this company at a perpetual loss for years and years.

Posted by dlog - 7 years ago

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Currently up $ .18 on the day. Either the market liked what they heard from CRG or technical bounce off of 200 day moving average. I vote for the latter.

http://finviz.com/quote.ashx?t=vtss

Posted by Techinvestor - 7 years ago

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"The savings "will go directly to the bottom line."" --where there's a toilet.

"Currently up $ .18 on the day. Either the market liked what they heard from CRG or technical bounce off of 200 day moving average." --the market was so startled to hear that vtss was still in business that buyers decided to pick up some shares on a goof.

--sardonic humor is my last refuge.

Posted by phobos - 7 years ago

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I was looking-over the past two years quarterly revenues and there is a seasonality where the second half of the year experiences about 6% higher revenue. Given our $24.8M Q1 and using the high end of Q2, VTSS would have a $50.8M H1. H2, given seasonality only, places H2 at $53.8M, which is not enough. The second half would have to grow in excess of 20% relative to the first half to meet analysts' expectations, or $61.2M for a yearly revenue of around $112M. Considering seasonality, perhaps 14% growth is not such a reach (he said wishfully), which averages to a revenue growth of around 6.8%/quarter (above seasonality) over the last two quarters of '15.

?

Posted by phobos - 7 years ago | Updated 7 years ago

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Thanks phobos for transcript link. A few points:

1) D. Williams (Ascendiant) " Congrats on the Quarter"
Q. Bolton (Needham) " Congrats on the nice results"
[ Puhleeze- you've got to be kidding !]

2) $ 6.6 mil stock compensation for 2015 per Marty M. (CFO)
[ For doing what??]

3) Will grow total revenue for the year per Marty
[ I hope you're right]

4) IP revenue 4 - 5 % of revenue per Marty
[ I would hope for a lower % because the denominator (Revs) is much bigger than expected]

Posted by Techinvestor - 7 years ago

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If you want to drive yourself crazy take a look at some of the %'s Gardner throws out there. Just as an example his statement that he expects new product revenue to be 80% of revenue by the 4Q (Sept 2015). He thinks he can "grow revenue for the full year" which means he has to have somewhere in the $60 million area for the last 2 quarters of the year (just to get flat revenue). So lets just say $30 million and 3Q and 4Q. If new product revenue is going to be 80% of the $30 million that would be $24 million (meaning of course legacy revenue is $6 million). For the quarter just reported new product revenue was $16.2 million. That means new product revenue has to grow 14% every 90 days, 3 consecutive times (3 quarters) to get there. (For 1Q it grew 6% just for comparison.)

You can play this game forever and every time you do you end up with the same result. Something has to be done that has never been done before.

I'm not going to go through all of this but my guess, and it is just a guess, is if I did I would end up with VTSS management looking at revenue in the mid $30's for 4Q. But that is all they are, numbers. It's way beyond time to execute.

Posted by dlog - 7 years ago

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I agree dlog. This is going to have to be a second half quite uncharacteristic for VTSS. I came up with a Q4 of around $33M.

The other thing the market does not like (besides losing money) is uncertainty. And VTSS, even though the second half results are a little unspectacular after all the hype, has finally begun to look out beyond the next quarter. Paying down the debt (albeit with a stock offering) has reduced financial uncertainty and calling for a "strong" second half also removes uncertainty: investors can finally pin-down management to specific long(er)-term performance goals.

At the call for the third quarter in August, investors will finally be able to call "BS". I'm thinking $28M, or above in August and you've got to treat the whole growth story with a renewed veracity. Conversely, a third $25M quarter for the year means there's something that just doesn't add-up, and Mr. Martin and his team, should start asking some questions.

Could the reduction in uncertainty be the reason for the modest short-term bounce in the share price?

Posted by phobos - 7 years ago | Updated 7 years ago

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Sorry Phobos! but Dlog continues to read this outfit year after year! DAMN I wish he was wrong but perhaps someday soon Crg will make this happen, PERHAPS,,,.

Now that 2015 is a wash lets gaze into 2016 and,,,
According to our leader of industry, Storage should bring us $200 million by 2020 but could he be under-calling his hand to keep competitors at bay?

Vitesse having licensed Kinetics has made serious enhancements to it, in my observation making it a better solution then its main competitor from Western Digital.

"This latest global enterprise storage market report emphasizes the highly competitive nature of the market, which is expected to increase R&D efforts to develop innovative new storage solutions. Vendors have started introducing efficient, reliable and high-availability storage systems with additional features and functionalities, in order to attract customers."

The big customer who's using our Storage approach has to be Dell, who alone stands to move our needle nicely; but as Cisco, HP, Fujitsu, Brocade, IBM, and perhaps EMC coming back home, start moving our Storage solutions- Vitesse could see $300-400 million plus from this product alone.

Time to do like Bears with this outfit again! she's dead money till next year but CRG might make some announcements that help keep shares afloat until next year.

sleep well all, pleasant dreams.... lol

Useless,

Posted by GARIF - 7 years ago

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From your keyboard to God's monitor GARIF!

I don't think we'll have to wait until 2016. Q3'15 should be $28M, or higher in order to begin to meet our very modest analyst estimates. We should see things accelerate from there.

If we don't, we're all going to have to do some soul-searching to see if we've been had yet again by VTSS.

I'm expecting a "strong"second half because CRG said so. If his assuarance doesn't materialize, we have a problem as investors. There will be a lot of people with a lot of questions if THIS year doesn't pan out.

Posted by phobos - 7 years ago

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Revisiting VTSS' share valuation:

Like I said previously, when I look at VTSS from the standpoint of the growth of the markets they are in, and might enter, I get a ridiculously high number for future growth. From an analysts' view this is very speculative. They really just want to estimate based off of present values and growth rates: just the facts.

For 2015, the first quarter is a matter of record: $24.8M with 68% of that from new product revenues. The total Revenues per quarter go Q1: $24.8M, Q2: $24.8M (est.), Q3: 27.6M (est.) and Q4: $30.1M (est.). The proportion of that from new products I have at 68% for Q1, 74% (est.) for Q2 & Q3, and 80% (est.) for Q4. This gives VTSS new product revenues for 2015 of around $80M, and legacy revenue of around $28 for 2015.

Looking at the growth rates in new products going back to 2012, I get a decling positive growth rates out to around $160M/year revenue in 2018, declining slightly moving into 2020. I adjusted the decline in legacy so that I matched the $130M number the analysts got for 2016 (around 45% decline per year). Let's do a valuation like I think (?) the analysts do it.

So, if VTSS follows that path, let's say that P/S goes from about 2.5 to 3.5 (conservative, I think), an increase of 40%, and revenues increase by almost 50%, then this should put VTSS just over $8/share ($8.10). If this is a reasonable valuation, then why is VTSS NOT over $8.00/share right now?

Let's do this as a binary option where the present value is the weighted average between the two alternatives between VTSS achieving an $8.10 share price by 2018 and going to zero in that time.

Looking at the percentage for the good outcome of going to $8.10 is around 48%, which is still less than 50%. Using the Kelly criterion to evaluate how much of one's portfolio one should invest relative to the possibility of a positive outcome:

Inv. = 2P - 1

As you can see with a 48% possibility of a good outcome, the amount of one's portfolio to be invested is around -4%: nothing. If the market starts to value VTSS even a little bit higher, it begins to make the case for investment (Tech., you might be seeing a resistance (is that the right word?) around $4.10 (?)).

How the analysts see this going forward:

2015 $108

2016 $130

2017 $152

2018 $160

2019 $158

2020 $157

Notice we get CRG's peak in the 2018 to 2019 timeframe. It is critical that Q3'15 sees analyst estimates at least and that Q4 '15 sees BE to make the case for investment (drive P/S upward). ALL of the above is wildly speculative, especially for a company like VTSS, but I do think it is how the analysts are crunching the numbers.

Things could change either way by a lot!

This also correlates with total market. If you add up all the new product revenues for the years between 2011 and 2020, you get around $900M+. If VTSS is a market leader in a vigorous market, then they should be garnering about one third of the total: ($900M/0.33) is around a total market of about $2.7B (I believe VTSS is currently claiming a total market size of about $3B). The numbers correlate, but it may not include nascent markets which VTSS has yet to test, or the risk of new technology entering the market (this happened to VTSS in the past when everyone went from GaAs to plain old Si and VTSS imploded).

I say again -- it could all change tomorrow.

Posted by phobos - 7 years ago | Updated 7 years ago

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"If this is a reasonable valuation then why is VTSS not over $8/share right now?" Phobos, the answer to this question is always the same. No one believes it. (This isn't unique to VTSS. It is the same answer for all of the other stocks when an analyst says ABC, trading at $25 is worth $35. If anybody believed that they would continue to but the stock until it hit $35.)

Good work on the numbers. I think without pushing numbers around we have nothing but blind guesses. And yes the numbers can change but we have to work with what we have. If and when they change we change the numbers and expectations.

Posted by dlog - 7 years ago

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Anyone see this article in the LA Times?

http://www.latimes.com/business/la-fi-stock-spotlight-vitesse-20150216-story.html

Posted by dlog - 7 years ago

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You never know what is going on behind the scenes when analysts raise/lower price targets and are either very positive or negative.

Pumping stock looking for bagholders so they can go short, or trying to shake out the weak holders before big buy for short squeeze and move up?

Article is a nice positive for VTSS, but I think a lot of burned investors are in a "show me" state before serious buying.

Posted by Techinvestor - 7 years ago

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Don't look now, but I think that LA Times article just got us a little credibility by tapping into the trend of the moment: internet of things. CRG pulls off a coup every now and then.

http://finance.yahoo.com/q?s=VTSS

Let's hope the trend continues.

Posted by phobos - 7 years ago

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Or could trollers of penny stocks be realizing the potentials between the winners of (ceragon) and the suppliers to(vitesse) and how this winner is winning with larger(vodaphone) and larger customers.
http://finance.yahoo.com/news/ceragons-ip-20-platform-helps-130000260.html
"After testing the Ceragon FibeAir IP-20C solution both in the Vodafone labs and live network, Vodafone Portugal was very impressed by its high capabilities and robustness," said Moisés Cruz,"

The stamp of approval Ceragon had been needing all these months it just got, off to the big times now! with Vitesse along on the ride.

Yea lets hope...

Posted by GARIF - 7 years ago

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The most exciting part of that article,
There are millions of 'counters" in America alone. With no one wanting to become another Target, is Vitesse formula putting the self in position to become part of the must have peace of mind solutions for business owners?? has Vitesse found a way to potentially touch every store in America/western world, or perhaps the world its self?? could our solution become the McDonald's of solutions(on every corner)???

RESPONSES???

"One example of how the company is taking advantage of new opportunities is at check-out counters in stores, said analyst David N. Williams at Ascendiant Capital Markets.

Vitesse designed an improved system at the point of sale, Williams said, so that when a consumer swipes a credit card at checkout, the new product authenticates the information, better protects personal information and completes the transaction faster."

Posted by GARIF - 7 years ago

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A chip in the mature and declining market of retail, a chip or two in every car, and a chip or two at the very edges of the industrial iot network. VTSS' chips are becoming ubiquitous. Dare I say it: necessary. I haven't even mentioned VTSS' traditional carrier market. This is getting very interesting.

Oh, and this:

World Economic Forum: Why we need to make the Internet of Things more secure.

http://google.com/newsstand/s/CBIwqLHagBs

Posted by phobos - 7 years ago | Updated 7 years ago

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The above article makes it clear there is Huge money to be made in Security, lets hope Intellisec takes a nice bite out of these opportunities.
Any idea what this "improved system at the point of sale" is worth to Vitesse?

Posted by GARIF - 7 years ago

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Phobos,
Mature yes! but declining, how so?
True that some retail has moved online but the bulk is still done the old fashion way; Walmart, Costco, Safeway,Home depot, malls across the country, swap meets... all are visited daily by million and as you well know very few pay with cash these days.

Many grocery store chains, also Home depot offer self check outs and nearly everyone ahead of me has a freaking card to pay with; even mom and pop businesses offer the option to pay with cards.

I had/have noticed in recent times how much faster check out with a card had/has become, few years back the clerk would engage in conversation while waiting or your heart(mine) would start pounding wondering if the transaction would clear; now in seconds we're good to go!
To my pleasant surprise i come to find out that our little company might be making this happen.

Techinvestor talks about how some company selling twinkets makes more money than Vitesse, well Tech Vitesse just might be on the way to providing something that is used by nearly everyone every day of the year, like toilet paper, or sanitary napkins, all indispensable stuff.

How about that??

useless

Posted by GARIF - 7 years ago

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Who says "you can't make money on the declining edge of a trend"? Certainly not I.

Posted by phobos - 7 years ago

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