Knobias ClipReport (8-6-2007)

Submitted from Knobias ClipReport

Many analysts have been predicting a slow down in the economy and with the recent pullbacks, they could be correct in their assumptions. Now whether it continues for a long period of time or not is up for debate. What is known is that to survive, and retain levels of profitability seen during growth economies, companies must find ways to cut back and become more efficient when times turn rough.

One company provides a service that helps companies become more efficient, and according to their latest earnings report, is doing it at an increasing rate.

Document Sciences Corporation (DOCX) is a provider of customer communications management solutions, from customized marketing collaterals, contracts and policies to high-volume relationship statements and correspondence. More than 500 content-driven organizations worldwide, including over 60 FORTUNE Global 500 companies, use Document Sciences' solutions to reduce development costs by up to 90%, improve time-to-revenue by as much as 75%, and enhance the overall customer experience with highly effective 1:1 communications.

Before the opening bell on Friday, the Company reported revenues of $11.2 million for the quarter ended June 30, a record for the company and an increase of 32% over revenues of $8.5 million for the comparable quarter in 2006. Net income per was 14c based on 5,244,968 diluted shares outstanding, compared with net income per share of 3c, based on 5,372,663 diluted shares in the comparable quarter.

Rewind some and one can see that the Company had been in a turnaround story for some time, and with the latest earnings, the Company may be beginning to taste the fruit of their labor.

In the Company’s fourth quarter earnings report, CEO, Jack Gannon noted, “Our cost structure increased considerably during the latter part of the year as we continued to invest in areas closely tied to revenue generation. Costs rose most significantly in the areas of Sales & Marketing and Professional Services, where we have increased headcount to drive and support anticipated continued growth in our software and services business areas. We believe that we are at a turning point in our business. Our portfolio is in the strongest competitive position ever and our global services delivery capacity is high. We made the strategic decision to aggressively increase our sales and marketing investments to capitalize on these two factors. While it's too early to be completely confident that this strategy will pay off, early indications are positive and it appears that our ability to execute will be the governing factor, not market demand or interest.”

In the Company’s first quarter release, McGannon noted “the first quarter represented our eleventh consecutive quarter of year-over-year quarterly revenue growth. However, increased spending in Sales & Marketing and additional Research and Development costs associated with additional staffing and our acquisition of CambridgeDocs drove our loss for the quarter. Starting late in the third quarter, the company has added substantial headcount in both our inside and outside sales groups, nearly doubling our North America sales force. Additionally, we have increased our marketing expenditures to drive awareness and lead generation.”

And finally in the recent release, McGannon noted, “The quarter's result reflects a return on the investment that we have made in Sales & Marketing to bolster our go-to-market capacity and validates our plan to grow to over $50 million of revenue in 2008. Acknowledging the competitive strength of our xPression technology suite, late in 2006, we began to grow our sales force, particularly in North America, and augmented this expansion with additional marketing outlays. Given the relatively long sales cycles of enterprise software, we are now enjoying the benefits of these expenditures.”

Another positive was the Company’s decision to use some $2.75 million to buy shares back in a Dutch tender offer in June. With the price of the Company’s shares so undervalued at the time and with the ample cash on hand, in light of earnings, the decision was a sound investment.

With a 20 day average volume of only 900 and volume on Friday at mid day of 75 thousand, many investors had taken notice of the Company’s turnaround initiatives and implementation of their national sales force. With continued follow thru and capitalization of their marketing efforts and an economy that demands document laden companies to become more efficient, the market share and revenues of the Company could demand even more attention to future earnings reports from the investing public. Investors would be wise to watch.


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