GSB

[David Randolph]

The guy fired 9 people on his first day as CEO.  Thats Draconian for a small company like theirs, but he clearly means business!

Yeah, Randy has been doing a terrific job managing GSB.

Here's a Fool article from today touting GSB:

• Wall Street's Buy List
at Motley Fool (Tue, Oct 30)

Thanks for bringing us this article Kublakhan

It seems GSB is starting to get some awareness from the part of investors, which is good. But there are some things to worry about inside this article:

«Like coachmax said, GlobalSCAPE posted 162% revenue growth last quarter. More impressive still, net profit increased 323%, and according to Yahoo! Finance, the company has nearly doubled its annual profits every year for the past five years. Yowza!»

This Fool didn't realize Q2 numbers were influenced by a large one time order coming from the Department of Defense. Even though there can be more big orders like this, it is unlikely that there was one in Q3 (very unlikely, or management would have announced it).

I truly love GSB as a long term investment, but I'm also pretty sure Q3 will be a disappointment for many recent investors. I fear a sell off when the company reports results.

I hesitate between considering taking profits before earnings, to buy back the shares on the pullback, or just hold for the long term disregarding short term swings. Usually I'm inclined for this second hypothesis, but seeing the hype and misinformation around GSB ... well, I'm going to think this over for a few more days, I still have time, and maybe we'll see $8 over the short term.

I'll keep holding GSB.

[David Randolph]

I hesitate between considering taking profits before earnings, to buy back the shares on the pullback, or just hold for the long term disregarding short term swings. Usually I'm inclined for this second hypothesis, but seeing the hype and misinformation around GSB ... well, I'm going to think this over for a few more days, I still have time, and maybe we'll see $8 over the short term.

The following is GSB's quarterly EPS numbers:



EPS was $0.03 for the seven quarters prior to Q2 2007, which was heavily influenced by the following one time order:

DoD order: $2.5 M

However, Randy Poole, GSB's CEO, has been reiterating the $20 M revenue guidance, and in the first half GSB's revenues were just $10.04 M. So the CEO has been saying there will be $10 M more in the second half, even without any new huge order (none was announced in the 2nd half).

I must say that I was really shaking here, considering the company could go back to the $0.03 EPS per quarter number in Q3 and a sell off would follow. But this CEO has been delivering on all his promises, so I have no reason to believe he's lying about the $20 M revenue number for 2007.

In the 1st half GSB earned 15 cents per share, so, if the same $10 M in revenue translate into another $0.15 EPS, the company will earn $0.30 in 2007. This should put the stock at least at $9 over the next 6 months.

You know I love GSB for the long term and I trust the company's CEO and his guidance to hold the stock over the short term, even though there's misleading information on the internet pumping GSB (which ignores the fact that Q2 was heavily influenced by a one time show).

[la-onda]

some more facts:
GlobalSCAPE Connectivity Software Reduces Bandwidth with Byte-Level Differencing
Sean Snyder, Associate Editor -- 11/2/2007 7:24:00 AM

GlobalSCAPE's Wide Area File Services (WAFS) software alleviates challenges associated with coordinating the development of one project file, such as a CAD file or an Excel document, over the Internet and between multiple users. The WAFS software mirrors a file set and is stored locally on each of the users' machines or servers. When one user opens the local file, the software pings the mirrored locations and locks the file from being edited by other users. Users can still access the file and "save as," but they are unable to edit and save the original file until the first user saves and closes the file.

According to GlobalSCAPE Marketing Director John G. Kelly, the WAFS software uses byte-level differencing in order to minimize data transfer loads. Byte level differencing doesn't transfer the entire file; it only transfers the data changes to the file to save time with larger files. "The software is smart enough to be able to see that that's the change that has happened," says Kelly. GlobalSCAPE also provides Continuous Data Protection (CDP) software, which provides a constant backup of designated drives or servers that like the WAFS software makes changes at the byte level. The user needs to establish a local or remote location for the data to back up. "Once you've got our Continuous Data Protection in place, whenever somebody is making a change you are capturing that change, and then at the central location for our CDP product we retain versions so anytime there's a version that's changed, we keep it," says Kelly. The WAFS software costs approximately $5,990 for the two-agent minimum and the CDP software is available for approximately $1,990, which includes one source agent and the backup. They are available together for $6,990 as the Avail Enterprise package , which supports two systems. Clients include Ericksen Roed, URS, Earth Tech, Carter and Burgess, Ammann and Whitney, Bohannon Huston and Fuscoe Engineering.

http://www.designnews.com/index.asp?layout=article&articleid=CA6496844

[David Randolph]

Thanks for the info la-onda

No doubt GSB has valuable software products.

My latest update has my reasoning to why I'll hold GSB over the next couple of quarters, despite some bulls bought the stock based on erroneous information, namely they ignored the fact that the 2nd quarter results were very influenced by a one time order coming from the DoD.

But because the CEO gave a $20 M revenue guidance for the full year of 2007, which is roughly double of the revenues the company had during the 1st half, I believe organic growth will be strong enough to mitigate the importance of that giant order, and therefore bulls might be right even as they ignore some relevant information.

Longer term GSB has the potential to be a multi-billion dollar software company, if we give it five years. I'll keep holding GSB for the long term.

[David Randolph]

Tokyopua brought us an excerpt of an interview GSB's CEO gave to IBD, where he says the following:

«"Nearly four full years into the plan, we're right on target. We project $20 million for 2007."»

GSB had revenue of $10.04 M in the first half, so he's giving us another $10 M as guidance for the 2nd half. With about the same revenue level I expect GSB to earn the same EPS as in the 1st half, that is, $0.15, to a full year 2007 EPS of $0.30.

Now the question is, will Randy Poole deliver on this promise? It isn't easy, because the 1st half was heavily influenced by a one time order coming from the DoD. I wonder if the company has another huge order in the pipeline or if the $10 M guidance for the 2nd half is just based on normal growth?

Anyway, this CEO has delivered on all his past promises (even if sometimes with some delay).

Longer term I believe GSB's products are just terrific and I see multi-billion dollar value in them, if everything keeps going well.

I'll keep holding GSB for the long term.

[la-onda]

nice coverage:
http://www.knobias.com/research.pdf?id=12142

[David Randolph]

nice coverage:
http://www.knobias.com/research.pdf?id=12142

Indeed la-onda, great work

I've noticed a little, but important, mistake: On page 11 the analyst forecasts just $2.6 M in revenue for Q3 2007, while on page 13 it forecasts $5 M (I think she put Q3 2006 revenue on page 11 by mistake).

Also, I see she's quite optimistic for the remainder of 2007, as she expects full year EPS of $0.31. The research report doesn't explain how GSB will have the same revenue in the 2nd half as in the 1st without any huge single order. I wonder if this is because of Avail's contribution? Will check this out for the next update.

But, for 2008, she's very conservative, expecting just 27% revenue growth. I believe GSB is still so small and its markets have so much room to grow that I don't see any problem for the company in growing, say, 50% plus on top of 2007 revenue levels.

I'll keep holding GSB for the long term. 

[David Randolph]

Also, I see she's quite optimistic for the remainder of 2007, as she expects full year EPS of $0.31. The research report doesn't explain how GSB will have the same revenue in the 2nd half as in the 1st without any huge single order. I wonder if this is because of Avail's contribution? Will check this out for the next update.

Here's the press release announcing Availl's acquisition in September 25th, 2006:



I would like to highlight the following information:

«"We are excited about the synergies created between these two companies," stated Randy Poole, President and CEO of GlobalSCAPE.  "Besides state-of-the-art technology, Availl has very talented people; we welcome them to our team and look forward to working with them.  Availl is profitable and growing rapidly.  We expect this deal to be accretive for GlobalSCAPE immediately."»

If Availl was profitable and accretive for GSB back in September 2006, I conclude that the $10 M in revenue expected for the 2nd half of 2007 won't come because of Availl's consolidation, which was done more than a year ago.

I just hope that Randy Poole doesn't fail on this one, or GSB will surely tank and it will be hard to recover later. The earnings multiple will be compressed for a long time due to lack of trust in management. I hope he delivers, like he has done in the past.

I'll keep holding GSB for the long term.

[la-onda]

sorry gang, another coverage:

Research Coverage Initiated on GlobalSCAPE, Inc. (AMEX: GSB)

MADISON, MS--(Marketwire - November 8, 2007) - SmallCapBullets.com, a new and unique small cap research service, is pleased to announce new research coverage on GlobalSCAPE, Inc. (AMEX: GSB). The complete ORS report, first published to subscribers on 10/08/2007, is available at:
http://www.smallcapbullets.com/index.htm?refID=gsb01

Information Security Threats Transfer Growth & Opportunity for GSB

ABSTRACT: If you are looking for small cap growth in the technology sector, look no further than GlobalSCAPE, Inc. (AMEX: GSB). Information security used to be a luxury; now it is a mandate across a number of industries and government. GSB used to be a consumer-oriented FTP software provider; now the Company is fast becoming a leader in secure file management to enterprise-class customers and even the U.S. Government. A few years ago, GSB began to shift its focus from the consumer segment, where its CuteFTP software had become the most popular file transfer application on the market, to medium and enterprise commercial customers. And guess what? The move is paying off big-time. For the last three years in a row, GSB has grown revenues at strong double-digit rates and we expect FY07 earnings to double FY06. Despite impressive earnings growth (that we expect to continue), GSB trails other software provider multiples, with less growth, by -50% or more. The growing number of mandates and data security scrutiny is opening up tremendous opportunities like the Company has never seen, and GSB's reputation and referral business grows with every successful customer experience. We expect to see a surge in both government and corporate spending relating to secure file management over the next few years, and GSB is perfectly positioned to capture a leadership position in this marketplace and continue providing investors with excellent results.

[terainvestment]

Do you think is better to sell half the position before earnings or hold it?
I have a large position on GSB (more than double beside other 3sof stocks)

[David Randolph]

Do you think is better to sell half the position before earnings or hold it?
I have a large position on GSB (more than double beside other 3sof stocks)

Tough to know, but yeah, in this case I think there's a relevant possibility of a disappointment, because everybody is talking $5 M revenue and $0.07 - $0.08 EPS and I don't see where they'll come from. I'm very confident in GSB for the long term, but the next earnings release is a serious challenge and I wouldn't be surprised if GSB had a pullback towards its ascending 50 days SMA.

I'll hold my full position for the long term, but if you're overexposed my advice is for you to take profits in half of your position before the next earnings release and then, if there's an earnings disappointment or a sell the news phenomenon (like the one after the Q2 earnings release), buy back around the 50 days, currently at $5.23. Good luck

[David Randolph]

GSB's 3rd quarter earnings and conference call are coming. I hope management delivers about $5 M revenue and $0.07 - $0.08 EPS, or the stock will go down. Longer term I'm a firm believer in the company's products, so I'll keep holding GSB for the long term, whatever 3rd quarter earnings are.

[David Randolph]

GSB, now the largest holding of the Main, actually went up a bit yesterday, or else I can't imagine what would have happened, a -10% day

Results will be coming out on Wednesday and I fear them ... perhaps that's an indication that the stock will actually go up after earnings, since where I had the highest expectations ... stocks went down.

I'll keep holding GSB for the long term.

[Garoh]

GSB, now the largest holding of the Main, actually went up a bit yesterday, or else I can't imagine what would have happened, a -10% day

Results will be coming out on Wednesday and I fear them ... perhaps that's an indication that the stock will actually go up after earnings, since where I had the highest expectations ... stocks went down.

I'll keep holding GSB for the long term.

David I see you'er a bit worry of the 3Q result 

I have no idea about it but the chart says $9.40  in hand very soon 
we just need to wait and see , but will they announce the result tomorrow before or after the market ??

thanks

[David Randolph]

we just need to wait and see , but will they announce the result tomorrow before or after the market ??

It will be on Thursday after the close:

• GlobalSCAPE to Host Quarterly Conference Call
Business Wire (Fri, Nov 9)