Strong fourth quarter revenue growth at interactive learning solutions group, Riverdeep, together with strict cost control, has lead to sharp earnings ugrades by brokers. While the reported net loss for the year to end June was up to $52.7 million from $35.2 million - the reported loss in the fourth quarter fell to $6.8 million from $7.2 million - the results were ahead of market expectations.
In the three months to end June the company became cash profitable for the first time when non-cash charges were excluded. This was two quarters ahead of expectations, according to chief financial officer Mr Bill Burke. Chairman and chief executive Mr Barry O'Callaghan said that by becoming cash profitable the company had now surpassed "the biggest milestone we set for ourselves this year". Reaching this goal in advance of forecasted expectations indicated the size of the opportunity, he said.
Riverdeep was "comfortable" with the higher end of market expectations on revenue for the current year, according to Mr Burke. Some analysts are forecasting a doubling of revenue in the current year. The company will be profitable this year, partly helped by an accounting rule change which will mean that some costs will not have to be fully expensed in the first year.
On the Nasdaq Riverdeep shares responded to the better than expected results rising $2.44 to $26.70 in early trading. ABN Amro analyst Ms Jemma Houlihan expects revenue to increase from $52 million for the year to end June to $125 million for the year to end June 2002, and to $210 million for the year to end June 2003. Her forecasts have been increased by 8 per cent and 18 per cent respectively and imply revenue growth of 140 per cent this year. She is forecasting operating profits of $26 million this year followed by $85 million to end June 2003, increases of 25 per cent on her previous forecasts. With the shares on a 2002 price earnings ratio of 20 and up 33 per cent year to date she expects continuing investor interest.
Fourth quarter revenue rose to $20.4 million from $1.7 million in quarter four 2000 and $14.8 million in the third quarter 2001 while revenue for the full year increased to $51.9 million from $8.1 million. New business generated in the fourth quarter jumped to $25.2 million from $5.2 million in the corresponding quarter of 2000 and from $21.1 million in the third quarter.
Adjusted fourth quarter net income of $0.4 million was reported when non-cash charges for stock compensation and amortisation of intangible assets were excluded. This compared with adjusted net losses of $4.4 million in the previous quarter and $6.3 million in the fourth quarter 2000. Adjusted net income per ADS share was one cent in the final quarter from an adjusted net losses of 13 cents per share in the third quarter and 23 cents per share for final quarter 2000.
Riverdeep revenue was not dependant on the health of the general US economy, Mr Burke. "The schools are federal and state funded and education is an important social and political issue. The infrastructure is in place and we are leaders in content so we are comfortable with the higher end of street expectations," he said.
Merrion analysts Mr John Coolican said he expected a continuing strong performance. "The latest figures confirm the rate at which the company is developing. The company is well ahead of its competitors and is delivering a good solution into a market that will grow steadily," he commented.
