DALLAS, TX--(MARKET WIRE)--Jun 19, 2008 -- NewMarket Technology, Inc. (OTC BB:NMKT.OB - News) today released a letter to shareholders from Philip Verges, the Company CEO. The letter is included in its entirety below:
Dear Fellow Shareholders -
The Company has recently made a number of announcements regarding several topics. In response to some of the announcements, we have received a number of shareholder questions. In hindsight, a few of the announcements may not have adequately explained the relevant shareholder value.
First off, I apologize. I am collaborative by nature and NewMarket's communications reflect my collaborative nature. The collaborative approach has resulted in providing NewMarket with a flow of sales opportunities and acquisition targets that I contest as unprecedented for a company of our size. We have also generated invaluable feedback from shareholders that has substantially contributed to the ongoing evolution of NewMarket's business model to continuously introduce new technologies to market. We are working to improve our collaborative approach to sustain its benefits, but at the same time reduce unnecessary confusion.
In the meantime, let me clarify the topics on which we have received questions. All four topics reflect important points that specifically enhance shareholder value.
1. Managed Services Strategy
On Monday, NewMarket announced a $4 million three year contract with Movistar, a division of Telefonica. This contract demonstrates the Company's strategy to transition our revenue from recurring short term contracts into recurring revenue from long-term managed services contracts. The recurring revenue from managed service contracts generally receives substantially higher price to sales and price to earnings valuations than revenue from shorter term contracts. This is because managed service revenue is in essence, a foundation of sales that can be built upon, rather than a sale that has to be renewed more frequently. We intend to announce further demonstrations of our move to make managed services an increasing percentage of our sales.
2. Debt Pay Down Strategy
NewMarket has recently communicated the retirement of a $3 million credit facility. The debt pay down was a conscious and proactive choice by management. We did not have to pay off the debt, but we decided it was in the best interest of the Company and its shareholders. The terms of this particular credit facility were contrary to our international strategy, and its ongoing documentation requirements were consuming valuable management resources that would be better used growing the Company.
NewMarket is internationally focused and U.S. lenders typically do not place the same value on receivables or the other assets generated from overseas operations as they do for those generated in the U.S. Since credit facilities are typically secured by a company's assets, NewMarket's existing debt is not serving the Company's strategic priorities as well as it could, due to the bias of U.S. lenders. The majority of NewMarket's growth is international and the terms of NewMarket's credit facilities are not as advantageous towards international expansion as they are towards domestic, U.S. expansion. Reducing, replacing, or eliminating this existing debt is an improvement for shareholders and the Company. We are working toward a full payoff, substantial reduction, or looking for new lending partners who understand and more fully value the nature of our overseas assets.
3. Bruce Noller's Role as President
We have recently announced Bruce Noller as the President of our Managed Services business. Our Managed Services business was explained in detail in a PowerPoint Webcast that can still be viewed at http://biz.yahoo.com/cc/4/93884.html. The objective of the Managed Services strategy is to improve the Company's value by extending the average length of customer contracts and improving the efficiency of our regional operations through the consolidation of our back office functions. This is an important initiative for the Company and its shareholders. As explained above, by transitioning the current business that represents 70% of the Company's existing revenue into managed services, we have the opportunity to grow sales more rapidly from a strong foundation and enjoy improved valuation in the market. Mr. Noller is a long-time known resource who has been involved with NewMarket for years. His understanding of the organization and his dedication to the Managed Services business will free me to concentrate on the Company's expansion into new markets and new technologies.
4. John Verges' Ongoing Role
Paul Danner was recently announced as the CEO of NewMarket's Chinese subsidiary. Mr. Danner follows in the footsteps of John Verges who served as the founding CEO of the Company's Chinese subsidiary. The transition has not been a sudden change, but rather a planned transition that has been in the works for over six months. Mr. Danner and Mr. Verges have been working side by side in China since the beginning of the year to not only introduce Mr. Danner to all of the Company's key participants, but to make sure Mr. Danner has a full working knowledge of the organization.
John Verges is one of the founders of NewMarket Technology, Inc. The Company was founded by my family in 1997 and John Verges is my brother. While he has transitioned out of the role as the CEO of the Company's Chinese subsidiary, he has by no means left the Company. After eleven years at NewMarket, he has acquired a broad base of experience through his participation in the Company's expanding operations. He participated in many company initiatives prior to the launch of NewMarket's Chinese subsidiary, and he will participate in future endeavors as well. John Verges will now serve as Managing Director of Red River Advisors, a third party private entity established a year ago to serve the needs of growing small businesses. Small businesses, particularly publicly traded small businesses, have a need for robust and dynamic business planning, financial planning counsel, and clear corporate communication strategies. In his new role, John Verges will now serve in a senior corporate communications role for NewMarket that will not only encompass the Company's Chinese operations, but the entire organization to include Southeast Asia, Latin America and any new market the Company enters. The communication of the Company's strategy and fundamental financial standing to Wall Street and the global investment community is essential to the Company's ongoing growth, its plans to expand well beyond $100 million in annual revenue, and the long-term market value of the Company.
Thank you for your feedback. While our collaborative communication style may have resulted in some inadvertent confusion, it nevertheless has generated great feedback that has helped me to make NewMarket a stronger Company. With the focused efforts of Paul Danner, Bruce Noller, and John Verges, we will strive to improve the Company's communications, reduce unnecessary confusion, grow the company and increase its value in the marketplace.
Thank you for your consideration and best regards,
Philip Verges
CEO
NewMarket Technology, Inc.
Corporate E-mail Updates
To be added to NewMarket Technology's e-mail database to receive company updates or to obtain more information on the Company, please send an e-mail to ir@newmarkettechnology.com or call 214-722-3065.
About NewMarket Technology, Inc. (www.newmarkettechnology.com)
NewMarket helps clients maintain the delicate balance between maintaining legacy systems and gaining a competitive edge from the latest technology innovations. NewMarket provides certified systems integration and maintenance services to support the prevailing industry standard solutions from companies such as Microsoft, Oracle, Infor, Cisco Systems, SAP, Siebel and Sun Microsystems. Concurrently, NewMarket continuously seeks to acquire emerging technology assets to incorporate into an overall product portfolio carefully packaged to complement the prevailing industry standard solutions.
NewMarket delivers its portfolio of products and services through its network of Solution Integration subsidiaries in North America and the leading emerging markets around the world to include Latin America, China and Singapore.
NewMarket ranked Number One in Texas, Number Three in the United States and Number Five in North America on Deloitte's 2006 Technology Fast 500, a ranking of the 500 fastest growing technology, media, telecommunications and life sciences companies in North America. Rankings are based on percentage revenue growth over five years, from 2001-2005. The Company grew from less than $1 million in revenue in 2001 to over $50 million in profitable revenue in 2005.
The company has continued its rapid growth, reporting $77.6 million in revenue with a net income of $5.8 million in 2006 and most recently $93.1 million in revenue with a net income of $7.3 million in 2007.
"SAFE HARBOR STATEMENT" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release contains forward-looking statements that involve risks and uncertainties. The statements in this release are forward-looking statements that are made pursuant to safe harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results, events and performance could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause NewMarket's actual results in future periods to differ materially from results expressed or implied by forward-looking statements. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making investment decisions.
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