Wednesday, September 16, 2009

PGI lowers guidance, but "lucky" insiders sold first (PGI)

AlphaNinja - While conferencing companies have fared well in the last few years, Premiere Global Services (PGI) is stagnating. Competitor GoToMeeting was bought for nice price by Citrix, and then able to leverage its parent's resources to better compete and gain entry to big clients. Webex was purchased by Cisco.

PGI isn't exactly comparable to the above-mentioned companies, especially with it's much-lower 10% operating margins. About 75% of revenue comes from its PGiMeet Solutions business segment - it is also their only growing business.

Firms in this space simply should not be operating on their own (even as a distributor), and if they are it should raise alarm bells. Maybe the most important part of PGI's 10k filing is its discussion of the competition, which includes the very companies it currently had distribution contracts with:


Yesterday afternoon, PGI released a statement in which they lowered guidance for the full year to about 87cents versus the street expectation of 1.00 per share. While they continue to win new business, existing clients have viewed their offerings as more discretionary than the company would like:

“While we continue to win major, new enterprise accounts, growth from our existing customer base continues to be affected by the current economic climate,” said Boland T. Jones, Founder, Chairman and CEO of Premiere Global Services, Inc. “We believe this trend, which is most apparent with our small- and mid-size customers, is a direct result of lower overall business activity and continued high levels of unemployment. Given the uncertainty of this economic environment, we are pleased that current trends associated with our new customer acquisitions, customer attrition and pricing all remain within recent historical levels."

PGI suggests that they remain on track to generate "meaningful" free cash flow this year. What that means I do not know, as $50million in FCF would certainly be more "meaningful" that $10million.

Shares are off 9% this morning, due to the guidance and a prompt downgrade from Northland Securities. At 80cents in earnings per share this year, the current share price of $8.20 is a PE of ten, certainly not too expensive. Investors didn't give this company a high valuation before the announcement, and I doubt they will anytime soon. But hey, at least the insiders with knowledge of the quarter's results unloaded shares throughout August, right before dropping the full year guidance. NOT OK.

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