Hi dig,
Course, I forgot that Wave's revenues are probably less useful than Wave's orders in this kind of discussion.
The top line number is all well and good, but if you juice the top line by hiring more staff, but the demand isn't strong, then the company is going to show slightly increased sales (whoopy) but also costs that increase faster than sales (boo).
So sales goes up, but the loss expands.
This is the argument that folks like nfp make.
So you are looking to isolate costs related to sales (so COS plus selling and admin costs) and compare that number with the figure for orders in the quarter.
This way you can get an approximate sense of the productivity of the sales force which not only accounts for the top line but also takes into account the increasing cost burden.
If you use accrued revenues (so the smoothing effect), then the ratio of income to sales-related costs was 127% in Q3. It was 106% in Q4. Ouch. But bear in mind the Safend write-downs are in that figure.
If you use quarterly order numbers, then these are affected by big orders and you have to strip those out to get a useable number.
An increase of, say, 20% in sales by the ordering team looks good. But if this is produced by increasing staff costs by 30%, maybe this is not so good.
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