Second 50 Public Companies Grew Sales, Losses
Size does matter, at least when it comes to sales. The smaller the company, the faster its revenue growth rate typically is.
A few weeks ago, the Business Journal’s list of the 50 largest publicly traded companies based here painted a lackluster picture. The companies posted a 5% gain in revenue last year,barely nudging past inflation. Losses for the 50 largest public companies totaled $580 million, vs. a profit of $1.8 billion in 1999.
This week’s list of OC’s second-tier public companies,those ranked 51 through 100 by sales,is a sprightlier group. The second 50 posted $4.84 billion in revenue last year, a 26% jump from the collective sales figure posted by the 50 companies on last year’s list. Sales were up 19% at the companies compared with their own 1999 figures.
The middle-tier companies benefited from new entrants such as Costa Mesa-based Resources Connection Inc. and fast growth at companies such as Irvine-based Quest Software Inc. Resources Connection, which lends top-level finance professionals to other companies, debuted on this year’s list at No. 51 after going public in December. In 2000, the company had $173 million in sales, up 55%, and $11 million in net earnings. Business software maker Quest, on the other hand, leapfrogged to No. 54 from No. 76 in 1999 with a 134% gain in sales.
Also big sales gainers include: No. 64 Lake Forest-based FutureLink Corp., which moved up from No. 128 on an 826% growth in revenue; No. 68 Garden Grove-based Bridge Technology Inc., which grew by 253%; No. 75 Newport Beach-based TriZetto Group Inc., which grew by 170%; and No. 83 Irvine-based Exult Inc., which had a growth of 1,272% and debuted on the list after going public a year ago.
But, as the old idiom goes, there is cost to everything. This year’s second 50 lost more money for every dollar of sales than they did in 1999. While revenue was up, companies on the list had an aggregate loss of $478.7 million, up some 20 times from a loss of $23 million in 1999. The higher loss was on account of $287 million in red ink at struggling application service provider FutureLink Corp. and losses at a few other firms.
Two out of every five companies on this year’s list reported a loss, while two out of every six companies had a loss of more than $10 million. Seventeen money-losing companies together lost close to $1 billion.
Companies on an average lost 10 cents for every dollar they earned compared with less than a cent for every dollar of sales they lost in 1999.
Some of the anomalies this year include a huge one-time gain for No. 66 Newport Beach-based Pacific Gulf Properties Inc. The real estate investment trust had a $255 million profit last year after selling most of its holdings. On the other side was FutureLink’s large write-downs.
Still, 11 companies on the list had flat or contracting sales last year, while 39 companies grew the top line.
Some of the companies that had a tough year by sales were: No. 55 Irvine-based New Century Financial Corp., a subprime lender that saw revenue slip 30%; No. 59 Fullerton-based Day Runner Inc., down 21%; and No. 100 Anaheim-based MAI Systems Corp., down 33%.
This year, the second 50 list is comprised of companies with yearly revenue between $35 million and $175 million. This week’s list is set to be followed in two weeks with a listing of the third tier of OC public companies.
The second 50 companies also added assets and workers last year. In 2000, the assets of the second 50 grew by 34% to $10.7 billion, when compared to those of the companies on the 1999 list. Compared to themselves, this year’s group added 2% to plants, machinery and other business assets.
Local employment at the companies grew by 16% to 11,337 when compared with last year’s list and 11% compared with year-ago figures at the companies themselves.
This year’s growth at the second 50 comes on the back of a 15% decline in revenue in 1999. If the 2000 revenue numbers are compared to numbers for 1998, then sales are up only 7%, or a compounded growth of around 3.4%.
Also, since the list is made up of middle-tier companies, fast growth by a few companies can skew the picture. And if a few large companies drop off the list because of acquisitions,as they did in 1999,that, too, can impact the group’s growth.
Four companies on last year’s list dropped off this year: 1999’s No. 73 Cerplex Group Inc., which filed for bankruptcy protection; No. 83 BNC Mortgage Inc., which was acquired; No. 85 Mossimo Inc., which relocated to Santa Monica; and No. 94 Continuus Software Inc., which was bought by Telelogic AB of Sweden. There were four companies whose ranking fell below 100 and hence are set to appear on our next list, which ranks public companies beginning with No. 101.
When it comes to choosing headquarters, Irvine continued to be the favorite pick of middle-tier companies. Nineteen companies had Irvine as their headquarters compared with 16 in 1999. Five companies were located in Costa Mesa, while Santa Ana and Newport Beach were home to six companies each. n
