These revenue and net income numbers are likely conservative. CodeSmart is not even looking to be the largest provider of this type of training by any means. The opportunity is enormous and there will be dozens of companies that benefit from it. But there are no other pure-play public investments in this space that I am aware of.
While there will likely be a number of providers in this space, CodeSmart has already established a solid first-mover advantage in many areas. The company's CodeSmart University has already been endorsed by more than 60 universities and colleges across the country.
Over the past few months, CodeSmart has inked deals to provide training for thousands of coders for private and government health care offices in Louisiana, Texas, Florida, Puerto Rico, Illinois and New Jersey, among others. It also signed with Amerinet, which serves hundreds of hospitals nationwide.
In August, CodeSmart announced that it had signed with Millennium Healthcare to market its products to doctors and hospitals.The company's new direct marketing initiative is expected to yield more than 1,000 new student leads per month. This is in addition to the more than 60 university and college partnerships already in place. The cost for enrolling an experienced coder in the program is approximately $1,500, whereas the cost of training a new coder is about $4,000. (CodeSmart does provide some discounts for group enrollment.) The curriculum is delivered online; the cost of materials to CodeSmart is minimal. Even with 1,000 students per month, CodeSmart will be on track to deliver very meaningful numbers. The groundwork for substantial revenues is here. The reason that investors have missed these obvious signs is that there were no revenues in the previous quarter after the company came public. As a start-up, that should not be a huge surprise. In a recent letter to shareholders, CEO Ira Shapiro noted that revenue was already beginning to accelerate. This is a big change from the previous quarters where revenue was near zero. As a result, within a few weeks, CodeSmart will immediately go from being a zero-revenue company to a company that likely has up to $5 million in revenue. While the previous 10Q indicates no revenue, the recent letter to shareholders and string of partner announcements indicate that substantial revenue will be announced in the next 10Q, which will be out in a couple of weeks. Given the low-cost structure, it is also likely to be quite profitable. At a minimum, we should expect to see the stock hit $6 per share or more once the 10Q reveals these results. In July, the shares had already traded as high as $7.90. In August, CEO Ira Shapiro bought 25,000 shares at a price of $3.21. Medical practitioners have been slow to pull the trigger on training their coders, a significant factor in low awareness and low share price thus far. This has caused revenue to materialize more slowly than Wall Street would have expected.
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