After missing earnings guidance in every single quarter of fiscal 2006 so far, educational software-maker eCollege (NASDAQ:ECLG) has just one last chance to exceed expectations or declare the year a (losing) sweep. The fourth and final quarter's earnings results are due out on Wednesday.

What analysts say:

  • Buy, sell, or waffle? Five analysts follow eCollege. Four of them rate the stock a buy, and only one a hold.
  • Revenues. On average, they expect to see quarterly sales slide 52% to $14.1 million.
  • Earnings. Likewise with profits, which are predicted to fall 53% to $0.07 per share.

What management says:
Management gave its owners a detailed look at its targets for Q4, for Q1 2007, and for the entire coming year when it released guidance in January. Let's take a peek at its planned curriculum:

For Wednesday's news, eCollege expects to report numbers very much in line with "analysts'" (cribbed from the company's own press release) predictions. Two points of clarification are in order, though: The $0.07 per share noted above refers to profits from continuing operations for Q4. To arrive at the expected net profit number (a loss of $0.02), subtract about a $0.05 loss from discontinued operations (presumably, the Datamark division that eCollege is trying to sell off). Also, one thing the analysts didn't tell you is that the firm was hoping to generate somewhere between $3.7 million and $4.1 million in free cash flow during Q4.

Looking farther out, eCollege is shooting for about $63 million in revenues in 2007, $0.36 to $0.39 per share in profits from continuing operations, and another $0.09 to $0.10 in profits from discontinued operations. The firm did not make a free cash flow prediction, giving us just half the equation: an estimated $11.5 million in capital expenditures and capitalized software development costs for the year, but declining to guess at this year's operating cash flow.

Still farther out, eCollege aims for 20% or better revenue growth and 40% or better growth in operating profits in fiscal years 2008 and 2009, with capex averaging about $8 million per year. Targeting an operating margin of 30%, the company apparently thinks it can once again become half as profitable (operating margin-wise) as rival Blackboard (NASDAQ:BBBB) was prior to its margin-devastating acquisition of WebCT.

What management does:
Thanks in large part to Datamark, eCollege's profitability has been on the decline of late. In each of the last four quarters, its rolling gross margin has fallen. In each of the last two, its operating and net margins did likewise.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

48.1%

48.6%

47.5%

47.0%

46.3%

45.1%

Operating

13.0%

13.4%

15.9%

16.0%

15.0%

14.3%

Net

21.8%

22.0%

5.8%

6.0%

5.7%

5.5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
You've seen the ultra-short-term predictions, and you've seen the ultra-long-term ones. How about, in this section, we take a look at what eCollege was last predicting for Q1 2007 -- the quarter we're in the middle of now.

Consistent with its long-term goals, management is targeting better-than-20% growth in sales to at least $14.7 million, below-target operating profits growth of at least 25%, and similar growth in net profits, aiming to earn $0.06 or $0.07 per diluted share in Q1 2007. Again, the firm gave no specific target for free cash flow, but advised that capex will come in close to $3.3 million. Having these numbers right at hand should make it easy for you to judge whether the guidance the company gives out on Wednesday shows it to be growing more or less confident about how the first quarter is progressing.

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Blackboard is a Motley Fool Hidden Gems pick.

Fool contributor Rich Smith does not own shares of any company named above.