TASA nails its first Q1 profit, remains upbeat on testing

TASA nails its first Q1 profit, remains upbeat on testing – Touchstone Applied Science Associates

The mounting opposition among educators and state officials to No Child Left Behind accountability mandates is sobering for educational publishers, but Andrew Simon, president and CEO of assessment provider Touchstone Applied Science Associates (Brewster, N.Y.), remains optimistic about the outlook for testing.

“I’m not quite as exuberant as I might have been 18 months ago,” Simon acknowledged when releasing first-quarter results for the firm. But part of the uproar surrounds funding, and Simon argues that with the billions of dollars being spent on education reform, states and schools will continue to need a means to measure student achievement. “I’m still bullish on TASA,” he said.

TASA provides custom testing services and proprietary reading tests, such as its flagship Degrees of Reading Power. Simon is most cautious about the future of the firm’s proprietary tests, which now account for about 45% of revenue. These tests are used by districts and schools but are not part of state testing programs, and they are vulnerable to objections of over-testing and district spending constraints. Still, proprietary sales increased 28% in the quarter to $1 million, partly on the sale of DRP to Los Angeles schools.

Simon is more upbeat about TASA’s custom testing business, which accounts for more than half of overall revenue. In addition to the multiyear extension of a contract in Michigan, TASA in the first quarter benefited from state spending on testing in Alabama, Missouri and Rhode Island.

First Q1 Profit

As a result, TASA reported its first profitable first quarter, ended Jan. 31. Revenue increased 18.2% to $2 million, while operating performance improved from a loss of $79,785 to income of $107,384. The company’s net income of $62,122 improved from a net loss of $296,450 in the first quarter last year. The first-quarter performance is particularly rewarding as it carries forward the momentum from fiscal 2003, when revenue increased 29.1% to $9.7 million (EM, Feb. 2).

Simon projects the first-quarter strength will carry further into the year, as the company gains revenue from scanning and scoring tests under its newly won contracts. Simon anticipates scanning and scoring services will contribute about 10% of the company’s revenue in fiscal 2004.

TASA is realizing the benefits of its improved business in the market. The company’s shares closed at $4 on March 9, up from 75 cents on March 10, 2003. The company’s stock, which trades over the counter, has not consistently broken the $3 mark since early 1994.

Touchstone Applied Science Associates: 845 277-8100; www.tasa.com

TASA Q1 Financial Overview

Ended Jan. 31, 2004 vs. 2003

($ in thousands)

First Quarter

2003 2002 Chg.

Revenue $2,087.8 $1,766.9 18.2%

Op. Inc./Loss $107.4 ($79.8) NA

Op. Margin 5.1% -4.5% 9.6

Net Inc/Loss $62.1 ($296.5) NA

Source: Touchstone Applied Science Associates

COPYRIGHT 2004 RR Bowker

COPYRIGHT 2004 Gale Group