4 ms·

A gross margin of 50% is not that impressive. Also, a "gross margin" number is not very insightful without additional information.

by robzyb 11y ago

varjag 11y ago
What? Gross margin of 50% is humongous. Google's gross margin is in the same ballpark, and Apple's is less than that.
- robzyb 11y ago
  IBM's 2014 revenue was $93Bn. IBM's 2014 costs was $46Bn. Therefore their gross profit was $46Bn (after rounding). This results in a gross margin of 46/93 = 51%. If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%. A gross margin figure of 50% alone is really nothing to be mind-blown about. (To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)
mattlutze 11y ago
Gross profit margin is the gross profit divided by revenue[1]. Gross profit is revenue minus the cost of the goods to the company[2]. Securis keeping 51% of the money generated by its business, after you figure in what that service first cost the company, is indeed impressive. What is also impressive though is if, as Securis' CEO suggests near the end of this[3] article, after all that their net income is only 1.4%. Is he really saying, there, that direct operating costs eat 99% of their gross margins, or is he not telling the FCC that a big chunk of change is being "spent" as operational costs on M&A and other re-directional consumables? My expertise is quickly exhausted in the subject, but... it can't all be going to kickbacks to the prisons. 1: http://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-gross-margin.asp http://www.investopedia.com/ask/answers/101314/what-are-diff... 2: http://www.investopedia.com/terms/g/grossprofit.asp http://www.investopedia.com/terms/g/grossprofit.asp 3: http://www.prisonpolicy.org/blog/2015/06/19/securus-profits/ http://www.prisonpolicy.org/blog/2015/06/19/securus-profits/
- jacquesm 11y ago
  A net of 1.4% on a gross of 50% spells 'creative accounting'.
  - JumpCrisscross 11y ago
    I read it as "lots of salary and bonus".
- robzyb 11y ago
  I'm sorry to repost the exact same reply, but... IBM's 2014 revenue was $93Bn. IBM's 2014 costs was $46Bn. Therefore their gross profit was $46Bn (after rounding). This results in a gross margin of 46/93 = 51%. If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%. A gross margin figure of 50% alone is really nothing to be mind-blown about. (To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)
jacquesm 11y ago
I'd sign for it. Just imagine: millions of people that can't switch providers that you can charge whatever you want. Coupled with a legal system that provides a steady inflow of new consumers. It's a super business model (albeit totally un-ethical). Most businesses are happy with 30% gross, that seems to be the number that normal and healthy businesses strive for. Plenty are happy with 20%. 50% is on the very high side of gross margins. Sure there are a few outliers but it definitely isn't normal.
- Terr_ 11y ago
  > Coupled with a legal system that provides a steady inflow of new consumers. To be fair, the legal system also removes consumers from the pool, so it's not a matter of "newness" but just that the system maintains some basic population.
  - robzyb 11y ago
    I think that part of the problem is that the legal system is not just maintaining some basic population. And even if it was maintaining some basic population, the incentives become misaligned when you start introducing a for-profit prison industry.
- robzyb 11y ago
  > I'd sign for it. Just imagine: millions of people that can't switch providers that you can charge whatever you want. So would I! My only point is that, in general, a gross margin of 50% is not that impressive for a company. It's pretty common. The article described it as a "a whopping 51 percent" but I would've described it as "a pretty boring 51 percent." Of course, that doesn't mean that I'm for their business model. I'm totally against it.

A gross margin of 50% is not that impressive. Also, a "gross margin" number is not very insightful without additional information.

by robzyb 11y ago

A gross margin of 50% is not that impressive. Also, a "gross margin" number is not very insightful without additional information.

varjag 11y ago

What? Gross margin of 50% is humongous. Google's gross margin is in the same ballpark, and Apple's is less than that.

robzyb 11y ago
IBM's 2014 revenue was $93Bn. IBM's 2014 costs was $46Bn. Therefore their gross profit was $46Bn (after rounding). This results in a gross margin of 46/93 = 51%. If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%. A gross margin figure of 50% alone is really nothing to be mind-blown about. (To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)

mattlutze 11y ago

Gross profit margin is the gross profit divided by revenue[1]. Gross profit is revenue minus the cost of the goods to the company[2]. Securis keeping 51% of the money generated by its business, after you figure in what that service first cost the company, is indeed impressive. What is also impressive though is if, as Securis' CEO suggests near the end of this[3] article, after all that their net income is only 1.4%. Is he really saying, there, that direct operating costs eat 99% of their gross margins, or is he not telling the FCC that a big chunk of change is being "spent" as operational costs on M&A and other re-directional consumables? My expertise is quickly exhausted in the subject, but... it can't all be going to kickbacks to the prisons. 1: http://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-gross-margin.asp http://www.investopedia.com/ask/answers/101314/what-are-diff... 2: http://www.investopedia.com/terms/g/grossprofit.asp http://www.investopedia.com/terms/g/grossprofit.asp 3: http://www.prisonpolicy.org/blog/2015/06/19/securus-profits/ http://www.prisonpolicy.org/blog/2015/06/19/securus-profits/

jacquesm 11y ago
A net of 1.4% on a gross of 50% spells 'creative accounting'.
- JumpCrisscross 11y ago
  I read it as "lots of salary and bonus".
robzyb 11y ago
I'm sorry to repost the exact same reply, but... IBM's 2014 revenue was $93Bn. IBM's 2014 costs was $46Bn. Therefore their gross profit was $46Bn (after rounding). This results in a gross margin of 46/93 = 51%. If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%. A gross margin figure of 50% alone is really nothing to be mind-blown about. (To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)

jacquesm 11y ago

I'd sign for it. Just imagine: millions of people that can't switch providers that you can charge whatever you want. Coupled with a legal system that provides a steady inflow of new consumers. It's a super business model (albeit totally un-ethical). Most businesses are happy with 30% gross, that seems to be the number that normal and healthy businesses strive for. Plenty are happy with 20%. 50% is on the very high side of gross margins. Sure there are a few outliers but it definitely isn't normal.

Terr_ 11y ago
> Coupled with a legal system that provides a steady inflow of new consumers. To be fair, the legal system also removes consumers from the pool, so it's not a matter of "newness" but just that the system maintains some basic population.
- robzyb 11y ago
  I think that part of the problem is that the legal system is not just maintaining some basic population. And even if it was maintaining some basic population, the incentives become misaligned when you start introducing a for-profit prison industry.
robzyb 11y ago
> I'd sign for it. Just imagine: millions of people that can't switch providers that you can charge whatever you want. So would I! My only point is that, in general, a gross margin of 50% is not that impressive for a company. It's pretty common. The article described it as a "a whopping 51 percent" but I would've described it as "a pretty boring 51 percent." Of course, that doesn't mean that I'm for their business model. I'm totally against it.