Networking issue- he said they are pretty much done with that and they see this network (should be a software update) as another ancillary revenue not only in the US but also in EUROPE. They are THE ONLY company which can offer this service to the customers. You can see how well advanced and ahead they are in front of TSA when compared with the competition. I personally have 0 concerns about the initial order and I think they will get larger portions of the 162mn IDIQ this fiscal year.
400 units a month is MAX CAPACITY- he said TSA will have a lot of flexibility with this capacity but HE did not say that they will produce this much all year around make 40-43mn. He is a very conservative guy and I am sure that they are targeting a significantly higher revenue figure than that internally for 16. I expect them to beat at least 50mn in revenues this year and I don't think that this 400 unit is a random number. I believe TSA needs more than 1170 initial order and they are simply ready for the next order.
Next targets are handheld and the new product that they are working with DHS with DHS funding. I give them credit for this. They don't want to just make 50mn in 16 and done with the growth. They need to spend money to bring in the new tech and products which will secure FY2017 and onwards. When they start getting the receipts from TSA and pending European deals, they will be in a much better place financially.
Pay attention to the gross margins expansion with close to 6mn quarterly revenues. This will go above 50% in near term. Look at how adjusted EBITDA got close to break even. With 30mn annual revenues, they should be break even on an EBITDA basis. So, in this quarter or latest next, they will be positive EBIT basis. Great point for refi discussions.
As usual, he knows what he is doing operationally but does not market the hell out of that. Show me one more company with 13mn in sales past year going up to 40mn plus with the deals in backlog and trading at these levels.
Given the noise, TSA delay and very little marketing, the SP will be where it will be at least until next cc in 45 days but this is becoming a real company with real revenues a lower cost base. It is very cheap fundamentally. Noble Financial is the only research with good coverage on this and according to their financial model, the target price was standing at 1.50 per share and I think it will be around there after last night as well.
