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I'm not sure there will be a Q1 pre-announcement anymore even though I'm the one who started the idea. I say that because I've been communication with Raj back/forth over the past few days. They have invited me down to see how their production facility is coming together. He's saying that they look forward to updating operations to investors "in the coming weeks" as of yesterday. As such, it may all just wait till normal Q1 announcement in early May.
So much will depend on the next update or two from the company and what institutional buyers think about it all.
Condor....to play off your growth breakdown more:
Q1: Revenue =$4.9M... End of Q Backlog =$2.5M.... Total = $7.4M
Q2: Revenue =$5.8M... End of Q Backlog =$5.8M.... Total = $11.6M
Q3: Revenue =$5.1M... End of Q Backlog =$11.5M... Total = $16.1M
Q4: Revenue =$8.3M... End of Q Backlog =$16.0M... Total = $24.3M
At some level this is the kind of set up we all look for in a microcap. Some of this growth has been priced in for awhile. Not sure how much at current stock price or how much the future is anymore. The questions going forward will be:
--- how fast will revenue goes up each quarter going forward?
--- what is the max capacity of production at the new facilities?
--- can demand ramp up more to take the new facilities to maximum production? in 2019?
--- can they get expenses to flatten out/rise only a bit more
--- can they get margins back at 35%?
COO Raj did interview with ProActive Investors at latest investor conference. He doesn't say much new other than they expect to target Australia, Africa & eastern US initially with their residential system in later half of 2019.
I know. I think the problem that is happening now is that existing shareholders aren't interested in buying more (I know I'm maxed out on my comfort level), but they haven't shown proof yet enough to bring in consistently new investors to turn the stock upward.
If they had done $8.3M in Q3 (instead of Q4) we'd be happy. If in Q4 they came out and said they beat Q3 by some amount, but are working through the last of the issues with their big expansion that should pay real dividends going forward, then we'd be happy. If Q1 then showed real boost in revenue, we'd be happy. The problem is everything is off by a quarter and no one is happy.
I'm expecting (next week maybe?) a pr on preliminary Q1 numbers and backlog vs the "backlog as of March 31rst" pr they mentioned in the cc call. The mere fact the latter hasn't come out yet makes me think it's the former for sure now.
They are still hiring. An ad for wireharnass assembler went up on their Linkedin page today. Also, an ad for Generator Assembler went up on Craigslist today.
It's more a post on a private forum vs a friend. He didn't say exactly. He did mention that the thing about "turning orders down" was miscommunicated in the cc call. They aren't turning orders down. It was Tier 2 US telecom/smaller customers telling them they want to order, but don't want to wait and so they will go elsewhere for now. The goal isn't to hold off on orders if they come, but more to ramp up production to get backlog wait down.
----So in that respect, the Tier 1's are willing to wait, but want a discount. The others are probably willing to pay more, but don't want to wait. POLA obviously has to put the Tier 1s at the top of the customer list right now.
He did say that he was told labor as part of cost-of-goods was too high in Q4 from overtime and training employees. Raj said labor is 12-14% of COG now and they think they can get it to 7-8%. The two big factors in COG are the engine and then raw material (then labor). They think they can get raw material costs down more too even with the tariffs by ordering in bigger quantities in time. It was mentioned in the 10K about some kind of special metal they use in their generator windings. They can't go direct yet as their volume isn't big enough.
If you read the cc call, the caller (stupidly) answered the question himself...."will you be at $4-5M per month??" (note---this is a pet peeve of mine that analysts do too much imo). Raj just said "yes" and went with it. Imo, he did not give specifics on exactly what the company thought themselves since he wasn't required to anymore. Companies love this kind of way out in calls. As such, the answer could have been higher. When asked specifically in NY, Raj said Q4 was only 45-50% of capacity and they hope to be 75% in Q2. Obviously no guarantee that hope vs expect is the same thing. It does mean that they are moving forward with integration.
Nothing on Q1. Also, Raj in the cc call said it was too early to comment on Q1. He didn't reply that rev will necessarily be weaker, just that Jan started weak as they moved to departments to the new facility. Who knows what that means for revenue. On the other hand, I wouldn't expect any great growth in Q1.
Speaking of integrating it all together......Did you see where they have 179 employees now? It was in 10K that I forgot to mention.
2018: As of March 1, 2018, we had 117 full time employees. Currently, 106 employees are located at our corporate headquarters in Gardena, California and eleven employees are located outside the U.S
2019: As of April 1, 2019, we had 179 full time employees. Currently, 160 employees are located at our facilities in Gardena, California and twelve employees are located outside the U.S.
I told you they have been running ads in Q4 and Q1 constantly. It seems to have slowed down now. ex. No more ads for TIG welder where as those used to be a weekly thing. They do have an ad for Generator Assembler on Craigslist as of a week ago. A few spots other spots on their Linkedin page.
At the Essex Conf the company mentioned they were only at 45-50% capacity in Q4 as there were lots of issues. They hope to be at 75% in Q2. It sounds like the demand is there to do it as mid-tier US telecom companies are becoming interested too. They just don't want to wait 4 months for product.
I'm surprised there is no pr yet on "backlog as of March 31rst". It doesn't take long----in Nov they put out a pr on a Monday (the 29th) for the update from the prior Friday (the 26th). Imo, since it hasn't happened already, that it will be a full preview of Q1 numbers similar to Q4 and won't be for a little while. That would make sense overall more too.
10K is out. I glanced through it and didn't see anything of real importance to note.
https://ir.polarpower.com/sec-filings-email/content/0001615774-19-005133/s117020_10k.htm
Worthy....two things are available today. I know for a fact that Raj is in NY doing 1v1 at that conference---someone I know is meeting him today. His question he wants to ask is why are margins going down for bulk orders if demand is so strong?
Also, insider trading window opens today. I'm not saying any will happen but it'd be nice to pretend it would.
Nothing like 200 shares trading at exactly 4:00pm EST to drop the price 20+ cents when 2 seconds before that there were thousands available on the bid at $4.74.
Army SMET/Robotic Mule program:
In this article they mention that Phase II will be done by end of May 2019. I know from previous articles that means the 4 participants will be whittled down to 2 for another round of tests. It appears that the Grizzly system from Howe & Howe (Textron) now is figuring they will be one of them. I still think the other one will be the Hunter Wolf from HDT Global. If so, we may know by the end of 2Q whether POLA's generators are in both of the last two finalists (the above two are POLA's partners). No guarantee on an overall contract being awarded by the Army in early 2020 for the whole program, but, if one is, then POLA would be rewarded for sure.
https://www.shephardmedia.com/news/uv-online/ausa-global-2019-grizzly-ugv-breaks-cover/
condor... As I think of it more, I find a separate pr on the backlog "as of March 31rst" odd. Why do it separate vs discuss it in the cc call? I can't imagine it's negative as then there is no reason to do it. However, is it because:
1. Are they expecting a last second order this week from a customer for the quarter and they want that included?
2. Insider buying window opens on Monday. If the future growth from their insider view looks strong + the stock is weak from a so-so cc call, then will insiders buy some shares? I'm not talking the big 3 execs, but perhaps some of the vice-presidents who don't own any shares or are given options? Will the pr be used as a benefit on Tuesday or Wednesday after the window is opened?
3. The Board last year gave out options to the big 3 on April 4th. Is a pr being used to coordinate after that?
4. The 10K has to be out by March 31rst. But, since that is on Sunday, the 10K will probably come out on April 1rst. It was out on April 2nd last year. Is the backlog pr coming out because something is mentioned in the filing (i.e. subsequent events since Dec 31rst?)
5. Or is it because they want to coordinate with the just announced pr on them presenting at a conference next week? https://ir.polarpower.com/press-releases/detail/37/polar-power-to-present-at-the-spring-investor-summit-2019
It will be interesting to see what happens. I think the stock gets some support from a pr like this showing that growth is coming, it's just taking more time to fulfill it then investors want.
worthy. I agree with you there. They aren't even taking care of US telecom markets. The NG engines should help solidify those markets going forward at least. I think the idea of residential/commercial is a distraction. They have a huge chance at the US robotic mule contract which I'm sure have decent margins. They will need capacity if they get that, not selling units to Calif residents.
Why revenue is more important than margins or expenses imo:
$15M/qtr x 32% margins (figure that's the best they get anymore) - $3.0M in expenses ($450K above current) x 0.74 for full taxes (Fed & Calif) divided by 10.2M shares = 13 cents/share. That's 52 cents/share full taxed. Assume everyone hates them (but sees the potential still for further growth) and they get p/e of 15 = $7.80.
Would I be happy with $7.80 a year from now? No. Would I take it? At this point yes.
I don't think you can assume margins are going to 35% unless tariffs go away. I think you have to assume expenses go up far more than they are saying. The question then becomes can they really get to $15M/qtr? 165 employees + more coming plus the money spent on automation means they are trying to get there. No doubt they make it in time if the demand is strong enough.
I think for long term shareholders the hope is they get to $15M/qtr asap and to heck with margins and expenses. Backlog #s are the only thing that shows there is demand. That pr comes in early March. The next news is earnings in early May and that will depend less on Q1 numbers and more on what production rate they are doing for Q2.
I disagree. Imo, showing revenue ramping up is more important than showing improvements in margins and expenses. Showing demand is there and needs to be dealt with asap is key to getting the stock to get above $6. I agree to go higher after that will involve how much flows to the bottom line. However, right now they just need to prove to everyone that they have the demand (and ability) to get to $12M/qtr or higher asap. Backlog #s are the best indicator of that right now outside of actual quarterly results.
Going forward:
At this point the thing that matters is the next news event and the effect it has on the stock price. That will be a pr on backlog as of March 31rst---perhaps next week already?!? Not sure why this will be a separate event vs commenting on it during yesterday's call. I don't doubt it will be positive at some level otherwise why do it. Not sure what new investors would need to see to buy in.
Right vs wrong:
The demand we always thought they'd have for their product is materializing for certain. In time, I could see it get to $100M/year. You can see the handwriting on the wall----they could get more US Tier 1 business (new NG generator will help), go after Tier 2 in US, international telecom will build, NG for commercial and residential, 50%+ chance at US Robotic mule + other military, etc...
What we've gotten wrong in analyzing this company (or me at least) is their ability to ramp up to meet that demand. Expenses are running far higher than I thought and margins are lower and all of it is taking longer than expected. I don't doubt they get to $15M/qtr going forward, but then this manufacturing facility is maxed out (at least on 1 shift/day and they have indicated it's tough to get employees for other shifts). How do they get to $20-25M/qtr?!? How much more capital will they need to raise to do it? I'm not against an equity raise, but only at a valuation above the IPO price for certain. Yet, even with more cash, how long would it take to get a new facility going & where do you put it to make sure it works for certain?
I don't doubt that money will be made going forward from current prices, but my hopes of a home run stock here have been diminished a bit by the reality that production and efficiency are the limiting factors here, not demand. Normally this would be a real positive, but the catch is that meeting that demand is harder than I calculated.
No clue on what it does tomorrow. I think the worst of this investment is now over and so I don't see it going down. Not sure how long it will take to bring in new investors to run it up. They may need more proof the expansion is really going to add up to strong revenue plus wait on margins & expenses.
We do have that institution that picked up 250K shares in Q4. As such, another one may show up and look to grab shares. Remember---these investors aren't burned out like you and I. For them the risk to reward over the next 2 years may be very appealing.
cc call---they have 165 employees now (huge jump). They are still integrating them and new facilities for efficiency. Feb is better than Jan. March better than Feb. Goal is $4-5M/month production rate with minimal overtime, expenses only slightly above Q4 rate and 35% margins (those margins more 2nd half 2019---dropping of tariffs would help). More demand right now than they can take on. Will give backlog update "as of March 31rst" in future pr. They want to get backlog down to $8-10M (=2 months of production they say).
Not sure what Q1 will be. Q2 will be a better view they say.
New NG engine coming for telecom in Q2 and residential in Q3.
It's positive, but also still frustrating to see "when" it is all coming together.
The jump in employees of over 50+ does mean they expect to do something. I told you that they are running lots of ads. The hiring should stop soon they said.
ebase...margins were just 28%?? How much issues did they have in expanding to the new facilities? I could see them spending days (but perhaps weeks?) relocating and organizing instead of producing.
The big thing is the comments on Q1. Q4 was about expanding production capacity. Q1 is about starting to show it working.
ebase...Did you read the analyst report link I posted while back? No one "thinks" that revenue is dipping in Q1. What they think is that Q4 shows that management hasn't ramped up production to take advantage of the situation. Q4 at approx $8.3M is not seen as a positive. The analyst who wrote that report made that pretty clear. Repeating it or exceeding it by a little bit is not good enough for Q1. Management itself said they need to get production up significantly in the Jan pr just to deal with the opportunity of US telecom----let alone international or other areas. If Q1 doesn't show a large improvement over Q4, then this stock is going no where. No one is buying the company. No investors are bidding the stock up. The Roth analyst (the one who's #s show on Yahoo) once thought the company could do over $100M/year from opportunities (back when they IPO'd). He's lowered the bar/his estimates now so low that management can pretty much crawl over it on their belly at this point. Upgrading it slightly isn't worth anything to the overall market. Let's be realistic----would you suggest to any one you know to buy this stock if they are doing $9M and 6 cents/share per quarter for a $5 stock in the current market & world economy?!? I wouldn't unless management shows there is a definite ability to get to $12M+ in a quarter this year. This is from someone who owns shares in this company too.
I think as shareholders we will have a very good idea of what management is truly about in the earnings report on Tuesday and the subsequent cc call. Are they truly taking advantage of the opportunities and have started to ramp up production significantly or are they just going to b.s./put up excuses/take about potential?
ebase22...I think it's important they make some profit in Q4 to show that expenses are appropriate and margins are somewhat decent. They should have gotten the 23% discount on all the engines used in the quarter from buying in bulk now. That has to be worth something you'd think? I don't think anything about Q4 moves the stock though. What will/won't is the Q1 update, backlog #s, and comments on the rest of 2019. I don't know what is needed to move the stock anymore. It's been disappointing that it hasn't rebounded at all with the overall market. There is no doubt in my mind that Q1>Q4, but I don't know by how much. The stock price isn't indicating much, though I'm hoping it's wrong.
worthy....I agree on the slim odds of a buyout since expanding the company is the CEO's dream. Just read the Dec interview with AlphaDirect to understand that. However, did you watch the recent interview on RedChip? The CEO has obvious health issues in that he has tremors and can't sit still. That alone may boost the odds of a buyout in time.
I also wouldn't say they aren't interested in the stock price. Putting out fluff pr's means nothing in the stock market anymore. What matters is results---that's it. They have no real #s yet to impress anyone. Obviously Q4 isn't going to do it either. I actually am hoping they have waited till March 26th to report (vs early March the last 2 years) just so they can give a full update on Q1. There isn't any doubt that Q1 will be stronger than Q4---just they fact they ran adds the entire quarter for employees shows that, but no one knows by how much.
Small POLA update on Namibia:
https://www.linkedin.com/feed/update/urn:li:activity:6512222276912545792
ebase.....my bet is they want to be able to give 1rst Q production #s or are waiting to make sure they have follow up orders for backlog before reporting. Something positive to say.
NG Fueled EV Home charger:
In today's announcement that the company will be attending the Roth Capital Investor Conference at the start of next week, there was the comment of:
" In addition to one-on-one meetings, the Company will be hosting a booth displaying its new natural gas fueled electric vehicle home charger."
I'm not a big fan of companies reporting late in a quarter (POLA has until March 30th to report & put out 10K). On the other hand, the longer it goes the more they can give of an update on Q1 production and orders can be had. That's what's moving this stock going forward vs rehash of Q4 results.
POLA CEO interview on Redchip:
https://finance.yahoo.com/news/polar-power-ceo-interview-air-140000495.html
ebase.....Ashok Kumar used to be with Joseph Gunnar. Obviously he's now with ThinkEquity.
One plus to this report is it shows he's still following them for his clients. If POLA can get their production up to take advantage of the opportunities that exist, then he will continue to report updates to his clients.
ebase....Here is the full pdf. It's the Jan 30th report from the 2nd analyst who is always on the cc call (the one with the strong accent).
https://thinkequity.bluematrix.com/sellside/EmailDocViewer?encrypt=f75da8ae-af9e-456b-8eef-35eeb3f6a38f&mime=pdf&co=thinkequity&id=km@think-equity.com&source=mail
He sees them growing sequentially quarter to quarter in 2019. His thoughts are that production is the limiting factor. He estimates for 2019 are below mine as I think they can ramp up faster than he does, but we'll see. He has an $8 target on the stock. I'm sure after the earnings report & cc call he will send out an update to his clients. AlphaDirect must have gotten approval to put out his Jan report. AlphaDirect is a side business of the Shaun Stevenson who is listed as IR for POLA though I'm not sure what he really does.
Even if he's right and I'm too optimistic, his estimates put them at a 60% growth rate for the year.
Interesting post about CEO's thoughts on EV charging:
"Polar CEO, Arthur D. Sams, extreme left of the other panel members at TE-Expo.com, presented a paper focusing on his contention of many decades: that the grid will not be able to support EV charging within the next few years. The other speakers backed this up with actual, predictive data on how EV is beginning to deplete grid resources already.
Polar's solution is to provide Propane/NG fuelled DC generators for very fast charging. Trillium, part of Love's Group are currently installing NG fuelled AC generators for charging at their Love's Truck Stops.
The audience welcomed Arthur's explanation of why DC generators should be prefered over AC, and the dire need for home and mobile chargers."
Here's a link to the Trillium/Love's EV charging station:
https://www.ttnews.com/articles/solar-power-installation-trillium-prepares-way-ev-charging
Namimbia....they announced on Linkedin they finished the tower building contract. There are still 410 or so towers to go and they should (imo) capture a higher % of them. They did 9% of the first round and even if it goes to 15% for the remaining, that's $4.8M. That doesn't include getting more contracts from Huwaei for putting equipment on or getting contracts for Phase II for generators.
Original PR last summer to catch you up:
https://globenewswire.com/news-release/2018/07/12/1536550/0/en/Polar-Power-Enters-Wireless-Infrastructure-Market-in-Namibia-Africa-Receives-Initial-0-8-Million-Purchase-Order-from-Mobile-Telecommunications-Limited-to-Construct-New-Cell-Sites-A.html
Last news report on overall project in Namimbia:
https://www.namibian.com.na/184911/archive-read/MTC-completes-41-tower-sites
Natural Gas/Propane Electric Vehicle Chargers:
"Polar CEO, Arthur D. Sams, will deliver the following paper in San Diego at the Energy, Utility & Environment Conference on 25 - 26 February:
USING NATURAL GAS & PROPANE FOR CHARGING EV'S
(Tue 07:30 - 09:30 AM)
We will also exhibit our:
Toyota engine based EV chargers
CHP based DC generators
Natual gas & diesel generators for electric hybrid specialty vehicles"
https://media.licdn.com/dms/image/C5622AQFag8onFRSxfA/feedshare-shrink_8192/0?e=1551200400&v=beta&t=EGWjv613ORp10M87fzL9niaLs6-vphnlzeBa9rRS7so
ebase...I bet expenses go up a bit from here in 2019. Figure right now they are doing at most 500 generators/qtr (say $12.5K each x 500 + Africa misc income = low $8M range). Divide that by approx 63 business days per quarter (5 x 13 weeks - a couple of holidays) = approx 8 units/day. We want them build 2x that. Think of the bottle necks....
---they bought a CNC metal sheet bending machine for enclosures.
---they bought a CNC painting machine for enclosures.
---they bought more CNC milling machines for parts.
---they bought a CNC laser machine to cut parts.
---they have more space to stock pile material and partially finished products
What is the bottle neck then going forward?? TIG welders, Wire Assemblers, and Generator Assemblers. They can get the parts quicker and do them in-house, but they still need bodies to put it all together. This is probably why they run ads for these jobs continuously now. The more they hire, the more generators they can produce.
Each of these spots probably costs about $20-25/hour when you ad in workmen's comp, insurance, benefits or $10.4-13K/qtr each.
ebase....there aren't many shorts left. The latest Nasdaq number is approx 68K (vs once being close to 300K).
There is obviously someone slowly trying to unwind their position though. Those that are buying don't have an urgency to step and grab shares. It's disappointing in that the overall stock market has done a 9 week V-shape recovery while this stock has done nothing.
For pre-earnings pr last month they stated a very important fact imo:
"We believe that in order for us to gain additional market share for backup generators in the U.S. telecommunication markets, it is vital to demonstrate our ability to deliver higher production volumes to our Tier-1 telecommunication customers"
That alone is the truth. If you listen to Generac's cc call you will hear their CEO very bullish on their sales to US telecom markets. POLA is not capturing market share. Again, from last pr:
"We believe that currently we have a relatively small market share of the U.S. telecom backup power generator market with significant opportunities among the top-tier carriers as well as the fragmented "last mile" service providers"
They reduced the cost difference and have shown in demos that their product excels, but it means nothing if they can't deliver it in quantities that customers want.
The real question is the following statement....(are they to be believed? Right now the stock price isn't showing it):
"Our strategic investments in plant automation and equipment has provided us with significantly higher production capacity for 2019. We believe this increase in plant capacity will enable us to not only increase market share with our existing Tier-1 customers, but also provide us with the ability to target and serve new customers and geographies."
Only from higher revenue volumes can they get higher margins. Only higher revenue volumes can show customers that they can handle bigger and bigger orders. Q4 showed that they still aren't there. Will they start to discuss that Q1 is taking a big leap forward?
I was hoping for a pr on new orders this month. My worry is that they aren't getting follow up orders from US telecom or international orders because of the production issues. The only thing that alleviates this worry is the fact they keep running ads for personnel. If they weren't getting the orders (or expecting them for certain), then they wouldn't be hiring more (or replacing). Also, they wouldn't have just delivered a very expensive laser cutter and another CNC machine at the end of December.
I think once they can prove to the investment community that they can do $12M+/qtr, then a lot of the other issues will go away from margins to stock price.
That's what momentum players do. They buy in early, build up the stock anyhow/anyway/say anything, and jump off later. Those that are trying to get a "following" have to go where others aren't to find something new. It doesn't mean they have the $ firepower to do it here. You'd need to hit POLA with 100K+ shares or more quickly imo. Most likely it's a fade without POLA putting out news to show things are happening.
However, one thing I do like about POLA is that (big if) they can get their act together the play into solar charging systems & electric car charging get bring in investors who might not look at them normally.
ebase22....on Stocktwits there were people posting that they were buying in because they thought it could be the next "runner" in electric car charging (like BLNK).