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They keep running ads for production. There are 4 now on Craigslist for their area. https://losangeles.craigslist.org/lgb/mnu/d/gardena-production-assembler/6823641272.html
Either they can't find anyone (though $14-16 + benefits should attract someone I'd think), can't keep anyone because they suck, or they are trying to find more.
ebase22.... in 2nd Q margins were 35%. In 3Q they were 30%. That will be the difference maker in Q4. The plus is that they should be using the discounted engines the whole quarter. The higher revenue should help too with lower costs. The question becomes then how much inefficiency did they have in getting the new facility going as far as personnel expenses? How much overtime was there? The reality is they didn't move their big new laser cutter in till after Christmas (from their Linkedin post) so I'm not sure how smoothly everything has been going. We also know this from the fact they only did the low $8M range in Q4.
Imo, if they did $8.3M with 35% margins and $2.3M in expenses, then net income comes in at your number (there shouldn't be any income tax this quarter since they have a bit of carryforward now). If it's 30% then they are lower down closer to 4 cents/share.
If they did $8.4M and 6 cents/share AND announced some rock solid backlog, I think it'd draw in some new investors. That's the problem right now. No one new is inspired to come in.
One plus that may come in 2019 to aid us......Canada and Mexico are both saying that the U.S. will have to ratify Nafta 2.0 first and that they will refuse to sign it unless the steel and aluminum tariffs are dropped. Those were used as an incentive to get them to negotiate. Now that they did, they want them gone or forget it. Senator Grassley is agreeing with them and pushing it himself.
A little more insight into their potential future diversification................The company will be having a booth at the TE-expo at the end of this month. It's focused on EV charging, battery, and electric fleet.
http://te-expo.com/
They aren't listed on the main page, but the are on the map and in the exhibiting master list: http://te-expo.com/wp-content/uploads/2019/02/2019-TE-Exhibiting-Companies.pdf
you and me both. Update: Essex Financial Managements owns 252K shares bought in the 4th Q, not the 504K the Nasdaq listed. They filed a Form 13F and a 13F/A the same day. Same shares, but Nasdaq doubled them for some reason. Still a positive. They seem to be positive. Perhaps fresh eyes vs our tired ones? We'll see. I'll be disappointed if there is no pr before earnings showing some kind of progress internationally.
new 5% (just under) major shareholder:
The final institutional ownership listing (for 12/31/2018) will be finalized by Feb 15th. However, some post their holdings early. POLA has had a couple of institutions sell off some shares, but they also have one large NEW buyer that occurred in the 4th Q:
ESSEX INVESTMENT MANAGEMENT CO LLC 12/31/2018 505,680 505,680 New
https://www.nasdaq.com/symbol/pola/institutional-holdings
Another new position hiring for (or maybe replacement)---Inventory Control Manager. What is different about this one is they have changed their standard description of the company in the ad to a new phrase:
"Due to significant success of its products domestically and overseas; Polar Power is in the process expanding production and automation. We are seeking top talent at all levels to promote continued expansion and prosperity of our organization"
Again, doesn't mean much, but perhaps each little crumb leads to something?? Earnings will be in 4 weeks. If there is some kind of meaningful pr out before then on a contract then I will good about the whole situation---namely it's all coming together on multiple levels. On the other hand, if there isn't anything till earnings then I figure it'll be a 'baby step' forward at best in Q1 (yet again).
POLA updated their investor relations webpage. I'm not going to pretend that it's something meaningful like "good things are coming" kind of stuff. But it is an oddity I will point out. Especially since the rest of the website is the same (with 2016 at the latest update on the bottom of each page).
Worthy....it will be interesting to see the impact of the 23% reduction in cost for the bulk engines they buy now in quarterly results. I keep my fingers crossed that the aluminum tariff from Canada gets dropped when Congress starts to look at Nafta 2.0. Senator Grassley (R) is pushing for it. Dropping the cost of their aluminum enclosures would help margins a bit.
I also worry that the company has little experience in ramping up and that may not play out as efficiently as they hoped.
reply to myself, Army SMET contract.....
You could make the argument also that if the Army wants these vehicles to have a machine gun then the Polaris and General Dynamics with their pneumatic tires are at a real disadvantage. It doesn't much good to fire a machine gun if the opposition can shoot out your tires. The other two (POLA partners) have either tank tread or solid flexible wheels.
Just became 67% chance at SMET contract (imo):
We won't know until a final decision is made in 2020, but the latest updated news bodes well: The ARMY SMET contract is investigating and potentially adding in a new requirement for the robotic mules vehicles being tested.....the ability to mount a remote controlled machine gun.
https://www.army.mil/article/217034/guard_members_to_see_expanded_use_of_robots
Imo, what this means is the Polaris MRZR-Z dunebuggy system is out as a choice. The front roll cage bars to protect optional drivers makes it impossible to have a machine gun in the back. The vehicle would be driven forward remotely, as such, it'd be kind of crazy to have to then do a 180 degree turn to fire a weapon. It's a great vehicle, ex where they have put drone jamming devices on the back
http://www.thedrive.com/the-war-zone/26067/uss-kearsarge-transits-the-suez-canal-with-anti-drone-buggies-keeping-watch-on-deck
but it, imo, can't take a 50 caliber machine gun like the others. Ex. Hunter Wolf https://breakingdefense.com/2018/10/hunter-wolf-robot-killer-golfcart/
Imo, it then means that there are only 3 real players left in the Army SMET contract and POLA is a partner with 2 of them.
ebase22...It really is good stuff. It shows that even if domestic telecom dropped in 2020, POLA is still a company that could put up double digit revenue #s per quarter. I don't think this is priced in right now. They still need to prove themselves fully, but it does take potential back to a level we always hoped for.
The talk of a capital raise is something else that needs to be brought up in the cc call. One plus to a CEO who owns so many shares is that his salary is meaningless compared to his stock ownership. He doesn't want to screw himself in the process.
Very interesting updates in investor presentation:
They gave a presentation at the LD Micro Conference in Dec. I didn't attend and they never put up the slide show on their webpage until just now (I look occasionally). Perhaps no one at conference fully understood what the company was discussing, but for a shareholder of POLA, the info is very interesting & absolutely needed to be read through:
https://s21.q4cdn.com/772584186/files/doc_presentations/2018/12/Polar-Power-Investor-Presentation-Dec-2018.pdf
#1 highlight....They are in 2 of the 4 Army SMET vehicles! Slide 15 shows pictures of the RS2-H1 system from Howe & Howe Technologies (the one with the tank tracks) and the HDT Global Hunter WOLF. They also mention on slide 22 they are in multiple Army Robotic Mule Program (i.e Army SMET).
What this means.....that gives them a 50/50 chance at a MONSTER of a contract. Potentially 5000 of these vehicles will be made going forward. That's saying there is a 50% chance they get a $50M contract spread out over 4-5 years. The winner will be announced in 2020 with production starting soon after and ramping up. Jan 2019 discussion on contract & vehicles: https://www.defensenews.com/land/2019/01/11/here-are-the-four-prizes-textron-systems-is-watching-in-2019/
imo, two best vehicles in the test are POLA's partners and the Howe & Howe Technologies tank track and the HDT Global Wolf (bullet proof solid/flexible wheels)vs the 8 wheel pneumatic tire vehicle from General Dynamics or golf cart design from Polaris. What is also interesting is that Howe & Howe was just bought out by Defense giant Textron just this month. Here is a comment from the CEO on her feeling secure the army smet contract going forward: https://www.govconwire.com/2019/01/textron-completes-howe-lisa-atherton-quoted/
#2 Highlight: There is no doubt they are going to make a push into the natural gas/propane market for residential, microgrid, commercial, car recharging, etc. They mention on slide 5, 11-13 the whole plan. It involves teaming up with LPG distributors. They go into detail on their new engine that is being designed. As shareholders we need to be aware that this will become a major push forward for the company.
#3 Highlight: The toss in more comments throughout the slides about the international market and how they expect it to ramp up in 2019.
#4 Highlight: On slide 22 they mention a $800K contract with defense contractor for a DC Power Auxillary Power System. Not sure if this is something new or if it's connected to their contract with Oshkosh and their firefighting truck.
#5 Highlight: On slide 5 they have a timeline. For 2019 they discuss international sales & natural gas expansion. They mention the possible need for more capital for receivables if things ramp up. What is interesting is that they mention 2020 comments of starting to build a nearly fully automated plant OUTSIDE of Calif to deal with sales.
Overall: This big one,imo, is their chance of the Army SMET contract just went from 25% to 50% (and maybe even better since they are in two strong partner vehicles).
ebase22....I honestly believe they hit it in Q1. To do so they would need:
$10.5M in revenue x 37% margins x $2.5M expenses (up $200K from Q3 which they said was bloated a bit) x 0.74 (26% for Federal and Calif Taxes)= $1.025M or 10 cents/share.
I can't imagine they have added in the manufacturing facilities and automated equipment at the rate they have done the last 4-5 months to not be planning on building revenue to levels far higher than $10M/qtr. I can see there being issues in Q4, but I can't in Q1 seeing issues that keep them from reaching at least $10.5M. Even with their normal level of incompetence I think they make it.
Q1 isn't my worry. I wonder about behind this quarter. Can this business get to $15M/qtr in revenue or not? Can they get the international orders? Can they build on US orders more? Can they diversify into other areas (army SMET, other military, natural gas--solar partnership)? And, just as importantly, if they can get the orders can they actually run a plant at that level without messing up?
Wadirum1....I actually don't care much about their upcoming new natural gas engine and a potential push with tying it to solar power in the U.S. for residential or commercial. At this point I just want to see them break $11M+ per quarter with the telecom business. After that perhaps the "hype" of a new market will give the stock a decent p/e. That'd be good enough for me at this point.
One plus that I'm hoping will slowly start to reflect in the stock price is that Q4 "should" be the low revenue for the ongoing future.
I'm perplexed a bit on the pr....
Why did they pre-announce 4th Q numbers? Seriously. Did they:
1. Do it as a warning? They did release them on a Friday. Yes, revenue was a record number and they highlighted it, but $8.0-8.4M isn't very impressive considering there was $2-3M in 3Q that was unfulfilled (due to lack of engines) that should have carried over to 4th Q. It's also not that impressive considering they opened their new facility in early November and had enough backlog (and indications from telecom companies wanting it) to deliver a lot more.
The problem with this idea is that it wasn't like the quarter was a bomb. Just disappointing a bit considering most investors were hoping for a ramp up with the backlog numbers and new facilities.
2. Do it thinking it's an upside surprise? Yes, the Q4 earnings were a record and they are ahead of the worthless Roth analyst #s (who doesn't do squat in adjusting them anymore as I'm sure he is done figuring out this company). Did they hope the pr would boost the stock price up?
The problem with this idea is why do it on a Friday then? Why not wait till Monday when it would get more attention. Also, it's not like $8.0-8.4M is something spectacular. They should have done this in 3Q and built on that in Q4. Besides, the Q4 revenue #s indicates to anyone with half a brain that they are still working through manufacturing issues.
3. A third option (and one I wonder about more and more)....did they do it just to get Q4 numbers out of the way? They realized they were neither very good nor very bad, but wanted 2018 behind them. You figure this is the first time they ever pre-announced earnings.
I say this because they keep talking over and over about international orders, even to the point of discussing them in the 10Q filing last quarter----"We believe completion if initial testing in these emerging markets will result in significant sales in 2019." The new fiscal year has started and perhaps they are expecting these orders to be initiated soon? If so, perhaps they expect a pr on them before 4Q earnings release in early March. Then the pre-announcement of Q4 makes more sense. Why put out good news in the month of February if they are then going to turn around and put up a blah earnings report in early March. The result of doing this is they just killed the momentum of a 2019 story of things ramping up. By pre-announcing Q4, they can ignore the discussion of it for the most part in the cc call and focus on the now & future more.
Is this just hyperbole by me?? Perhaps. But look at the hirings they have done in the last few months. Look at the equipment and manufacturing facilities added. This can't all be to do just $8M per quarter or even $10M. Who we kidding, they could have done this kind of revenue in the old facilities I'm sure. Also, they have spent money on multiple CNC milling machines, a CNC punching machine, CNC painting machine and easily $500K on a laser cutter the size of a small commercial bus. Also, no one knows more about the company than the CEO. He filed that trading plan for 200K shares in early September to potentially sell shares through the end of March. When he filed it the stock was in the low $6s. The stock in November hit $6.50 for a brief moment and he wasn't a seller so it means his price is higher. What makes him think the stock was going to go up enough (with volume) to trigger his sells by the end of March? Certainly not Q3 numbers as he was already aware himself in Sept that those would disappoint. Perhaps he thought Q4 would ramp up faster and he hadn't expected more issues to arise? Even then, this means he expects to ramp up more than it has. You figure the end of March will only have Q4 earnings before it and any pr's on orders/backlog. If he wants to get the stock up, he isn't doing it on Q4 earnings for sure. However, by getting it out of the way, he may be able to do it on new information.
Overall:
I don't fully understand why they released Q4 numbers early. They weren't horrible, nor were they great. They did it on a Friday 6 weeks before the actual report/cc call happens. What was the purpose of it? All I can think of is that they did it just to put 2018 behind them so new pr's build the story (and stock) for 2019.
Does this make any sense to anyone else??
New positions POLA hiring for this week:
---they renewed their ads for Generator Assembler and TIG Welder. They have also run ads for two more to deal with growth:
Inventory Coordinator:
• Perform Random & Required cycle counts manually or by utilizing RF scanner
• Classifying, labeling and warehousing all product inventory for future use.
• Execute and maintain accurate Inventory within three facilities combining 100,000 sq. ft.
• Report shortages, overages and all inventory levels monthly for replenishment.
• Assist the receiving and shipping department in logging all incoming inventory purchases and loss prevention department with any investigation when required.
• Maintain accurate part numbers and product codes in the system at all times
• Conduct product moves from location to location per directive from management
• Strong attention to detail while demonstrating accuracy and thoroughness Stock room Standards
• Maintain a clean work area
• Recycle all cardboard/plastic straps
• Assist Team Members in fostering a safe, positive, cohesive work place
• Responsible for the proper use and maintenance of all equipment • Communicate issues or concerns with supervisors/managers
• Maintain up to date knowledge of ERP technology, barcode scanners etc.
• Other Duties and Responsibilities as directed
Production Controller:
At the request of the Planning Department, creates and distributes work orders and prioritizes work on the manufacturing floor.
• Moves parts, tools, and manufacturing travelers from material control to work center(s).
• Assists planning, locating lost and/or missing paperwork
• Expedites manufacturing travelers, tools, and materials on the manufacturing floor, coordinating with Planning, Material Control, and Manufacturing.
• Supports supervisors by filling shortages
• Works with Quality on on-hold status items and communicates the same to planning.
• Maintains frequent, constant communication with planning and floor manager to understand what items require expedite.
• Reviews daily shipping report to understand daily, weekly, monthly requirements for contracts that are shipping during current financial period.
ebase22....are they 1 qtr behind where we want them at? If they had done this preliminary Q4 rev number in Q3 it'd have been acceptable. With the new facilities truly up and running, will that then bring Q1 above $10M+? They have the backlog obviously for it.
$10.5M x .38 margins - $2.5M expenses x 0.75 for taxes = 11 cents/share net income. If that's all they can do in 2019 for 4 quarters, the stock will still do well.
ebase22...I think the stock won't go anywhere until investors know:
1. How much in revenue per quarter can then (honestly) produce?
2. Can they do #1 in an efficient manner going forward to boost margins?
3. Can they get U.S. telcom and international orders in 2019 and 2020 such to keep building backlog so that they can do #1 consistently?
4. Can they open up additional areas in military and natural gas generators to increase future growth prospects?
Until the above happen I can't see the stock running up in price. I can see some investors wanting to sell out as they don't trust management's ability to manufacture and don't want to wait to see if they get it straightened out.
As I posted back in Dec......they did just buy a $500K+ laser cutter and additional CNC machine. They are doing it to either deal with future growth or to increase efficiency. Either result should be helpful.
I will start off with saying I'm disappointed in Q4 revenue. It's too light especially with the carryover that "should" have occurred from Q3 being light. They obviously have issues with ramping up manufacturing. They said it themselves in the pr---to get more orders and market share they need to show they can deliver. So far they aren't doing that very well. How do they take on international orders of large size when they can't handle the US market efficiently? This is how small companies with great products lose out on potential growth. I'm sure the manufacturing capacity is greater than $10M/qtr now, but how much more?
One potential positive point we haven't really discussed that relates to the future.....from pr and their R&D:
"new technologies related to natural gas generators, lithium battery storage systems and efficient integration of renewable energy with DC power supplies" and "target what we believe to be a significant market opportunity in the industrial, commercial and residential power generation markets"
= non-telecom market they are looking to go after combining their DC generator + natural gas with the increasing use of solar polar arrays by residential and commercial in the US.
Namimbia MTC tower update. Not sure how much of it all applies to POLA, but here is an update on the whole 500+ tower project.
https://www.namibian.com.na/74918/read/MTC-completes-41-tower-sites
Worthy....the CEO mentioned some big goals in that AlphaDirect interview last month. They just spent easily $500K+ on that laser cutter and new CNC machine. They obviously have plans, but they also need to play the Wall Street game and get their company back on the radar of investors. If they don't come out with an update pr in the next 3 weeks I'll be disappointed (and a bit worried).
ebase22...I've posted all I know. The # of short sellers (as of Dec 31rst) is still around 78K. It pretty much ended the year at an all-time low (compare that to 280K or so in January 2018). Institutions need to post their share count by mid Feb. However, one of POLA's larger shareholders already has submitted theirs---it showed them selling off approx 50K of their 150K shares in Q4. Not surprising. I thought a lot of the sell off was institutions being forced a bit to sell due to investor redemptions + taking tax losses to balance other gains. That killed the price and momentum then took over.
POLA won't report Q4 until approx March 8th or so. I expect some kind of update or announcement before then. When that happens is ??.
POLA boosting manufacturing with more automated equipment.....They just put on their Linkedin page that they just bought a 3rd Haas CNC mill & a big laser cutter to boost production.
https://www.linkedin.com/feed/update/urn:li:activity:6482820171319865345
From the 2nd post (about the Haas mill) "The reason behind expanding machining capacity internally - as opposed to subcontracting - is to reduce production cycle time and parts cost, offering us yet another edge to our competitiveness."
Besides renewing the regular ads for Generator Assembler and TIG Welder, they are hiring for an "Expediter" to make the the manufacturing facilities run smoothly. They are either expecting to ramp things up even more and want to be on top of it or are finding themselves not running the facilities efficiently right now in getting orders done and out on time.
Job Summary
Polar Power is currently seeking an Expeditor to work in our manufacturing facility in Gardena.
Duties And Responsibilities
Coordinates work flow priorities with production work centers
Distributes work orders to the production floor, assuring all materials and drawings for immediate production
Works with engineering to assure work orders and drawings are correct based on expects
Reports to planning, any material shortages or capacity issues that need attention to meet Shipping Promised Date
Expeditor is the first on to know any obstacles preventing promise date
Communicates and updates production schedule
Coordinates with shipping department all expedited units to assure promise date
Manages FIFO (First in First Out) throughout manufacturing, assuring units are set in priority
Interview on POLA---last of it is very interesting:
https://alphadirectadvisors.com
I had to give them my name and e-mail for the pdf access. Most of the interview with the POLA's CEO is just background info and discussion of the advantages of their product. Arthur Sams discusses how they are building the business components up equally (sales, manufacturing, infrastructure) to what they expect revenue to be at so they don't get costs ahead of themselves. The last paragraph is the part that is most interesting:
"When we reached between $7 to $8M in sales our first round of capital raise was $1.2M,and with this $1.2 Million we grew to $24 M in sales and this performance gave us the credibility for the next raise, a $17 net capital raise via IPO. The IPO raised the minimum amount of funds that would allow us to reach our sales goals ($75-$100 million) and even if we wanted to raise more capital our business plan and credibility would not allow it. Also, the management infrastructure was not in place to effectively make use of a larger capital placement. We will need a third capital raise to assemble a much larger, more automated factory with the necessary inventory that will take to the $500M and above sales revenue. We are conservative in our capital raises and subsequent expenditures as we have our investors best interest at heart, including myself."
----they intend to go from where they are at now to $75M to $100M in revenue then raise money through institutions again and take the business to $500M with an automated factory. For him to be dreaming that big perhaps things keep coming together more and more?!?
One plus going on......all their recent advertisements for hire (most of which initiate on their Linkedin site and then are sent out to other online job postings) are for production.
Generator Assembler and TIG Welder are renewed every couple of weeks. The latest (yesterday) is for Engine Technician (to deal with checking engines as they come in, test them, and get them ready for use as they are shipped out with generators).
This is the name of the game anymore = manufacture generators. It's what the stock price needs to rebound and hit 52 week highs. The belief that they can keep up with strong orders.
The company needs to manufacturer generators at a far greater rate than the past to make the statements come true that were posted in the Safe Harbor section of the last press release:
----Polar Power's belief that the new production facility will double its production output in the near future.
----Polar Power belief that DC Power technology is superior to AC power technology;
----Polar Power belief that it can deliver the backlog to its customers on time; for substantial revenue growth in 2019;
----Polar Power's expectation that lithium battery storage and renewable energy products can generate significant growth in sales
ebase22....imo the stock is down because the Russell 2000 is near a 6 month low. There just aren't a lot of buyers in smaller stocks right now. I think POLA can find some, though, with a Q4 that proves revenue and backlog are growing and 2019 is a year of expansion.
As for me buying.....I would. I like the risk vs reward right now for sure. However, I own enough shares that I don't need more. If the stock does what I expect it to then I have enough already to be rewarded nicely.
Worthy....we'll see. They already had 1 on 1's earlier I'm sure. The problem (imo) with the stock is it's over priced based on the first 9 months of the year and underpriced on what's coming. Until Q4 shows the future for sure, I'm not sure the stock does much. It's worth them going to just get the story out there and more eyes on it.
They need to just keep getting orders and ramping up manufacturing. Those are the first two steps. Once those truly show up in quarterly reports then we can all worry about the stock reaction.
wadirum1...they were asked in the cc call how much of the backlog they could deliver for Q4 and they specifically said that would be like giving guidance which they did not want to do. They did say that the telecom companies wanted as much as possible by Dec 31rst of that earlier backlog level ($15M) and delivering on it depended on suppliers, manufacturing, employees, etc. After the history of this company, I have a hard time imagining them doing $12M for Q4 until things are running smoother, let alone more. It'd be a dream come true if they did $15M in Q4 with enough backlog showing that Q1 coming in there too. However, I certainly wouldn't expect it or encourage others too at this point until they prove themselves more.
Hypothetical....They have $19M backlog as of Nov 26th. That means 8 full weeks have passed through the quarter. Let's just hypothetically say they have done $7M to this point. I think it's more than they have, but let's just say it is. I'm sure though they are cranking out a decent number as there is no way that US telecom companies are piling on the orders more and more if they aren't delivering product at a solid level now. Say they finish with another $5M in orders in the last 5 weeks---a bit higher rate since they have two fully functioning lines. That would give them $12M for the quarter and, here's the thing, leaves them with $14M in backlog. That assumes no more orders for the quarter which may be wrong.
This is my thing.....how do they take on big boosts in international sales if they have backlog that will be close to max they could do in Q1? The second caller on all the cc calls (former analyst who helped in the IPO) keeps asking about Malaysia and the "big" opportunity there. He's done it like 2-3 calls in a row. The company even mentioned it in their 10Q. What about Sri Lanka that they keep saying could lead to large orders? What about Africa or Australia? How do you take on something like those when you are rolling into Q1 with $14M in backlog?
Correct me if I'm wrong, but, imo, they are either cranking out more in revenue in Q4 or else they are building up capacity to deal with $15M+ quarters already. U.S telecom isn't putting in orders for 8 months from now. Imo, this backlog is being delivered in 4-5 months at most. As such, they need to be able to deliver these orders PLUS take on anything international tosses at them.
The opposing argument could be that they have lagged in Q4 in orders and that's why the backlog is growing. However, why would AT&T and T-mobile keep putting in order after order to POLA if they aren't proving themselves this quarter in delivering? Those two companies could easily just go to Generac and take an AC generator. Yes, it may not be as efficient, but if POLA isn't delivering than that is better than nothing. Imo, POLA is getting orders because they are proving themselves this quarter at a rate that is good enough to show they can do it. They are then showing they can ramp it up even higher with the second line now too.
It still makes me wonder what they are planning for 2019 in terms of revenue possibilities.
We all own this stock in the hopes POLA does $15M+/qtr in revenue. Not in 2020 or 2021, but starting sometime next year. At least that's why I'm here. The U.S. telecom market is on fire and POLA needs to ride that wave now. Imo, $15M/qtr is what gets the stock to $12+. Today's news may not have given us all the info needed to move the price up today, but it is exactly the kind of news we need to get to that goal.
$15M x 40% margins = $6.0M. Figure they continue to expand operations (maybe in Asia with another office similar to what they are building in Africa). Figure they run extra shifts. As such expenses are $3.0M to do $15M/qtr. $6.0M - $3.0M = $3.0M profit. x 74% to take into account Fed and State taxes = $2.22M net income. Divide by 10.4M in shares (up a bit more after options early next year). = 21 cents/share.
$15M in revenue imo makes at least 21 cents/share. Margins could be better on that revenue. Expenses maybe a smidgeon less (as they already have most of the mid-management needed to run it). That to me makes this a $12 stock for sure on a p/e of just 15. It's probably higher with momentum or if backlog is growing or they are talking about rolling into housing industry somehow (tied with solar power company and lpg).
Today's pr is just another step needed to this goal.
Wadirum1...You are 100% correct here. This wasn't a $4M order, it was a $7M order imo. However, it was mostly U.S. telecom. That's great, but we need international and military and other diversity going forward. We all know how the faucet shut off on Verizon.
For us as investors----growing revenue and backlog are the 2 most important things for the next 5 quarters. Efficiency will take care of itself. The stock price will take care of itself too if they are performing.
As for the stock not going up......we all need to remember that at $6---for a stock that just lost money in Q3---a good portion of this is already priced in. What's positive with this pr is that the risk of them disappointing in Q4 or Q1 is pretty much gone. We won't be slipping down into the lower $5 range no matter what the overall market does.
Wadirum1...The CEO and sales people were in Buenes Aires recently for a telecom forum---on stage answering questions. Not sure what it means, but they are getting around. It's important as international orders are what is needed to get to the $12 level:
https://www.linkedin.com/feed/update/urn:li:activity:6473080974354763776
Latest short #s through mid-Nov. Lower still:
11/15/2018 81,679
10/31/2018 89,188
10/15/2018 89,961
9/28/2018 90,796
9/14/2018 103,956
8/31/2018 119,624
8/15/2018 147,978
7/31/2018 130,299
7/13/2018 160,943
6/29/2018 167,593
6/15/2018 172,922
5/31/2018 187,146
5/15/2018 180,312
4/30/2018 170,570
4/13/2018 141,059
3/29/2018 191,644
3/15/2018 189,171
2/28/2018 205,368
2/15/2018 215,808
Wadirum1....I wouldn't worry about stock price until after Q4 numbers come in. I think Q4 will help shareholders learn a lot about POLA's future. I say that because:
1. there is nearly unlimited ability for revenue this quarter---the backlog to start the quarter + backlog mid-point are both large enough for this. All they need to do is perform in manufacturing. I don't expect for them to hit a grand slam for revenues---too much inefficiency still with the new facilities just up and running this month and the bugs probably needing to be worked out more. However, they need to show they can hit a homerun. Or they will show they can't do that and give feeble excuses. As shareholders we can't really expect them to be able to do $15M/qtr consistently in the future if they can't show success at some reasonable level in Q4. Also, if they can't deliver to customers now, how can they be trusted with higher levels of orders from them + bringing in new orders from additional customers. They don't just need to prove themselves to shareholders, they need to prove themselves to telecom companies around the world that they can handle strong growth.
One plus is they are higher people with experience. Look at their Linkedin page for the last two months. They show pics + experience of some of their hires:
Shipping and Receiving Supervisor
Procurement and Logistics Manager
Applications Engineer
Director Technical Services (for warranty, installs, commissioning, training & service)
Human Resource Manager
Director of Quality Control
These posts show two things---one they are building the personnel to deal with large growth. The other is they are hiring "older" guys. Most of the pics show guys, imo, in their 50s or higher. To deal with the tough employment market, they are taking on guys in the later part of their careers. It's a plus imo. They get better loyalty + knowledge from it. POLA doesn't need innovators, they need employees who can make the machinery run smooth.
2. Also , margins should rise and give a taste of where they can go. No doubt there will be excess expenses and overtime that should disappear in the future, but the engine deal should show at some level. We will learn if 40% margins are possible or just a pipe dream.
3. Backlog at the end of the quarter and mid-point when they announce Q4 results. This is very important. Say they put in a big Q4. The next question everyone will ask (especially those that want to buy into the stock and push it upward) is is it repeatable? They aren't going to get a high p/e unless shareholders think that this is just a taste of what could come.
I've learned long ago to not put an arbitrary ceiling on a particular stock. There is nothing worse than selling a strong winner and then watching it go to the moon even after a then big run up. It almost always happens because management has the ability to grow the company in ways no one fully realized. Instead I now constantly reassess its valuation and potential after each bit of new news is known and added to the collection. I like POLA because the ceiling, imo, is very very high as growth could go in areas I never imagined (ex large international expansion in terms of contracts in the 10s of millions, military expansion in multiple vehicle lines, residential systems tying their generator to solar panels + their batteries, data center backup, or commercial systems that recharge electric cars with the cost advantage of natural gas). The thing that determines a lot of this is the vision of management and their ability to execute. I think Q4 will finally teach us a lot in this area. They have done a decent job (though slower than I'd like) of expanding from just VZ to a wider diversity of customers that are now on board + more coming in 2019. Can they take this all to a whole new level and then one after that and again? Watching potential sit there the last 12 months has been frustrating. Imo, management needs to show everyone (customers & The Street) that they can perform. If they can do this, then I honestly think you will be getting your $12+ in stock price a lot sooner than you think.
Wadirum1... on the cc call, did you get a feeling that the 3rd caller already knew the answers? I ask this because this topic of residential power/LPG generator has never been discussed by the company before. Yet, this caller seemed, to me anyways, to be asking questions he already knew the answer to and just wanted them said outloud----like he'd had a similar conversation with the company before and had an incline of what they were thinking. I know the CEO had been one of the speakers at the national LPG conference so perhaps it's related to that. I just thought the whole topic was odd. On the other hand, what the company sometimes discusses in small ways often is what actually happens 12 months later as the wheels slowly turn for them.
On a buyout: I look at it this way. I figure it will take $2.5M in expenses for them to have a $10M quarter. Probably $3.25M to have a $15M quarter. $3.75M to have a $20M quarter. They already have more than enough personnel to do a lot of the revenue generation now so it shouldn't have to go up big to get more.
I think on $15M+ they are easily turning 40% margins just from scale alone. You can see this in the engine discount.
So, the question becomes can they get to $20M/qtr on their own in the next 24 months?
($20M x 0.4) - $3.75M = $4.25M x 0.75 for taxes = $3.18M. Divide that by say 10.6M shares by then (additional options added in) = 30 cents/share.
Can they get the business going in so many ways that $20M is a consistent quarter? Yes, U.S. telecom will fade in time, however, US military could be huge (ARMY SMET contract alone if their partner won). International opportunities dwarf US though there is more competition there. If the can, then put a 20 p/e on this and you have a $24 stock.
I don't doubt the company thinks if they can bring it all together that they can make this a $20 stock. They maybe be able to do that on their own if they are smart, but I think it becomes hard to maintain the size of the company at that point and it gets absorbed by a bigger player. Not sure of the premium.
As far as a buyout.....imo it will happen someday. Not sure when though. The CEO is 66. How long does he go for it? He will want his payday, but he's also going to want the thrill of the build after struggling on his own for 20 years. No doubt he sells out eventually though. One thing everyone says about him is he's a bit of a micromanager. I can't see a guy owning 50% of the stock giving up control of his baby and letting someone else run it for him. Also, in a buyout he can't wait too long. He will need to go with the acquiring company for a few years to help them with the transition.
Probably most important part of 10Q for shareholders:
I like the 25% discount on engines, but the following new statement (which has not been in prior 10Qs) is probably the most important for us:
In the international markets we have continued our investment in R&D and Sales to develop and demonstrate localized lower cost products to address bad grid and off-grid applications. The lack of electric infrastructure in emerging international markets requires integration of renewable energy, battery storage and DC generators to provide longer run times. In 2018 we have successfully demonstrated such integrated solutions to Tier-1 telecom customers in Sri Lanka, Namibia and Malaysia. We believe completion if initial testing in these emerging markets will result in significant sales in 2019.
----let's be realistic. None of us are invested in POLA for $10M in revenue/qtr. I want to see $15M-20M/qtr numbers and they need international to take off to help them get there continuously.
One more interesting post for the day:
POLA just hired an Acquisitions Manager in Romania this month. She used to work for Camusat (a competitor). It's odd since they just do their IT there. However, POLA has discussed making inroads into Europe. Something may be brewing there.
https://www.linkedin.com/in/diana-minea-3a866160/
wadirum1...one thing that would be nice to know is if any of the component shortage carried into 4Q in October (even for a week or so). I doubt it, but it'd be nice to know.
I say this because in the 10Q they mentioned the $7.2M order received and announced on Oct 1rst is part of the $11.4M backlog at the end of Q3. That means US telecom put in some big orders since then. Why would they do that if POLA wasn't showing they could produce big time in October? So, if POLA decided their goal for Q4 was to deliver all $11.4M of the Sept 30th backlog by Dec 31rst, it would then be around $5.2M that has been produced in the first 6 weeks of the quarter. Take $5.2M from $11.4M and you get $6.2M as a balance. To get to the current Nov 9th backlog of $15.1M, it means they turned around and got $8.9M more in orders on top of it already this quarter.
What this means is that if POLA does $11.4M for the quarter, they still finish with $8.9M in backlog + whatever new orders they get for the rest of the quarter. It sets them up well for Q1 to match it. This is important so there isn't a drop off (lumpiness) going forward in revenue. We need them doing $50M+ in 2019 come hell or high water.
I think when you start to look at it this way, I have a hard imagining that delivering the backlog at the end of Q3 isn't their goal. They need to or else they won't be able to take on new orders from international sources (Namibia, Sri Lanka, Thailand) in Q1 2019 as their backlog will be too big to start.
I doubt they want to lose orders by falling behind on production.
Nimibia:
On POLA's Linkedin page for their South Africa coordinator:
https://www.linkedin.com/feed/update/urn:li:activity:6468320349065920512
The key part of it is the fact MTC and Powercomm were there. As shareholders, the business of building towers for MTC and putting the equipment on the towers for Huawai is nice, but we want to see contracts for generators for these towers.