ebase22....here are my thoughts on 3Q and 4Q:
Q3 Revenue: In Q1 cc call they talk about AT&T building up orders and then it staying constant. They did $4.0M in Q2 from AT&T. That's only around 200 generators at the price they are paying. I have a hard time seeing AT&T fortifying FirstNet at 200 generators a quarter when FirstNet is said to be dealing with up to 60K towers. I think that number goes up. However, I'd rather be conservative and say it stays the same in Q3. As such, AT&T = $4.0M for Q3.
Verizon----I know they did the national RFP bid for them, but who knows what is happening there. I wouldn't put it at more than $800K for Q3, same as Q2.
T-mobile----This one is easy. They need to have the initial $1.8M in orders shipped by end of Sept.
Military---from what they said in the amount of military % of the backlog and the amount they expect to ship, it came out to me that about $1M in orders here will happen.
Overseas---They have $800K in tower builds in Nimibia. I'd expect that is slower than we'd like and will end up $400K for the quarter.
Total revenue that I'm comfortable prediction for Q3 = $7.2M. There is upside potential, but I will leave that as a surprise. Another thing that works here is the engine deal with Japan. At 20% of total costs in Q2, that means they did $750K in purchases from the manufacturer. Is that worth a wholesale deal? Not sure. However, I'd say $1M/qtr is. If we said in Q3 that engines were 20% of total costs again and they did $1M worth, that back calculates to low to mid $7M range assuming margins are upper 30%.
Q3 expenses and margins:Total costs for material are based on when it goes into inventory and when it comes out. If an engine costs $1000 in April from a 3rd party and $800 from the manufacturer in June, then you have to use the $1000 ones up first before you start to use the $800 ones. As such, 3Q should have all cheaper engines for the quarter vs Q2.
Total costs for each unit for labor is the same approach I'm sure the July & August generators will have more overtime and labor per unit vs the ones in Sept when the new equipment is up and running. I do think it lowers costs per unit down from Q2, but not sure how much. The CEO alluded to this in the cc call when he said lower labor costs could help margins a lot more in the future than lower material costs.
Margins: Margins were 35.5% in Q2. I think it's safe to figure they are 37.5% in Q3. I think they go up more in Q4 when everything is running smoother.
Operating expenses: they were $1.81M in Q2. I'd assume they are $2.0M in Q3. I think that is way too much actually, but I'm trying to be conservative.
So $7.2M x 37.5% margins = $2.7M Gross - $2.0M OP expenses = $700K before interest and taxes. They have a smidgeon of tax loss carry forward still from Q1. I figure they come in at 4.5 cents/share for the quarter. I know the analyst dropped his number from 3 c/share to 2 c/share on Yahoo. I don't understand why though.
IMO for Q3, I predict $7.2M and 4 cents/share with upside potential.
Obviously this isn't good enough. However, I think T-mobile is coming in at $4.0M+ in Q4 also along with AT&T. You can see this already with a $1.9M follow up order for October only from T-mobile! I think Verizon and military are $1.0M combine at least if not more. (Note: They really need Verizon back at higher level in 2019). I think Nimibia gets follow up orders at some level. They finish the 2nd half of the $800K order for sure. That's $9.4M right there with lots of upside potential all around. I think Q4 margins start to get back to 40%. Even if expenses are $2.2M in Q4 (too high imo) they are breaking 10-12 cents/share still. I think that is where POLA gets priced for the future.
One positive is that part of this will get priced in if the story starts to fully emerge in Q4 with more international orders and it becomes clear that T-mobile is $4.0M or more per quarter also. We don't even need it to happen, just that it's coming for sure.
Remember in the cc call----they ask about % of revenue for international in 2019 vs U.S. The impression I got was U.S. could be very strong. AT&T and T-mobile aren't dragging out tower hardening for 5 years. It's a get it done now type of thing. I'm sure POLA's been giving estimates of potential orders. The big thing is they are being asked if they can deliver quickly. It's why they ramped up manufacturing long before it's really needed. They can see what can come if they can produce.
As far as the stock price......it's a now vs then thing. It's expensive now, but could be cheap in the future if things play out strong. Not 1 year from now imo, but 6 months or less.
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