POLA KIK I would say mildly disappointing Q4 update in that they still seem to be having some growing pains getting their expanded production facilities up to a profitable quarterly revenue run rate of $10+ million despite the backlog to do so.
I also found their 2019 outlook of "positive revenue growth" to be less than inspiring. Even if they average only $8 million of quarterly revenue as they achieved in Q4 or $32 million for 2019 that would amount to "significant" 33% positive revenue growth over the $24 million in 2018. Why give such a tepid vague revenue outlook at all? Don't think that was very well considered.
I think their backlog will be driven by the procurement policies/schedule of their Tier 1 telecom customers who probably won't see much point placing orders that can't be delivered within 6 months. As long as their backlog maintains at a level like it is now that allows them to operate at maximum capacity (once they get past their operating capacity expansion kinks), I consider it to be healthy. Their Tier I business is a great foundation off of which to grow their other business.
They spoke to improved margins in the 2nd half of 2019. But to achieve higher earnings, I think they need both to get production up to capacity and to generate material "non Tier 1" business--international and/or military. At this point with only negligible international revenues and significant international marketing costs, I think good profitably for the 2nd half of 2019 depend on significant new international orders. Otherwise, international costs will continue to squeeze earnings.
Overall, I see why the market isn't really responding to the PR today as this has become more of a "steady Eddie" long term growth story than a near term exciting explosive growth story. Given the increasing risk that the overall market is getting "tired" and increased recent volatility, I think it's harder to justify a stock position that in the best case is likely to require a longer term hold.
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