FEIM just to clarify the problem caused revenue to be lower not expenses higher.
Keep in mind on margins that with percentage of completion accounting they could have simply judged that revenues were 600k lower instead of the 1.8 million lower they ultimately reported. Instead they subsequently decided it was more like 600k and they will claw back 1.2 million of that going forward.
They seem to have been overly conservative on their accounting which is why they now expect 1.2 million of that to come back in future quarters. I kind of wish they had taken that approach to begin with as we wouldn’t be having this conversation.
I think the problem was project tracking more than forecasting. They had a project floundering and it wasn’t bubbled up. Those problems can typically be attenuated if caught early.
That’s on them for internal project management although this is no doubt a long running problem. It’s not like they came in and eliminated proper project management software, reporting, and procedures. I had an extensive discussion on this with management, and having knowledge on how project management is supposed to work, and how problems are supposed to be nipped in the bud, I’m comfortable that they are doing the right things.
That said there is no excuse for it getting out of hand in the first place. I’m taking them at their word that they are doing what they say they are doing which wouldn’t prevent problems in the future, nothing can, but would greatly mitigate them.
They don’t get a second chance, but based on a preponderance of the evidence, I’m thinking it’s fixed, and the over the top reaction was the result of conservative accounting on a project that wasn’t as screwed up as they originally thought.
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