Q3 - The Good, Bad and Ugly Good (Highlights)
The Company has reduced its reliance on any single customer by continued diversification of its revenue base. As a percentage of total sales the relative contribution of its largest customer has declined year-over-year.
During the nine months ended September 30, 2015 the company has achieved an overall expense reduction of fixed costs (fixed manufacturing costs and operating expenses less depreciation and one-time costs) of $2.4 million versus the comparable period in 2014. The reduction reflects an average quarterly expense run rate of $6.4 million in the first three quarters of 2015 compared to $7.2 million average quarterly expense run rate in the comparable period of 2014. The expense reduction was achieved due to several initiatives implemented in the last six months including new manufacturing optimization plans, new patents strategy and the manifestation of other cost reduction initiatives instituted by new management. The Company continues to execute on its stated cost reduction strategies and anticipates a lower average quarterly run-rate in fiscal 2016.
The above noted costs savings have been reflected directly in Adjusted EBITDA, which has declined by a modest 4.2% despite a 15.2% decline in revenues compared to the same period prior year. The Company anticipates further improvement in Adjusted EBITDA in 2016 as costs are expected to stabilize and revenues are expected to increase.
In other words, costs are going down, profit is going up. More diversification.
Next fiscal year will bring more revenue and more profit.
This is wonderful news!!!
Bad
EPS (0.16) - Not a great number.
Earnings for this quarter are (in my opinion) low due to transition costs. The expenses incurred are necessary for the turn-around.
Ugly
The turnaround process is painful and slow. I doubt we will see good numbers in the next three quarters. Maybe Q3 or Q4 of 2016…
But who knows. Randy Dewey and his new team might be able to turn this ship around faster than we think.
A few months ago I said this process would be a lengthy one, but already we are seeing results.