RE:Pretty, pretty GUD...I am still digesting some of the more intricate details but my view is mixed on the Q1.
- Revenue: Great to see this coming in ahead of expectations. This was a big positive for me.
- Gross Margin: I am happy with this but think there is room to run by a few more percentage points on GM %.
- Operating Income: This is still below where it should be relative to the investment that was made to acquire Biotoscana. There is still some work to be done in this area. Fortunately, the platform is already built so incremental revenue should come with a higher marginal rate of return. It is clear to me that Knight intends to do something material or their restructurng efforts would have brought down the G&A expenses further.
- Integration: It was good to get an update that this has materially progressed. System changes and implementaiton are way harder than people ever think.
- Investments: No surprise here. There will be further unrealized losses in Q2. I would like to see a timeline as to when they will wind down this component of the business as no longer appears to be a strategic priority and is now a potential impediment to the capital allocation priorities of Knight.
- Buybacks: This reminds me of the Teledyne playbook from back in the 70's. I am happy to see them continue to buy at these levels.
This is a slow and steady team and that is fine by me.
Best of luck,
LR