RE:RE:RE:RE:RE:RE:RE:RE:The importance of managing expectationsFTB: last exchange with you on these. No point going back-n-forth if you feel entrenched in your position, as I do in mine.
Why are you bringing up Q3 numbers? Remember Getinge termination was on Aug 1, which was likely followed by shock/confusion by its customers. Then there had to be a lot of hand holding in transition. Our latest number at YE18 was: 66 installed, 12 shipped, 24 backlog. Those shipped typically get installed within a month or so, hence we probably have 78 installed right now. This is 28 more than Getinge did in 2.5yrs, or 56% more. Remember the market is always forward looking, and not backwards looking. I would also argue our SP will be driven by more by orders than actual revenue numbers, which is typical for companies in our stage of commercialization.
Getinge contract:
As in any take-or-pay contract, Getinge can do whatever they want with they inventory that they bought from us, like letting it rot in a warehouse, recycle the materials, or whatever. We have zero rights on inventory purchased by them. It is a win-win situation that we are able to buy these back at a deep discount--we get VP4s cheaper than we can make it, and Getinge can get something back for their units.
In terms of economics of installed and pending install units: remember the business model of low-temp sterilizer--most of the economics come from consumables in the 10yrs following the initial capital equipment sale, but the sales commission is paid upfront. Getinge likely has to pay their sales people $10k commision on each VP4 sold, and they need to be compensated for this upfront cost given Getinge won't be getting a big cut on consumables going forward (they get some on consumables but will get phased out in a couple years).
I guess your point is we can force them to give those up for nothing because they are the ones who breached the contract. Probably, but we must remember Getinge still sells to 20-25% of US hospitals (and talk to even more) and they still don't have a low temp offering in the US. Since Getinge don't want to introduce Steris or ASP into their customers' hospitals, they are more likely to recommend VP4s to their customers if they are looking for a low temp solution. Would we want to sour this Getinge relationship and destroy these sales leads? RR previously said that TSO3 receives at least 1 sales lead per week from Getinge post break-up.
Why no smart money buying?
Imagine I run a $1b fund (recall the Fido fund was $4+b). TSO3 has a $60mm market cap. In order to get just a 1% position in the fund, I need to buy $10mm worth of stock, or close to 20% of the company. Given the liquidity of TSO3, how long do you think it takes me to accumulate that much stock, and how much higher the price would be? Anything less than 1% is not even worth my time. Let's say I can buy a 0.3% position (5% of company), even if it doubles this year, it is only 30bps to me in performance. Even if TSO3 is the best investment story ever, these fund managers would have missed it because they would never have looked at (and done work on) it in the first place...until the story gets around and the company gets larger in market cap.