RE:RE:RE:RE:RE:Some good news finallyI think it's be fair to assume that the business was won with an aggressive bid. Therefore, I would suspect that the contract would be dilutive to gross margins. However, the problem with the last couple of quarters is that utilization rates have run below normal levels (due to declines). Therefore, the gross margins (while thinner) from the contract should flow more easily to the bottom line (the company won't need additional overhead). Also, over time, I can see Data selling more products/services to this customer. This news is positive.
Also, keep in mind, this contract was one potential win in an increasingly active pipeline. Next year, we'll get the benefits of this contract (and others), additional cost reductions, the completion of the ERP, and some M&A. I would think this business can generate between $22 million to $24 million in EBITDA in 2018. Stable EBITDA would go a long way to increasing the company's valuation. I think the shares should be worth between $2.50 and $3.00 based on conservative valuations.
What do we need now? I think the company needs to generate EBITDA of $5 million in Q3 to regain some confidence that it can meet its 2017 guidance. I think there's some work to do on the cost side. And I wouldn't count out some small M&A. These would all be positive catalysts, in my view.