GREY:XEBEQ - Post by User
Post by
GGreenon Nov 10, 2020 9:30pm
277 Views
Post# 31875397
My take on Q3 - Good, bad and (luckily not much) ugly
My take on Q3 - Good, bad and (luckily not much) uglyFor what it's worth here's my take on XBC's Q3 earnings and investor call...
+ve:
- New BGX Biostream sounds interesting product sounds like it will be a short-term opportunity in EU ($100M in quotes)
- new CFO appointed to support expected growth of XBC (I would have liked to see someone with more US experience and a CPA vs CMA background, granted the CMA will be useful in a manufacturing setting but you could have that in a Comptroller)
- strong cash position for acquisitions and more importantly mgmt won’t be distracted with having to do a financing to raise $$$ and lose focus from operations (planning on 3-5 service cos per year); service cos have $50-$60m revenue run rate going into 2021
- COO taking revenue, M&A and other Qs that would normally be addressed by CEO (see my earlier post about a possible succession plan (call on CFO has already come to pass with the announcement today)); really like how COO responded to questions: direct, clear, concise, with no fluff
- J&K(?) partnership - I had not heard about this before, sounds interesting
- Service business is 36% and will grow to 50% with new acquisitions
- Exploring Spain and Australia as areas to expand into (surprisingly CEO felt need to add US, I thought that it was already a priority)
-ve:
- Revenue and gross margin missed and won’t be able to meet revenue targets for 2020 (but think they can catch up in one 1-2 quarters)
- Significant increase in SG&A, not much comfort fromCFO that there’s much there that is non-recurring
- Larger COVID impact than expected on margins (although COVID is an easy fall guy but I think it could also be operational inefficiencies but they won’t point that out (time will tell if they can’t)
- MD&A didn’t provide any additional colour (only stated the obvious), an experienced investor could have written it just by looking at FS
- BOO - no revenues in 2021! Execution, execution, execution. Putting all eggs into FTQ JV for BOO (looking at 10 projects, 2-3 years for permitting, approvals etc). Not sure I like this heavy reliance on QC gov’t like agency! COVID also blamed (again) for delays.
- Sounds like they didn’t have internal controls in place to facilitate uplisting (based on comments from CEO on amount of time and work required). For a company in TSV already it should not have been so long. Bit disappointing that there is still no target date.
- No 2021 guidance (blame COVID again)
- I don’t see value of the ops in China
- Looking at adding manufacturing in US to counter “buy America” policies hmmmm that could add to inefficiencies
- Headcount now at 260 after Titus acquisition
- Internal target growth of 10-15%, for service cos ok but not for products
Bottom line: not surprised that they missed revenues and margins (not happy about it - see earlier post about operational risk and NOT including revenue in forecast from acquisitions you have not yet made); liking COO more and more; not sure new CFO will be at level required beyond TSX (ie. NASDAQ, US mkt more generally); disappointing that there is still no target date for uplisting... will still continue to hold but will watch closely, especially GM and operating margins in 2021.