Q1 Call - What did we Learn1. CLAAS: They weren't specifically mentioned but it was implied that COVID had caused there German factories to shut-down or at least delay production and the resumption in 2H21 appears to be what is driving AJX optimism.
2. Inventory levels haven't budged. That tells me the company is positioning itself to ensure ample parts available for OEM/VAR sales in coming quarters
3. R&D expenses remain elevated given the level of sales. This again is likely related to new OEM/VAR product roll outs or development
4. Mahindra Mahindra: It's still very early days. Will likely take 2-3 more years before anything meaningful comes from this relationship but when it happens could be huge (global).
5. Ag Leader IP lawsuit: "We expect a favourable outcome" - AJX is sticking to its guns and isn't going to back down so it's up to Ag Leader at this point to decide if they want to continue fighting or face the music. Ag Leader is going to lose big time if this ends up with courts deciding. The fact that Ag Leader specifically was cited as the reason for the drop in YoY in sales tells me that the company is signalling it should be able to recoup a significant portion of the lost opportunity in future quarters.
6. IP revenue: I would expect this to be only around US$1.5mm for the year, or about $375K per quarter so not moving the top line but it certainly helps margins
7. Gross margins: They are saying it was volume rather than any issue with parts costs or warranty issues that resulted in the lower number this quarter. Should expect to see this rebound in 2H21 but OEM/VAR sales tend to have more discounts if volumes are high enough so likely 45% rather than 50% is achievable.
8. Balance sheet: $1.5mm payment loan now on the books. It may not be a credit facility but its debt nonetheless. Not necessarily a bad thing but cash flow remains a concern unless profitability can be achieved.
9. Direct (Wheelman) sales: They maybe did $800K this past quarter, certainly no more than $1mm. It's going to be a low contributor to profits going forward but still positive.
10. All the OEM/VAR that DV said were coming on board in 2021: ZERO mention of any of this or at least no way to tie what DV said in the past to what management is currently saying. That doesn't mean its not happening, it just means we have no idea.