Growth Rate
The larger issue here is the FY25 outlook.
Every week that goes by without a turn-key sale makes the target of 35 MM in FY25 (30% ish growth rate) seem more difficult to achieve. The 22.9 MM backlog sounds impressive, and it is indeed a record, but it will disappear quickly when we start booking 8 - 9 MM quarters. Keep in mind that turn-key projects take around a year to complete with the bulk of the revenue being accrued towards the end of the project. As I see things, this means that projects need to be started now or in Q1 at the latest so that most of their revenue can hit the books in FY25. The earlier the Q1 start, the better.
If Q4 FY24 comes in at 9 MM, that would leave 13.9 in the backlog. All this amount should be booked as revenue in FY25. Custom sales have been coming in at a little over a million a month, and the revenue for these sales is typically accrued within 3 to 6 months according to what Bill has said in the past, so maybe add 10 MM in custom revenue for FY25. That puts us at 23.9 MM in revenue plus whatever turn-key projects are announced and started in the next couple of months. So, 35 - 23.9 = 11.1
Are we going to have 11.1 MM worth of projects announced in the next couple of months? On one hand, it seems possible with all of the outstanding PDA's, but on the other hand, it seems unlikely since in the past, it has always been in the fall that clumps of projects were announced. Q1 has typically been somewhat slow when it comes to sales announcements.
I think that it's this murkiness about the future growth rate that contributed to the recent sell off. Bill did not address the slowness of Flu Ace sales in the conference call. Is it a staffing issue? There were a record number of PDA's last Feb; I believe that there were more than 20. Bill has said that it takes on average about a year to complete a PDA a receive a decision. It looks like 6 of those PDA's were converted into projects; what's going on with the other 14 that are at least 14 months old? Were some of them completed but declined? Or do they not have enough people to complete PDA's as well as complete the active projects? A bit more clarity on this situation would go a long way.