Post by
retiredcf on Oct 30, 2024 10:25am
Detailed Reaction
GAAP EPS of $1.37 missed adjusted estimates of $1.53; revenue of $191.97M missed estimates of $197.66M. EBITDA of $34.37M beat estimates by 7.1%. Sales rose 6.9%. EBITDA margin was 17.9%. Backlog rose 4%. Data centre product growth remains strong, but HPS did comment on a 'slower overall market for standard products', with weakness in commercial construction and industrial markets. Canada growth was 26.1% and the highest of its regions. Gross margin increased to 33.8% from 31.7%. There is good and bad in the quarter. It was a 'miss' but cash from operations nearly doubled to $43M. Share based compensation (SBC) costs were $17.5M, vs $11.2M. This is a reflection of a higher share price and employee incentives. We have mixed views on this. It is a non-cash expense, but does impact earnings. But a high SBC also means a company is growing and its stock is robust. It is hard to always make those points a negative. But it has a impact: earnings would be more than double this quarter without SBC. If HPS can grow its business faster than its employee count (which should be very doable) we would expect this to be less of an issue over the next few years. We would still consider it one of our favourite small cap companies overall. (5iResearch)