Post by
Tierney on Mar 01, 2019 9:42pm
Profitability
At the end of day you need to make money.
Just look at the financials, Space systems contributed $5 gross margin dollars on revenue of $1,129....if you believe their cost allocation. It's a real mess...they're payaing a bunch of good people to sit around waiting for the next big contract that isn't coming. If you don't have them and you manage to win a contract, how do you hire and fit-up quickly? It's a mess.
SG&A costs are even worse. They are up 127% from 2016. Yes, they've acquired other businesses but there should be efficiencies as well. You shouldn't need all the HR, Finance, Legal headcount. I remember when Lance came in, he was hiring high-priced ex-Generals left and right under the guise that they knew their way around the US contracting scene. They really need to cut headcount. Another mess.
The backlog...a big chunk of this is with the US. This note was included in the Backlog section of the current MD&A "We believe it is the U.S. government’s intention to exercise all option years, subject only to annual congressional appropriation of funding and the federal budget process". After everything that has happened with this company over the past year, do they really expect investors to have confidence when they start a sentence with "we believe"? And Trump to boot...risk+++
My biggest concern is that they didn't provide guidance for 2019. For me that's a red flag. I've read that Buffet doesn't like companies to report guidance. He says it just leads to a lot of bad things. I'm not arguing with the Master, I just like to read the guidance.
All in all it's a mess.
GLTA
Tierney