Estimating revenues this Q is tough.
The revenues came in at $37M, and since I expected that SEG hurt revenues by about 2.4%, my estimate was close for once. But I missed the bottom line again. Apparently the costs of the increased capacity at their oversea plants, advertising and marketing costs, and the costs of resolving the component shortage issue hurt the profit margin, offset a bit by a favorable tax rate.
Some on the thread have been concerned about competition, but in response to the question "Are Margins dropping in response to competition?", Al Castleman said that competitive price pressures aren't causing margins to drop. He said that capacity utilization is the key to higher margins and "higher capacity demand will increase margins". As per Adflex ops in Thailand, Healey said that they haven't really seen much competition from this operation yet. Asked if he was worried about the competitive threat, he replied "From a cost standpoint, we are right where we should be." and alluded to their low cost foreign sites.
Now to your question on next Q revenues; I will guess, but its tough. They said the book to bill was only 0.93, and I didn't get the exact backlog, but it was down, and Al said backlog was soft, and "may be reduced".
In late April, Al was expecting that the 3Q revenues would break $40M and set a new record for SFLX. But based on this and the uncertainty in the SEG shipments, I think that is probably out. My guess is $38-40M again, but eventual SEG shipments could cause the number to vary substantially from this. ST the SEG situation will probably dictate the revenue story. One analyst noted that SEG said that the current Q is uncertain, but that the situation and shipments will return to normal in the 4th Q.
All in all, I guess I get the impression the immediate upside is limited, but the risk is lower than I thought previously (particularly at this price). This will take patience, but I believe the SEG situation will improve, and the new capacity will eventually be more fully utilized.
Paul |
