I’m not feeling very pleased with this at all. The revenue guidance since RWL became involved has frankly left a lot to be desired. That’s me putting it politely.
At the EGM in July we were told that 83% of the anticipated (all US) $90m 2017 revenue was booked or in backlog. That’s $74.7m in July.
Then, in a subsequent August update, we are told that revenue booked or in backlog at 31st July was $65m. Henry spoke to this (only when directly asked) in the accompanying webcast and reasoned, basically, that it was for one project; they (he and Bob Wowk) included it - then decided they shouldn’t include it. Gee. Way to introduce yourselves to shareholders fellas.
Fast forward 5 months from the EGM and we are expecting (approx) $60m in actual real-life 2017 revenue. Zero growth on RWLs 2016 revenues. Whatever way you look at it, this looks very much like a situation of over-promise, under-deliver.
Don’t despair though, because it has just ‘slipped’ into 2018 where we now have a massive backlog, of which $75m is expected to be recognised in that CY. I guess we just trust that.
I am very keen to see what revenue guidance they provide for 2018 on the 31st January. The key thing for me is that when expectation for 2017 was still being reiterated at $90m, they proclaimed a minimum aim of 25% revenue growth year-on-year. This immediately set the minimum 2018 revenue expectations at $112.5m. The question concerning me now, is whether this will be reneged down to 25% of the actual $60m revenue total from 2017.
In October they stated that some revenue would slip to 2018, but that - importantly - this would be expected in full in 2018 revenues, in addition to the 25% growth target. It seems today that by ‘some revenue’ they meant $30m. In my opinion therefore, if revenue guidance on 31st January is not a minimum of $142.5m, this is another example of over-promising and under-delivering on revenue. That figure should also not include the Africa plant which is just an MOU to be sole negotiator (and in any case was announced after the 25% growth expectation for 2018), and also, as Richard told us, ‘this (growth expectation) does not include influxion demand from China’.
In my mind, come 31st January, a line has been drawn at $142.5m.
Lucky we have MABR, because if this (above) was the whole story i’d be concerned that the company is stagnating in a sector which is booming. An October report tweeted by Fluence expects the Desalination and Water Reuse market to grow by 30% in 2018. If we are standing still we are going backwards.
Everyone who talks with me or reads my posts knows how bullish I am about Fluence, but it’s important not to just be a cheerleader. I’m not selling a single share, and i’m very confident that things will turn around and this excruciating decline will one day look like a blip. I think we ought to be doing better though, and I think management have some making up to do in 2018. ‘We are working hard’ doesn’t cut it. They need to start proving themselves by executing at or above expectations - especially on revenue.
The heat is on Henry. As CEO he is responsible for executing the strategy. If it is not being executed, the buck stops with him first. At the very least he needs to cut out the misguiding and under-delivering of revenues whilst telling everyone that they are doing everything they said they would do. He needs to show ambition, articulate a strong vision for the future of company, and prove he has the laser-focus and ability to get sheet done.
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