Couple things caused miss: system integration was lower than most investors thought. Mgmt calls this full qtr a baseline. Full qtr as last qtr for AI data systems integration was only one month. So naturally investors were thinking 3x. But mixed in the prior qtr was a one time non AI contract. So that is one and this is at higher margin vs procurement.
Procurement is an in and out business where margin is 4.4% on gross. Go to the call if you need to as CFO discusses when they record at net or when it is full revs. Secondly procurement receivables are factored to get cash. This interest expense was $1.1M vs less than $300k last qtr.
Last is facilities mgmt. They essentially had a warranty claim and thus margins were lower than normal. May happen from time to time but not often.
By the way Breakout Investors did zoom call on Friday with CFO. This is posted on YouTube. Everyone should go watch this.
All useful additions Kevin, thanks. And in addition, I surmised for some time that they have a sort of baseload from dell for rack integration, and then projects on top of that, like the huge xAI phase 1 and I entertained the possibility that the latter might have terminated within the quarter and they have no clear visibility when phase 2 will start, hence the flat guidance, but there is a decent, if not strong possibility they'll get additional business, from xAI or other Dell customers (and they can even land another customer besides Dell, let's not forget that either).
Couple things caused miss: system integration was lower than most investors thought. Mgmt calls this full qtr a baseline. Full qtr as last qtr for AI data systems integration was only one month. So naturally investors were thinking 3x. But mixed in the prior qtr was a one time non AI contract. So that is one and this is at higher margin vs procurement.
Procurement is an in and out business where margin is 4.4% on gross. Go to the call if you need to as CFO discusses when they record at net or when it is full revs. Secondly procurement receivables are factored to get cash. This interest expense was $1.1M vs less than $300k last qtr.
Last is facilities mgmt. They essentially had a warranty claim and thus margins were lower than normal. May happen from time to time but not often.
By the way Breakout Investors did zoom call on Friday with CFO. This is posted on YouTube. Everyone should go watch this.
All useful additions Kevin, thanks. And in addition, I surmised for some time that they have a sort of baseload from dell for rack integration, and then projects on top of that, like the huge xAI phase 1 and I entertained the possibility that the latter might have terminated within the quarter and they have no clear visibility when phase 2 will start, hence the flat guidance, but there is a decent, if not strong possibility they'll get additional business, from xAI or other Dell customers (and they can even land another customer besides Dell, let's not forget that either).