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Why the Bulletproof Group Ltd share price is tumbling on lower guidance

Small-cap technology stock Bulletproof Group Ltd (ASX: BPF) has provided an updated forecast for its first-half results this morning. Regrettably for shareholders, it also downgraded its full-year revenue guidance which was provided just three months ago.

Bulletproof’s share price slipped almost 4% as a result and has now fallen almost 57% since peaking at 56.5 cents in February.

What happened:

In its update today, Bulletproof, which helps businesses and governments around the world connect to the cloud, said its first half had been impacted by customer-side project delays and lower-than-anticipated sales bookings. As a result, it expects first-half revenue to be around $24 million, up 11% on the prior corresponding period, with underlying earnings (before interest, tax, depreciation and amortisation, or EBITDA) to be a loss of $0.5 million.

It also expects EBIT to be a loss of $2.8 million, while it will book a write down of $3.6 million of capitalised product development costs.

In regards to its full-year results, although it was only at the end of September that the company said it expected $60 million in revenue, it now expects just $54 million. It does, at least, expect a rebound in earnings with EBITDA and EBIT to hit $6 million and $1.5 million, respectively.

Part of this improvement, it seems, will come as a result of a reduction in headcount. It said it had reduced its employee base by around 30 individuals compared to the 2016 financial year. It said this was “to better position capability for customer needs, improve operating efficiency and drive underlying profitability”.

It also said these initiatives, together with other cost savings, are expected to deliver $4.5 million in underlying EBIT and EBITDA benefits on an annualised basis from the second half of this year.

What Now:

While it is pleasing to see an improvement in operating efficiency, investors should watch to ensure the removal of staff doesn’t impact its ability to generate revenue going forward.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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