$PNV's overall results have been pre-announced, so there should not be much of a surprise in the key results which have just now been released.

I am super-focused on the financial performance because, as the business grows and matures into the increasingly competitive US market and growth matures surprisingly quickly internationally (albeit a good result in the UK, where it is striding ahead in leaps and bounds into the trauma market with strong KOL support and clinical data).

I'm not going to give a complete run down of the results, but I have pulled out two trend charts on key financial ratios as follows:

First (above) is the ratio of employee costs + overheads as a percentage of total revenue. This is looking flat, albeit increasing slightly (bad). I've excluded R&D expense from these analyses, as I want these to increase (it didn't).

Next is the inventory as a % of revenue (above), which is steadily climbing, presumably as the number of markets profilerate, as well as product variants.

Basically, my quick diagnosis is that $PNV needs to start being managed as a business as we might be seeing the consequences of not having an established CEO in place.

This is a partial diagnosis, but it reinforces my hypothesis that the potential of the product to drive strong cashflow generation driven by it 95% Gross Margin (sure the highest in the medical devices industry) is being eroded by expense growth and working capital.

Thus Operating Cash Flow and Free Cash Flows for FY24 and FY25, respectively are:

• OpCF $3.124m (FY25) vs $3.683m (FY24)
• FCF -$3.8m (FY25) vs +$1.65m (FY24), by my calculation

So, we are still sitting at the inflection point.

Of course, on FCF, FY26 will see the end of the investment in the major facilities expansion, so the second half of the year will turn strongly positive in FCF generation.

Much will be made (no dobut) of the incredible turnaround in Operating Cashflow between 1H (-$12,5m) and 2H ($15.6m), but by my reckoning this was the result largely of recovering the massive receivables problem at the end of 1H in 2H. (Again, operational management!)

My main point here is that it is super important to take a step back and look at the trends and underlying drivers in $PNV, as there is a lot going on from year to year and half to half which are really special situations. It will take a bit of effort to parse the noise from the signal.

Overall, while $PNV is likely undervalued and I may be foregoing a good opportunity here, I am going to take my time to assess this, given my concerns about 1) leadership stability, 2) operational management and 3) short term moving parts masking what the longer term margin performance will be.

Disc: Not held (I currently hold $AVH in this industry sector)