Modeling Quarterly Figures from Full Year Guidance
Hi All,
As I continue to work on my modeling skills I need some guidance on how I should handle quarterly figures. I recently completed a modeling exam for a boutique ER team. In the test they had me update the first-quarter results and using the full-year guidance update Q2, Q3, and Q4 forecasts.
Should I be using the historical % of revenue that each quarter represents of the year?
I haven't found many courses or videos dedicated to quarterly figures, if anyone has a suggestion it would also be appreciated.
Thanks
For revenue numbers you would (typically) use y/y figures and drive annual expense from the sum of those quarters. Then, yes, using a seasonality factor based on % of annual revenue to estimate quarterly numbers is appropriate imo.
Ok but if they provide a guidance range how am I to model the remaining quarters from that guidance, example below.
“Management expects full year revenue to be in the range of $195M-$205M with operating expenses of $75M-$80M. Management also expects slight pressure on gross margins and expects a 50-100bps drop through 2021 from current levels.
I would say it depends on the industry/company. Many have seasonality as a factor although some significantly more than others. Different revenue/product lines also differ. Without any context can't help a ton, but I would say look historically for any pattern, read through the transcript for any questions on pacing/seasonality etc... keywords like front/backloaded, see how their prior estimates were paced out for the year. Obviously important thing is making sure full year is within guidance unless you want to answer why you think the company is wrong and you are right and you better have a good reason.
Thanks for the input, the company is Celsius Holdings (CELH). Celsius Holdings, Inc. develops, markets, distributes, and sells functional calorie-burning fitness beverages. I believe a sensitivity analysis of their historical earnings pattern would make sense but please add your input if you agree/disagree.
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