Scenario & Sensitivity Analysis
Fiscal Year 2026

Cash-generative in every scenario; the risk is margin, not liquidity.

Base Case Summary

Adjusted EBITDA = Revenue − COGS − OpEx (ex-D&A). No add-backs identified; Other Income/Expense immaterial ($75 / $76 YTD). Budget variance uses Jan–Jun only. Model parameters are rounded for presentation (GM 39.2%, variable OpEx 1.72%); exact T3M ratios are 39.17% / 1.716% — see Section 8, finding 1.

Monthly trend — actuals and forecast

Bars: monthly revenue (2026 actual in navy, Sep–Dec forecast translucent, 2025 actual in gray). Line (right axis): 2026 gross margin %, red; dashed where forecast. Margin peaked in March (45.6%) and has run 38.4–40.5% since; excluding March, Q1 averaged 38.7%.

Base case versus the prior-year fourth quarter

The forecast window is compared with the same four months of 2025 to test whether the implied step-up in EBITDA margin (14.8% YTD → 16.8% remaining) is consistent with the business's own seasonal pattern.

The revenue seasonal index is identical by construction (the proxy is PY × growth). The margin step-up in the forecast (+2.0 pp) is smaller than 2025's (+4.0 pp), so the earnings uplift is not aggressive. The exposure is on cost: 2025's Q4 OpEx ran 7.1% above its Jan–Aug monthly average ($255,427 vs. $238,400), driven by December ($281,177). The forecast holds OpEx flat at the 2026 YTD average. If the pattern repeats, remaining EBITDA is ≈$74,000 lower — larger than any tornado bar except revenue. This is disclosed rather than modelled because it partly offsets the ≈$56,000 of cushion in the YTD OpEx basis (Assumption 4); the two roughly cancel. Section 8, finding 14.

Subsidiary snapshot — YTD 2026

Profit and loss

Balance sheet at 31 August 2026

Subsidiary 1 (Parent) carries no P&L or working-capital activity in 2026. Subsidiary figures sum to consolidated within $3 of per-row rounding. Days metrics on each subsidiary's own YTD flow ÷ 243. Two things the consolidated view hides: Subsidiary 2's DSO of 75 is already past the 70-day warning threshold in Section 6B while the consolidated 62 reads green (bringing Sub 2 to 62 days releases ≈$248,000); and Subsidiary 3's gross margin of 37.6% is below the 38% Q4 margin floor proposed in Section 6C. Subsidiary 2 earns 67% of EBITDA on 55% of revenue. Section 8, finding 15.

H1 budget versus actual

Key assumptions

1. Revenue, remaining 4 months: $4,626,682 — Sep $1,131,560 · Oct $1,134,806 · Nov $1,116,944 · Dec $1,243,372. Method: Sep–Dec 2025 actuals ($953,186 / $955,921 / $940,874 / $1,047,373) × 1.187. Monthly average $1,156,671 vs. T3M actual $1,115,113 (+3.7%, Q4 seasonality). Default proxy — not a management forecast. Triangulation (Section 8): six proxy methods range $4,119,102–$5,165,905; the chosen figure is mid-range. Growing each revenue component at its own rate (journal +11.4%, transactional +83%) gives $4,728,071, ≈$101,000 above the figure used.
2. Gross margin 39.2% = trailing three months (Jun–Aug 2026; exact ratio 39.17%). YTD 40.0%; Q1 41.2% (38.7% excluding March); FY 2025 38.1%; Sep–Dec 2025 39.8%.
3. Headcount flat. Personnel (accts 6210/6230/6235/6090/6260) at YTD run-rate $107,018/month. No hires or departures recorded. Against 50 employee records this is $25,684 per head per year — implausibly low for a fully loaded cost, so either payroll is partly posted elsewhere or the headcount includes inactive records (Section 8, finding 16).
4. Other OpEx at YTD monthly run-rate: Advertising $20,822 · Marketing $18,883 · Facilities $25,328 · IT/Telecom $28,042 · T&E $24,571 · Professional/outside services $13,530 · Insurance $12,471 · Other G&A $8,403. OpEx has trended down through the year (Jan $270,573 → Aug $241,128; T3M average $244,448), so the YTD average carries ≈$56,000 of cushion over four months. Against that, Sep–Dec 2025 OpEx ran 7.1% above its Jan–Aug average (≈$74,000 if repeated). Net: the cost basis is roughly neutral, not conservative.
5. CapEx $6,050 remaining (YTD $12,100 annualised; maintenance only). No growth CapEx plan exists in the account.
6. Debt service: no term debt. A revolving line of credit (acct 2410, Subsidiary 2) exists — $2,000 drawn 12 Aug 2026 (JE49), repaid 1 Sep 2026 (JE50); balance zero at the analysis date. Facility limit and covenants are not in the ledger. Account 8100 ($2,136/month) treated as a fixed finance charge.
7. Working capital stable in the scenario tables: DSO 62, DIO 103, DPO 68 days consolidated — zero net cash effect. Basis: balance at 8/31 ÷ (YTD revenue or COGS ÷ 243 days elapsed). On a full-year-forecast basis the same balances give 60 / 102 / 67. Subsidiary-level days differ materially (Sub 2: 75 / 128 / 82; Sub 3: 46 / 74 / 52). The "Cash under working-capital stress" table in Section 2 relaxes this assumption.
8. Cash is pre-tax. No income tax, sponsor fees or distributions are modelled in any cash figure.
9. No known large items. Largest customer (Design Excellence Ltd.) is 7.9% of transactional sales; no single-customer dependency.

Cost behavior classification

Defaults applied; no user overrides provided. Section 8 tests the two extreme alternatives — no conclusion in this report changes under either.

Remaining fixed OpEx $956,859 ($239,215/month); variable OpEx 1.72% of revenue ($79,409 at base). Contribution margin = 39.2% − 1.72% = 37.5%. Advertising + marketing fell from 4.46% to 3.56% of revenue Jan→Aug while revenue rose 21% — the data suggests the pool behaves closer to fixed than semi-variable (Section 8, finding 5).

Scenario Analysis

Default parameters; no user-defined scenarios. Adjustments apply only to September–December 2026, proportionally to each month's seasonal forecast. January–August actuals are identical in every scenario. Fixed cost is held in every scenario — the scenarios show unmitigated exposure; management response lives in Section 5 and the what-if panel.

Triggers

Financial impact

Checks: Upside remaining GP $2,045,919 = $5,089,350 × 40.2%; Downside $1,462,957 = $3,932,680 × 37.2%; Severe $1,256,144 = $3,470,012 × 36.2%. Cash = $2,647,367 + remaining EBITDA − $8,546 interest − $6,050 CapEx; pre-tax, flat working capital. Exit run-rate is for valuation context only; it overstates a normalised run-rate because Q4 carries the seasonal peak.

Full-year revenue (navy) and Adjusted EBITDA (gray) by scenario; Severe Downside highlighted in red.

Monthly bridge — remaining window by scenario

Every month remains EBITDA-positive in every scenario; the thinnest month is Severe November at $53,053 (6.3% margin).

Cash trajectory by scenario

Month-end cash (pre-tax, flat WC), Aug 2026 actual through Dec 2026, by scenario. Cash = prior month + monthly EBITDA − $3,649 (interest + CapEx). All four paths rise; the Severe path (red) adds $238,914 over four months versus $762,625 in Base.

Cash under working-capital stress

The scenario tables hold working capital flat. In practice a revenue downturn stretches collections and builds inventory at the same time. This table couples each scenario's year-end cash with a working-capital slip; a 10-day DSO move is worth $35,246 per day of consolidated revenue and a DIO move $20,350 per day of COGS. Cells below the $2,400,000 cash warning threshold are highlighted.

Reading: no revenue shock in this report reaches the cash warning threshold on its own (Section 4), but the Severe scenario does so with a 14-day collections slip — and Subsidiary 2 is already 13 days above the consolidated DSO. This is why the 6B DSO indicator is weekly, why it is now tracked by subsidiary, and why Lever 3 is recommended regardless of scenario. Pre-tax throughout.

Interactive what-if

Revenue Sensitivity

Gross margin held at 39.2% on remaining months (isolates volume). Variable OpEx (1.72% of revenue) flexes; fixed OpEx of $956,859 does not.

Each 5% step in remaining revenue ($231,334) moves EBITDA and cash by $86,704 (= $231,334 × 37.5% contribution margin). No covenant-breach row exists — no funded debt. Sensitivity table assumes linear cost behavior; cash is pre-tax with flat working capital. Actual results would vary based on management actions and cost structure.

Left axis: full-year Adjusted EBITDA (navy). Right axis: year-end cash (gray) — shown in place of leverage, which is 0.00x throughout. Red dashed line: EBITDA breakeven (remaining-period EBITDA = $0, i.e. full-year EBITDA = YTD $1,220,558).

Which assumptions matter most

Remaining-window EBITDA impact of a symmetric shock to each assumption, largest first. A 10% revenue move ($173,408) outweighs everything else. The second bar is new in v5: a repeat of 2025's Q4 OpEx seasonality (±7.1% on total remaining OpEx, $72,551) — larger than a 1.0 pp margin move ($46,267), which in turn is worth as much as a 5% cut in all fixed cost. Margin moves of 2 pp or more between adjacent months have occurred four times this year. December carries 27% of remaining revenue and December 2025 posted a 49.6% gross margin against 36.3% for Sep–Nov 2025 — a year-end adjustment signature; read the "Dec ±10%" bar with that in mind.

Two-dimensional sensitivity — revenue × gross margin

Full-year Adjusted EBITDA. Rows: remaining revenue vs. base. Columns: remaining gross margin change. Cells at or below the Severe Downside result ($1,474,068) are highlighted.

Reading across: 1.0 pp of margin at base volume = $46,267. Reading down: 5% of volume = $86,704. A 2 pp margin loss (≈ $92,500) is therefore equivalent to a 5.3% volume loss — a swing that has occurred between adjacent months four times in 2026.

Breakeven and Threshold Analysis

Lever Analysis

Available responses if the Downside scenario materialises, ordered fastest-first. Base amounts are FY 2026 YTD monthly run-rates from the general ledger.

Context: the Downside scenario costs $331,413 of full-year EBITDA vs. base. Levers #1, #2 and #4 run for the remaining four months (≈ $130,000) recover ~40% of that gap; annualised they more than offset it. Levers 3 and 5 together (≈ $560,000 at GL sizing) exceed the $486,281 of cash headroom the Severe scenario has above the warning threshold — they are the defence against the working-capital stress in Section 2.

Mid-point estimates. Navy: annual EBITDA impact. Gray: cash impact. Red: the single largest liquidity lever (AR acceleration) — shown at the GL-balance sizing; see the composition caveat.

Key Takeaways

6A. Most likely scenario

1. Momentum supports base, and then some. Year-over-year growth has accelerated through 2026 (Q1 +8.1%, Q2 +20.5%, Jul–Aug +32.4%), and the acceleration is present in both revenue components — journal-posted revenue +2.5% → +15.0% → +20.3%, transactional +71.9% → +60.3% → +137.8% over the same three windows. July and August ($1,148,113 / $1,106,339) were the strongest months of the year. Applying the trailing-three-month growth rate to 2025's Q4 gives $5,165,905 for Sep–Dec against the $4,626,682 used — the Upside case is, in effect, the momentum case. Around base, volume risk is balanced to slightly favourable. The one cost caution is Q4 OpEx seasonality (≈$74,000 if 2025 repeats), which roughly cancels the cushion in the YTD cost basis.
2. Margin is the operative earnings sensitivity. 2026 monthly gross margin has ranged 37.9%–45.6% with no trend (Q1 excluding March 38.7%; T3M 39.2%; FY 2025 38.1%; Sep–Dec 2025 39.8%). Moves of 2 pp or more between adjacent months have occurred four times this year; each 2 pp is worth ≈$92,500 of remaining EBITDA, equivalent to 5.3% of volume. The Downside scenario's 2 pp compression is a routine monthly event, not a tail case — which is why the margin floor and T3M margin threshold (6B, 6C) matter more than any volume trigger. Subsidiary 3 (37.6%) is already below the proposed 38% floor.
3. Working capital is the cash risk. No revenue scenario reaches the $2.4M cash warning threshold; Severe plus a 10-day DSO and 15-day DIO slip does ($2,228,565). Subsidiary 2, which holds 67% of receivables and 67% of inventory, already runs DSO 75 and DIO 128 — 13 and 25 days above the consolidated figures. The DSO indicator was green at consolidated level and red at subsidiary level; it is now tracked at both.
4. Plan credibility. H1 revenue missed budget by −$396,504 (−6.2%) while OpEx ran +$70,025 over; EBITDA beat budget only on margin (40.1% actual vs. 34.5% budgeted). No H2 budget exists to anchor the forecast.

Revision notes: an earlier draft characterised gross margin as having "compressed from 41.2% in Q1 to 39.2%". The methodology review (Section 8, finding 4) showed that comparison rests on a single outlier month (March, 45.6%); with March excluded there is no downward trend, and the framing was withdrawn. The v4 draft described the cost basis as "conservative"; the prior-year Q4 comparison (finding 14) showed it is roughly neutral, and the wording was changed. The working-capital point (reason 3) was added in v5 after finding 15 and the coupled stress test.

6B. Early warning indicators

6C. Decisions for now

6D. Binary events

How to Read and Act on This Report

This document is a decision instrument, not a forecast. It answers one question — what happens to earnings and cash if the next four months differ from plan, and what can management do about it — and it should be used in that spirit.

Interpreting the numbers

Signal → action playbook

The early-warning indicators in Section 6B are only useful if each one is wired to a pre-agreed response. The table below pairs them.

Using this report in governance

1. Adopt the thresholds formally. Have the CEO and CFO agree the Section 6B thresholds and the playbook above in writing, so that pulling Lever 1 or 2 in October is an execution step, not a debate.
2. Refresh monthly, within five business days of close. Replace the forecast month with actuals, roll the T3M margin, and re-run all four scenarios — including the Section 8 self-review battery and the subsidiary snapshot. The remaining window shrinks each month; by November only one forecast month remains and the analysis should pivot to FY 2027.
3. Load the H2 forecast into NetSuite as the first refresh action. Until it exists, every board conversation about the "plan" is a conversation about a proxy. Once loaded, the budget-vs-actual chart in Section 1 extends to the full year automatically.
4. Close the debt question before the next IC. Obtain the revolver's limit and covenants and a one-line confirmation from the sponsor on HoldCo debt — either retires the covenant sections or activates them. Do not present 0.00x leverage to the IC without that confirmation.
5. Run the AR program in Subsidiary 2 regardless of scenario. It is the only lever that improves cash without touching EBITDA or capability, and Subsidiary 2 is already past the DSO threshold. Start with the transactional receivables; confirm the collectibility of the journal-origin balance before counting it.
6. Do not over-react to a single month. The monthly EBITDA series in Section 1 ranges from $74,981 (Jan) to $224,429 (Jul) on similar revenue, and gross margin has swung 2 pp or more between adjacent months four times — month-to-month noise is large relative to the scenario deltas. Act on two-month and T3M signals.
7. Protect Q4 demand generation. Lever 2 is fast but it is also the lever most likely to convert a Downside into a Severe Downside if pulled indiscriminately in October–December. Decide now which campaigns are protected.
8. Use the what-if panel in the meeting. When a director asks "what if margin drops another point and we cut fixed cost 5%," the answer is available live in Section 2 rather than deferred to the next cycle. For working-capital questions, use the stress table above it.

Refresh cadence and ownership

Methodology Review

After the model was built and the actuals tied out to NetSuite's standard reports (Appendix D), a structured adversarial self-review was run before release. Every published figure was recomputed from unrounded inputs; every assumption was tested against its plausible alternatives; every interpretive claim was tested for dependence on a single data point. A second pass (v5) added four tests that the first pass had not covered: growth decomposition, prior-year reasonableness of the forecast window, subsidiary dispersion, and coupled working-capital stress. The findings are listed in full, including the four that changed the report. A clean result would have been less useful to the reader than this table.

Findings

Forecast-proxy triangulation (findings 3 and 13)

Cost-classification sensitivity (finding 5)

Under every variant: cash breakeven remains unreachable, every scenario and every month remains EBITDA-positive, and margin remains the dominant earnings sensitivity per unit of plausible movement.

Review method

The battery — recomputation, bucket completeness, proxy triangulation, outlier test on every trend claim, classification sensitivity, cash-path completeness, balance composition, label audit, ratio-basis disclosure, run-rate basis, year-end signature, debt-survey design, growth decomposition, prior-year window reasonableness, subsidiary dispersion, headcount plausibility — is fixed and is re-run at every monthly refresh (Section 7). Findings are graded Material / Minor / None and resolved as Edited, Disclosed or Accepted. An independent model-based second review was attempted on 9 September 2026 and did not complete for technical reasons; no third-party review is represented here.

Data Lineage, Queries and Verification

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