Another Mardi Gras has come and gone.

But unofficially, the party isn’t over until the last slice of king cake is gone. As a Louisiana native, I can’t let the carnival season wind down without indulging in this tasty treat. One of my favorites comes from Lilah’s Bakery in Shreveport, LA, where options range from the classic pralines and cream filling to more exotic flavors such as maple bacon, strawberry Bavarian, and bananas foster.

From a humble beginning selling just 70 cakes in 2008, the bakery’s highly efficient assembly line can now turn out 700 a day. Lilah’s expects to sell more than 23,000 cakes this year, grossing three-quarters of a million dollars in sales.

Not bad for a few weeks. But this is the very definition of a seasonal business. Soon, the bakery will go dark and the part-time employees will move on to something else until next year.

There’s nothing wrong with seasonal businesses. I have profited from many of them in my High-Yield Investing portfolio, like tax preparer H&R Block (NYSE: HRB) and boatmaker Marine Products (NYSE: MPX). Most retailers have at least some degree of seasonality, as do many manufacturers and service providers.

But there’s something reassuring about businesses that just don’t have an “off season”. Those with unwavering demand for their products 365 days a year. Some of these companies field more inbound orders than they can handle at a given time – meaning a portion of those deliveries will have to wait until tomorrow.

Yes, I’m talking about sales backlog.

“Backlog” is loosely defined as orders that have been received but not yet fulfilled. This unfinished work builds up whenever demand consistently exceeds current production capacity. We’ll get to it next month… or next quarter. Not exactly a bad problem to have.

Here’s how I like to explain this situation…

Picture a football team scoring 49 points in a game. Imagine that the scoreboard operator couldn’t keep up and credited the team with only 35 points at the final whistle — so the remaining 14 points were carried over to the start of the next game.

Now, this high-powered team will probably score again and again next week. But even if the offense goes cold and gets shut out over the next four quarters, it still has at least two touchdowns already on the board.

Backlog is highly visible, predictable, and quantifiable. Since the transactions have already occurred, projecting future revenues associated with these orders is a bit like forecasting yesterday’s weather.

Take Beazer Homes (NYSE: BZH), a mid-sized builder with an active presence in a dozen states from California to North Carolina. The company delivered more than 700 finished new homes to customers last quarter, while receiving orders for 763 more over the same period.

The company currently has 1,000+ homes waiting to be built in the backlog column. This figure would gradually be whittled down if not replaced by fresh incoming orders. But at the very least, even if demand dries up, we know that Beazer has enough work to keep it busy for the next four or five months — a “rainy day” fund worth $573 million in future revenue.

Now, that doesn’t mean companies with fat backlogs are completely immune to recession. They aren’t bulletproof. During a slowdown, they will see a slump in new orders just like anyone else. In fact, Beazer’s orders were down about 18% last quarter. But at a minimum, there’s a pipeline of product orders already on the books to feed revenues and earnings for a while until activity picks back up.

That cash flow safety net helps explain why backlog-heavy companies can not only maintain dividends during lean times, but increase them – IBM (NYSE: IBM), for one, managed to hike payouts during the 2009 recession as well as the pandemic.

Most businesses don’t have that luxury.

A Head Start on Tomorrow’s Profits
Take a coffee shop, an auto dealership, or a hardware store. They all start each new quarter (each new day, in fact) with the cash registers at zero. There is no carry-over from one period to the next. If the business doesn’t close any new deals, then it doesn’t report any revenue for that period – so it’s always hungry for the next sale.

The best we can do is estimate how many lattes or sedans or hammers will be sold over the next 90 days.

But demand can and does change quickly… for just about any reason. Pricing can soften too, throwing financial projections out the window and drawing a swift rebuke from the market.

Just ask Target (NYSE: TGT). Last year, the retailer suffered a sharp top-line deceleration, with visitor traffic drying up and same-store sales growth flatlining. In May, the company issued a lukewarm 2025 earnings forecast of $7.00 to $9.00 per share. Considering it had pocketed $8.86 in profits the prior year, that outlook ranged from a modest increase of 2% to a painful decline of more than 20%.

That’s a large cone of uncertainty. At the time, Chief Financial Officer Jim Lee acknowledged “a wide range of potential scenarios.” Not surprisingly, the stock slumped to a multi-year low.

I’ve seen worse. During the early stages of the tariff wars, Ford (NYSE: F), Delta Airlines (NYSE: DAL) and dozens of other companies had so little confidence in making short-term forecasts that they simply suspended quarterly sales guidance. That’s tantamount to saying we can’t even give you a rough idea how much customers will spend over the next three months.

To be fair, they had numerous question marks. Ford was grappling with the impact of raw material inflation and had to assess dealer inventory levels, foreign currency translation and other such variables. Delta was forced to weigh volatile fuel costs and estimate passenger revenues per available seat mile (PRASM).

Tricky even when the macro outlook isn’t unusually hazy.

By contrast, companies with hefty backlogs have a good chunk of future sales already in the bag. These transactions are done – they just haven’t been tallied by the bean counters yet.

Beazer and IBM don’t really start the next fiscal quarter at zero. They know in advance that a certain number of widgets are already in the sold column. These businesses are sitting on a stack of confirmed purchase orders and only need to deliver the merchandise for the sales to be recognized on the income statement.

Converting these orders into tangible dollar revenue is often just a matter of weeks or months.

That’s good news for Boeing (NYSE: BA), which despite high-profile mishaps, delivered 600 commercial jets to airline customers around the globe last year. That’s the best productivity since 2018. Right now, the company is turning out just over forty 737 models per month – about one per day.

Meanwhile, Alaska Airlines just placed an order for 105 of these workhorse jets… along with five 787 Dreamliners. That’s just one customer. Boeing took in total orders for 336 new jets last quarter, driving the backlog to 6,100 units.

At the current production pace, that’s a full decade of work – worth $682 billion in future revenue. While there is still improvement to be made in the free cash flow department, that backlog is a big reason why BA stock has ascended from the $170s to the $240s over the past 12 months.