I have a 40 year background in accounting and finance at a number of public and private companies in increasingly responsible positions and have been a CFO for the last 20 years. My background in preparing financial statements, reporting to the Securities and Exchange Commission and having been involved in a number of company sales and purchases are invaluable tools in reading and understanding public company financial statements and their valuations.
Alphatec announced Q1 earnings in May. Much better than Q4 thankfully. Revenues were $28 million ($34.2 million last year) with 60% gross margins and they increased their adjusted EBITDA to $500,000 from $71,000 last year. At least part of the revenue decline is due to their intentional realignment of their distribution channel. They reduced headcount from 195 at September 30, 2016 to 140. GAAP loss was $5.15 million compared to $6.6 million last year. Non-GAAP net loss was about $3.2 million compared to a loss of $6.6 million last year. They had $25.5 million of cash and net debt of just under $43 million. My valuation came in at $9.42 down from $16.50 pre-financing. ATEC looks like they have all new leadership (CEO, CFO and a bunch of others) that all come from highly regarded spinal companies (other than the CFO where it really doesn’t matter). I was impressed with the conference call (but there were no questions from anyone on the call) and am much more confident that this play can work. One statement by the CEO was impressive to me“ We are here because we view Alphatec as the most attractive opportunity in orthopedics. So much so that we wrote in with our checkbooks in our March financing, with the entire senior leadership team investing our personal assets as a demonstration of our belief in the opportunity and our commitment to our collective success”. From what I can tell, it looks like the management put in a bit over $2 million into the offering. I am hanging on to this one, it may take another year or two, but the risk/reward feels good here.
Julian Singer (JDS1) filed a form 13D/A yesterday disclosing a purchase of 190,000 shares at $6.15 on May 18th, bringing his stake up to 1,372,00 shares or 13.9%. As previously mentioned, CCUR will have almost $5 a share in cash after the sale of their Real Time division.
Synacor reported Q1 earnings. No positive impact from the ATT deal yet, and it looks like we will have to wait another quarter to see anything significant. Revenues came in at $26.5 million compared to $30.25 last year and they lost about $2 million on a Non-GAAP basis and $6.7 million on a GAAP basis. Adjusted EBITDA was a $3.3 million loss. Q2 guidance is revenue of $28 to $30 million, a GAAP loss of $3.2 to $5 million and an adjusted EBITDA loss of $1.5 million to breakeven. Not too exciting for sure. But, they are projecting revenues for the year of $160 to $170 million which means second half revenues should come in at about $103 million. They are projecting an adjusted EBITDA profit of $6 to $10 million which means positive EBITDA in the second half of about $9 million to $13 million. My valuation fell for Q1 to $4.49 from $5.66, but if they hit their guidance for the second half of 2017, my valuation could exceed $9 a share and we have a growth story on our hands.
Bridgeline also announced Q2 earnings. More of the same, although they seem to be getting their costs under control. Revenue fell to $4 million from $4.2 million. Net loss was $530,000 compared to a loss of $1 million last year. Adjusted EBITDA was $22,000 compared to $25,000 last year. Non-GAAP net loss was $162,000 compared to $643,000 last year. It looks like recurring revenue is just under 50% of revenue. My valuation rose to $1.44 from $1.38. This is looking more and more like a good tax loss candidate for 2017. The only hope is for them to get bought—and we will lose money anyhow
Concurrent announced that they had a deal to sell their “Real Time” business for $35 million. This is about 50% of their business. It will give them close to $5 a share in cash (no debt). The price seems too low, barely over one times revenue for a profitable division. If they sell the rest of the company for the same multiple we are looking at about $8 a share. They also released Q3 earnings which included Real Time results. Their existing business revenues rose from $7.2 million to $7.5 million while the Real Time revenues fell from $8.3 million to $7.5 million. They lost $1.6 million compared to $1.2 million loss last year. The current quarter included $1.1 million of transaction costs, so their loss fell excluding these costs. They will have to cut some costs out of the remaining business to be profitable. My valuation fell to $10.60 from $13.83. They are still paying the $.48 dividend, so the “waiting for something to happen” cost is covered. They are also discussing what to do with all the money—close to $50 million. I hope they declare a $3 dividend and not do a share buyback—unless they buy back at $8 a share, which I don’t think will happen. They only have about 9.3 million shares outstanding.
Another of our private subscription stocks got bought out last night. ANGI got an offer from IAC Corp for $8.50 a share in cash or stock of the new company created by the merger of Home Advisor and ANGI.
ANGI stock soared past the buy-out price this morning and we sold it at $9.10.
We stopped publishing our free weekly CSI Blog after 10 years of publishing at the end of 2015. We are following our 6 remaining open positions until the end.
In late 2015 we started offering a paid subscription service which is similar to the Blog, but we tell you exactly what stocks we bought—and sold every day, with a weekly summary of activity, open positions, how many shares we own and their valuations.
Here is the list of private subscriptions positions I have bought and sold since December 2015.
Syneron Med. 46% gain on Buy-Out
RocketFuel, 140% gain in 4 months
Lantronix, 135% gain
Undisclosed spinoff, 1% gain
HLIT, 74% gain on our remaining position
Ceragon, 48% gain
Imation, 31% gain
Mitel, 15% gain
SGI, 70% gain on BUY-OUT.
AVID, 55% gain (this was a trading position-in addition to our long-term holding)
HLIT, 85% gain. We sold 75% of our position here.
UVE, 36% gain.
ATEC, 71% gain. (This was a trading position-in addition to our long-term BLOG holding)
United Online, 6% loss (take-under)
If you are interested in becoming one of our private paid subscribers, please e-mail me at email@example.com. It is NOT CHEAP though.
We averaged a 58.4% gain on our 13 sold stocks (12 winners and 1 small loser) in our private portfolio since January 1, 2016. We have 19 open stock positions with 13 stocks up, and 6 down.
CSI FREE BLOG
Of our closed out positions on the Blog, since inception, we have had 70 winners, 17 losers for an 80.5% win-rate with an average gain of 38%.
Since we have only 6 remaining stocks in our “portfolio” we will be discontinuing the portfolio performance metrics in 2017. We will continue to update on the remaining stock positions individually in 2017.
April 2017 Legacy Portfolio
|** Current price includes cumulative dividends|