We were up 3.9% last week on the back of ARIS’s price rebound. We are over weighted in ARIS. We are now up 9.7% for the year. The DOW was down 8% and NASDAQ was up .6%. For the year, the DOW is up 2.3% and NASDAQ is up 6.5%
Some good EXTR news last week.
Some of our stocks are just stupid cheap—compared to their net cash on hand divided by their stock price.
Check this list:
Last week we went 7 stocks up, 5 down and 2 even. Since inception we are now 68 stocks up and 18 down for a 79.1% winning percentage (80% is our target win %). Of our closed-out positions 59 have been winners and 13 have been losers for an 82% win percentage and a 34% average net gain per position.
The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).
CafePress, Inc. Inc. (NASDAQ-PRSS)-Recommended 5/19/2014)
Buy Price $5.40
Closed up $.05 at $5.35
Next earnings due out Tuesday, August 12th after the market close.
Waiting on the outcome of their review of “strategic alternatives”.
Extreme Networks, Inc. Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $3.95
Closed up $.42 at $4.79
Next earnings due out Wednesday August 13th after the market close.
EXTR announced last week that their Q4 revenues would exceed their previous guidance. Revenues would be $153-$155 million compared to guidance of $145-$150 million and Non-GAAP earnings would be $.06-$.08 per share versus guidance of $.02-$.04 per share.
A Director bought 25,000 shares in May at $4 on top of the CFO’s 10,000 share purchase, also in May.
EXTR announced Q3 (March 31, 2014) earnings on May 6th. We will use all Non-GAAP numbers here, as all the accounting adjustments related to their merger, just don’t mean a thing to their business (pardon us SEC). Revenues came in at $143.7 million compared to the pre-merger $68.2 million last year. Earnings per share were $.02 compared to $.04 last year. Gross margins were 55% versus 56% last year. Net cash was negative $.16 per share. So in our view, a decent quarter.
The company is still going through the merger integration and expects to achieve significant cost reductions ($30-$40 million a year). For the upcoming quarter they expect to be at a $20 million saving run rate, versus $8 million in the March quarter.
Up 21% HOLD
United Online Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $10.28
Valuation $32.35 (Was $27.86)
Closed up $.80 at $10.54
Next earnings due out August 5th after the market close.
UNTD announced Q1 2014 earnings after the close on April 30, 2014. Revenues were $55.4 million down 3% from $57.2 million last year. GAAP net loss was $.75 a share, compared to income of $.03 per share last year. OIBDA (operating income before depreciation and amortization-the term United uses, which is essentially EBITDA) was $3.2 million compared to $5.2 million last year. Overall an OK quarter. Our valuation rose to $32.35 from $27.86 last quarter. UNTD is trading at about 33% of our valuation and cash is 50% of the market cap ($4.79 a share versus $4.29 a share last quarter.
Up 2% BUY
Synacor Inc. (NASDAQ-SYNC)-Recommended 12/17/2013)
Buy Price $2.56
Valuation $5.44 (Was $6.67, $6.39)’
Closed down $.03 at $2.45
Another 13D/A filed on July 17, 2014 calling foul on the SYNC Rights plan they implemented and for the sale of the company.
Another 13D/A filed on July 14th, demanding the sale of the company and Director changes.
JEC continued their assault on SYNC filing another Form 13D/A on July 8, 2014, demanding all kinds of shareholder information and management compensation. JEC and Ratio, who together own 9.8% of SYNC sent letters to the SYNC Board in June demanding that they halt the CEO search and immediately put the company up for sale. Our thought’s exactly.
SYNC announced Q1 2014 earnings on May 13th. Revenues were $25.2 million down from $29.1 million last year. Net loss was $.07 per share compared to breakeven last year. Adjusted EBITDA was a loss of $.7 million compared to positive adjusted EBITDA of $1.8 million last year. Not a great quarter.
Our valuation fell to $5.44 from $5.94 last quarter. Cash was $1.17 per share, about 45% of the current market cap. .
Down 4%. BUY
Dex Media Inc. (NASDAQ-DXM)-Recommended 5/10/2013)
Buy Price $15.14
Valuation $37.98 ( Was $34.36, $31.50, $24.25)
Closed up $.28 at $12.65
DXM announced on June 5th that they were tendering to buy back more debt. They spent about $54 million to buy back $65 million in debt. Save $11 million plus interest costs on the $65 million.
DXM announced Q1 2014 earnings on May 6th. Revenues were $456 million down from $581 million last year (adjusting for the SuperMedia acquisition). GAAP net loss was $4.74 a share, compared to a loss of $.5.84 per share last year. Adjusted EBITDA was $194 million compared to $230 million last year. Not a bad quarter as YOY declines have been anticipated, but a bit below our expectations. DXM generated $97 million in free cash flow and paid down its debt by $74 million in the quarter. Net debt stands at $2.447 billion. Our valuation rose to $37.98 up from $34.36 last quarter. DXM is trading at about 33% of our valuation, but due to the high debt level and small number of shares outstanding, relatively small changes in DXM’s results can cause large swings in our valuation.
Down 16% HOLD
XRS Inc. (NASDAQ-XRSC)-Recommended 2/26/2013)
Buy Price $1.50
Valuation $5.60 (Was $5.57, $6.71, $6.16, $6.79, $6.50)
Closed up $.21 at $2.99
XRSC announced Q2 2014 earnings (quarter ended March 31, 2014) on May 8th. Revenues were $12.8 million down from $14.5 million last year. XRSC is a bit similar to BLIN as they are transitioning their legacy software business to a subscription based service and revenues take a hit as they don’t book a big software sale upfront, but rather record it monthly in smaller pieces. But subscription based revenues are generally worth more to a buyer than one-time sales. GAAP net loss was $.07 a share, compared to a gain of $.01 per share last year. Non-GAAP earnings were $1.2 million or $.04 per share compared to $2.2 million or $.08 a share last year. Our valuation rose to $5.60 up from $5.57 last quarter. XRSC is trading at about 53% of our valuation. We will continue to HOLD as results were not that exciting, but the valuation is still compelling.
UP 99%, HOLD
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.09 (Was $1.20 before we doubled up)
Valuation $3.25 (Was $3.25, $3.42, $4.64, $4.86, $4.00)
Closed up $.03 at $1.26
DAEG announced Q4 2014 earnings (quarter ended April 30, 2014) on June 17th. Revenues were $7.2 million down from $9.8 million last year. They actually made a profit of $.01 per share on a GAAP basis. On a Non-GAAP basis they made $.07 a share versus $.03 last year. Our valuation rose to $3.39 up from $3.25 last quarter. Gross margin inched over 70% and net debt came down to $7.2 million from $12.2 million a year ago. Looks like DAEG may finally be turning the corner.
From their press release: “We are excited about our product offerings and opportunities and remain confident that we’ll demonstrate growth in the second half of calendar 2014.”
Norm Pessin filed a 13D on November 27, 2013 disclosing a 6.2% stake and upped it to 12.2% in December 2013. Good news that someone else sees the value here.
Up 16%, BUY
Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.17 ($1.24 before 2/14/2014 $10,000 adder)
Valuation $1.74 (Was $1.83, $1.61, $2.19, $2.35, $2.56, $2.24)
Closed unchanged at $.87
BLIN announced another multi-million dollar contract in June–$3 million over 3 years.
BLIN announced Q2 2014 earnings (quarter ended March 31, 2014) on May 15th. Ug. Revenues were $5.3 million down from $6 million last year. GAAP net loss was $.13 a share, compared to a loss of $.05 per share last year. Non-GAAP loss was $.07 per share compared to breakeven last year. Our valuation fell to $1.74 up from $1.83 last quarter. BLIN is trading at about 50% of our valuation. BLIN management expressed how disappointed they were at these results. No kidding. We were too. Their backlog was a healthy $20 million ($12.2 million booked this past quarter) but the $7 million deal they recently signed won’t kick in until FY 2015 (2 more quarters). Until then they are projecting about $6 million a quarter. We are still believers here but this is no longer a BUY. We will give them another couple of quarters but we are reducing this to a HOLD for now. We really like BLIN and think that just their recurring revenue stream of $6.4 million is worth more than the current $18 million market cap.
Down 30%, HOLD
Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $5.99 (Was $5.32, $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)
Closed down $.03 at $3.27
Next earnings due out Tuesday, July 31st after the market close.
TSYS announced Q1 2014 earnings after the close on May 1. Revenues were $85.1 million down 10% from $94.8 million last year and up 8% from last quarter. GAAP net loss was $.01 the same last year. Non-GAAP net income was $.04, also the same as last year. Overall a decent quarter. Our valuation rose to $5.99 from $5.32 last quarter. TSYS is trading at about 55% of our valuation. .
UP 139%, HOLD
MRV Communications (Pink Sheets-MRVC.pk)-Recommended 10//10/2011
Valuation $23.19 (Was $25.50, $28.98, $24.01 $23.06, $27.15, $31.80, $34.60, $28.60, $41.20, $43.20 (after $9.50, $6.00 and $1.40 special dividends), $52.40, $55.80)
Buy Price October 7, 2011- $8.50 ($25.40 before special dividends)
Closed at $14.14 down $.06
Karen Singer filed a 13G in May 2014 disclosing a 5.3% stake. Singer was a 13D filer before and helped instigate all the special dividends. Good to see them with a healthy stake again.
MRVC announced Q1 results on May 8th. Revenues were $42.3 million up 9% from $38.9 million last year. GAAP net loss was $.58 a share, compared to a loss of $.59 per share last year. Non-GAAP loss was about $3.0 million compared to $4.4 million last year. Our valuation fell to $23.19 from $25.49 last quarter but up slightly from $23.19 last year. MRVC is trading at about 60%% of our valuation. ,
Lloyd Miller disclosed a 6.9% stake in February 2012.
UP 64% BUY
Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Valuation $8.24 (Was $9.16, $12.30, $11.86, $8.24, $13.05, $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.13 at $4.20
SIGM announced Q1 2014 earnings (quarter ended May 3, 2014) on June 11th. Revenues were $36.9 million down from $38.5 million last year. GAAP net loss was $.29 a share, compared to a loss of $.13 per share last year. Non-GAAP loss was $.14 per share compared to a $.01 profit last year. Our valuation fell to $8.24 down from $9.16 last quarter. Net cash per share was $2.38.
Only forecast in the press release was that this should be the lowest revenue quarter for the foreseeable future.
Ariel Investments filed a 13G on January 10, 2014 disclosing a 10.1% stake in Sigma.
The CEO bought 343,000 shares back from Potomac Capital in December 2013 leaving Potomac with only 465,000 shares of SIGM. The interesting part was that the CEO paid $5.50 a share or about $1 over its trading price. Either a great expression of confidence in SIGM or a small price to pay to get rid of an activist investor.
Down 51%, BUY
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $15.01 (was $15.10, $14.55, $14.77, $16.26, $16.20, $15.37, $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.04 at $8.25 (including dividends)
Pays $.48 annual dividend.
CCUR announced Q3 2014 earnings on April 29, 2014. Revenues were $18.3 million, up 8% from last year and EPS was $.12 up 9% from last year. Net cash was $2.47 per share. Overall a nice quarter. Our valuation fell slightly to $15.01 from $15.10 last quarter. CCUR is trading at 50% of our valuation and cash is about 30% of the market cap. We have collected $.60 in dividends so far (excluding the $.50 special dividend which reduced our basis).
UP 80%, HOLD
ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.67 (was $5.57, $5.70, $6.71, $6.41, $6.14, $5.97, $6.21, $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $3.08, up $.26.
ARI announced Q3 2014 earnings (quarter ended April 30, 2014) on June 12th. Revenues were $8.2 million about even with last year. They actually made a profit of $.01 per share versus a $.05 loss last year. Our valuation rose to $5.67 up from $5.57 last quarter. Recurring revenue was $7.6 million or 93% of total revenue.
It was nice to see them stop losing money, but growing revenue at their 80% margins boosts value more than earning $.01. Too bad their poor capital structure makes them have to balance the two. It will just take longer for them to grow.
From their press release:
“As we noted on our prior quarter earnings call, we expected year-over-year organic revenue growth in the back half of fiscal 2014 to be challenging, however, we anticipated significant improvement in our earnings and cash flow. The results for Q3 are in line with these expectations. The investments we are making in sales and marketing are having a positive impact on new sales and upsells. To date in fiscal 2014, we have invested 29.4% of revenue in sales and marketing versus 25.2% for the first nine months of last year. This has contributed to new dealer sales and upsell bookings, measured in annual contract value (ACV), being up 38.8% year-to-date. We believe this should translate into single-digit organic growth in Q1 FY15, growing toward low double-digit growth as we progress through fiscal 2015.”
UP 91%, HOLD, Still a large valuation gap here.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.99 (Was $1.02, $1.05, $1.07, $1.14, $1.17, $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.365 closed at $.33
CTI announced in June that the special committee of the Board of Directors rejected managements $.40 buy-out offer. Then the special committee was promptly disbanded. This company should not be a public company, but we can understand the decision in rejecting a lowball offer. They need to get an investment banker and sell the company. Probably get $.75 a share for it from someone.
Earnings for the quarter ended 3/31/2014 announced in May. No press release of course, just a 10Q filing.
Revenues were $3.9 million up slightly from last year and they lost $303,000 on an operating basis compared to a loss of $338,000 last year. Due to the QWEST settlement, they reported income of $979,000 compared to a $443,000 loss last year. Our valuation declined slightly to $.99.
UP 35%. HOLD