Alphatec Update

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.

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Synacor (SYNC) Update

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 Update

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 Update

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.