CSI Update May 2018-Free Blog

Of our closed out positions on the Blog, since inception, we have had 71 winners, 18 losers for an 80% win-rate with an average gain of 37%.

We will continue to update on the remaining stock positions individually until they are all sold.

In May:

SYNC reported Q1 2018 earnings. Better than guidance but still nothing to write home about. Revenues were $32.9 million compared to $26.5 million last year and they lost about $1.2 million (Non-GAAP) and had Adjusted EBITDA of $611,000. Net cash was $11.25 million. The CSI valuation dropped from $6.46 to $5.25 which was way better than their guidance which would have resulted in a valuation of $4.20. Q2 guidance is revenue of $33-$35 million and a GAAP loss of $1.8 to $2.9 million. For the year, they are saying revenue of $150 to $155 million and Adjusted EBITDA of $7 to $10 million. So if they aren’t lying, the valuation should go back up over the next few quarters. They currently have about $44 million of recurring revenue a year. Even at a modest 3X multiple the recurring revenue stream is worth $132 million a year compared to the current market cap of $74 million. But at this point I don’t know what the catalyst is to get this stock moving up. It was supposed to be the $100 million AT+T deal. There was not a mention of AT+T in the press release, although on the conference call they said AT+T revenue in the quarter was $8.5 million. HOLD


ATEC reported Q1 2018 earnings. This is going to take longer than I had hoped. The bet here is on the new management from Nuvasive. They seem to have a plan. First it is converting their distribution channel to dedicated distributors and they say they are 50% of the way there. The second is to add products,  which they are saying should happen in the second half of 2018. Third is to differentiate their product offering which is why they bought SafeOp, which when approved by the FDA (hopefully by the end of the year) will help surgeons protect the patients nerves when they are operating. They also raised $50 million to finance the purchase of Safe Op, be ready to pay off their maturing debt later this year and fund their operations (and losses). So with all that said, their financial results don’t show any progress. U.S. commercial revenues (remember they sold their international business a while back and they are just fulfilling their obligations to the buyer at little or no margin) were $19.2 million down from $20.9 million. Gross margin was 70%. Non-GAAP adjusted EBITDA was a loss of $2.4 million compared to $1 million positive last year. My conservative valuation fell to $3.11 from $5.78 (mostly due to all the new shares outstanding. The only good news I can see is that their net debt is down to about $16 million. HOLD. https://finance.yahoo.com/news/alphatec-reports-first-quarter-2018-200500086.html

AVID reported Q1 earnings. Another long-termer it seems. The best news was that they refinanced their debt at lower interest rates and pushed the maturity out to 2023. Revenues were $97.9 million compared to $104.1 million last year. Non-GAAP operating income was $3 million down from $9.4 million last year. My best estimate is that they lost $2.5 million for the quarter. My valuation fell to $14.98 from $17.51. The stock is still trading at a huge discount to our valuation, but our valuation keeps falling. HOLD, and hope for some catalyst to move the stock, like a Buy-Out. Q2 guidance is revenues of $97-$107 million and adjusted EBITDA of $4 to $10 million. https://finance.yahoo.com/news/avid-technology-announces-q1-2018-202316432.html

PRSS reported Q1, 2018 earnings. Nothing good here. Revenues fell to $14.6 million from $18.3 million and they lost $3.6 million compared to $3.4 million last year. The “turnaround” doesn’t appear to be turning in the right direction. Our valuation fell to $4 from $7.77. Net cash was $1.32 a share down from $1.92 last quarter. A buy-out is our only hope here, and I doubt it would be above our current valuation of $4.00. HOLD

May 2018 Legacy Positions:


                  Share      Current      Lifetime      Current      Price to     Prior

 Stock         Cost          Price          Gain            Value         Value       Value

SYNC           $2.56        $1.90           (26%)             $5.25         36%         $6.46

PRSS           $4.01         $1.40           (65%)             $4.00         35%         $7.77

ATEC          $7.06          $3.83          (44%)             $3.11         123%       $5.78

AVID          $8.35          $5.10          (39%)            $14.98         34%       $17.74



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