XRS Corporation (NASDAQ-XRSC) got a buy-out offer this morning for $5.60 a share. Our latest valuation was $5.35 and the prior valuation was $5.60 a share. Not too far off. Omnitracs, LLC is buying XRS.
We are never ones to hang around until the merger is consummated so we are selling this morning and booking a gain of about 270% at a $5.55 sell price. Not bad for 18 months.
Alphatec Holdings Inc. (NASDAQ–ATEC)
Valuation-$3.00
Price August 29, 2014-$1.56
ATEC has had some troubles lately. We personally bought ATEC earlier this year, but then sold it when it lost a $50 million lawsuit they inherited from an acquisition in March. We now own ATEC again based on recent performance.
Latest earnings were for the second quarter ended 6/30/2014. ATEC posted record sales and adjusted EBITDA. Revenues were up 4% to $53.2 million from $51 million and they lost $2.9 million versus a $4.7 million loss last year. They are projecting around $210 million of sales for 2014 and adjusted EBITDA of $30-$33 million. Our valuation based on the latest quarter is $3.00 a share.
Back in March when they lost the lawsuit they entered into a loan facility with Deerfield entities (which own about 4% of ATEC) to be able to fund the lawsuit settlement. They currently have about $21 million in cash and $100 million in debt. They still have $31.5 million to pay on the settlement but are only required to pay this in $1.1 million quarterly installments.
Healthpoint Capital is a longtime holder of about 20% of ATEC.
Trading at only 52% of our valuation we think this is a BUY.
There are about 97 million shares outstanding and it trades about 180,000 shares a day.
About ATEC: Continue reading
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 they 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.”
BUY
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.”
HOLD
CBEY got their take over offer this morning from Birch Communications at between $9.97 and $10 a share. While this is way below our valuation of $26.21 we generally don’t violate Rule #1—Take the money. We will book a 37.4% gain on this one.
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