They're named in one lawsuit as a party out of many, not much details, doesn't seem to be major. Virtually all turnout gear has PFAS in it and there's no credible alternative so far, the thing is it's not like PFAS in your water, it's in the protective lining so a lot less exposure than something in your food/water.
It's also difficult to blame your turnout gear for cancer when you jump into buildings that are on fire and full of smoke, much bigger carcinogenic risk there.
I heard replay of recent smallcap conference they were at. Sold 5 $20 puts and was put the stock. Basis is $19. I should have continued with my conviction and bought on the big dip. It has recovered. I am in the black and will hold.
I don’t like using ebitda as capitalized investment costs is not accounted for. I prefer dis and a pe close to growth, but as they become that leader they should have a premium as risk is less.
Do you have estimates on eps that correlate to the respective ebitda?
There's a lot of noise in the numbers because of all the acquisitions and restructuring, and a bit because of FX. I do believe it'll get a lot cleaner going forward.
I haven't had the time to build a clean EPS bridge but it's not a capex intensive business so D&A should be quite small, I'd expect going forward that the EBITDA -> EPS is quite clean.
I’m struggling a little with the cash flow generation of the business. You mention teens EBITDA margins but they look much lower to me. This business also has not really been able to generate consistent FCF despite small capex. Working capital is a big drain on cash generation. Given this, why do you think it deserves a premium multiple? Or do you think management will change things and if so, how?
I believe he has at least either at the Vegas microcap conference and on an MS Microcap interview, not sure if he did on an earnings call. I also talked to him recently and he re-iterated those targets
The former CEO talked about these targets as early as Apr 2022, and he described these as 3 to 5 year targets as well. Why are EBITDA margins still meaningfully below the high teens target?
I think there's clearly been a reset in those. Prior CEO had 0 credibility to lay those out. I think the new management team seems to have a much clearer vision on how to get there and has been doing things to get there.
They've been consolidating facilities, hired much better sales leaders and fired guys who did nothing (head of APAC sales used to live in Canada), working on some 80/20 operational improvements, and then growth in services will be quite accretive. This wasn't part of the strategy back then, was just a random number put out there by a guy about to get fired.
Big picture I also feel like it's not crazy when you look at what comps earn margin wise and the kinds of gross margins they have.
They also structured their compensation agreement so that they get paid if they hit those targets so at least they believe in them.
Really interesting & unique write up. Thanks for sharing.
Do you have any thoughts on what impact PFAS litigation may have?
They're named in one lawsuit as a party out of many, not much details, doesn't seem to be major. Virtually all turnout gear has PFAS in it and there's no credible alternative so far, the thing is it's not like PFAS in your water, it's in the protective lining so a lot less exposure than something in your food/water.
It's also difficult to blame your turnout gear for cancer when you jump into buildings that are on fire and full of smoke, much bigger carcinogenic risk there.
I heard replay of recent smallcap conference they were at. Sold 5 $20 puts and was put the stock. Basis is $19. I should have continued with my conviction and bought on the big dip. It has recovered. I am in the black and will hold.
I don’t like using ebitda as capitalized investment costs is not accounted for. I prefer dis and a pe close to growth, but as they become that leader they should have a premium as risk is less.
Do you have estimates on eps that correlate to the respective ebitda?
There's a lot of noise in the numbers because of all the acquisitions and restructuring, and a bit because of FX. I do believe it'll get a lot cleaner going forward.
I haven't had the time to build a clean EPS bridge but it's not a capex intensive business so D&A should be quite small, I'd expect going forward that the EBITDA -> EPS is quite clean.
Thanks for the write-up. Interesting story.
I’m struggling a little with the cash flow generation of the business. You mention teens EBITDA margins but they look much lower to me. This business also has not really been able to generate consistent FCF despite small capex. Working capital is a big drain on cash generation. Given this, why do you think it deserves a premium multiple? Or do you think management will change things and if so, how?
Thoughts on earnings today? down almost 20% pre-market on 6/10
I post updates on twitter typically. See here: https://x.com/everyonehatesp1/status/1932227524802544036?t=OQMXy3ouhso4WMumEgXfmQ&s=19
Has Jenkins actually reiterated the long term growth algo? I've only found former CEO Charles Roberson lay out the targets.
I believe he has at least either at the Vegas microcap conference and on an MS Microcap interview, not sure if he did on an earnings call. I also talked to him recently and he re-iterated those targets
The former CEO talked about these targets as early as Apr 2022, and he described these as 3 to 5 year targets as well. Why are EBITDA margins still meaningfully below the high teens target?
I think there's clearly been a reset in those. Prior CEO had 0 credibility to lay those out. I think the new management team seems to have a much clearer vision on how to get there and has been doing things to get there.
They've been consolidating facilities, hired much better sales leaders and fired guys who did nothing (head of APAC sales used to live in Canada), working on some 80/20 operational improvements, and then growth in services will be quite accretive. This wasn't part of the strategy back then, was just a random number put out there by a guy about to get fired.
Big picture I also feel like it's not crazy when you look at what comps earn margin wise and the kinds of gross margins they have.
They also structured their compensation agreement so that they get paid if they hit those targets so at least they believe in them.