PRSS - Cafepress

[ccplz]

https://triumfcapital.wordpress.com/2015/09/06/cafepress-prss-2/

 

TLDR:

-Annual revenues of around 120m, adjusted EBITDA around 2-3k

-Turnaround story: thesis based on probable operational turnaround to profitability

-Traffic has declined since IPO; revenues have declined as well despite having made a number of acquisitions, whilst there hasn't been profitable for the last 3 years

-Founder returned 12 months ago as CEO; announced turnaround strategy which was to monetize noncore assets to shore up the balance sheet and focus on the core business, return it to profitability

-Stock has run up a certain extent since then due to sales of noncore segments, but operational turnaround has not been priced in

-Gross margins up from 35%-38% to 41%; marketing expenses as % of sales have gone down from 30% to 19%

-Customer experience has improved drastically and revenues have stabilized since founder's return

-Current EV is around 30m, which is just 0.25x sales. With slight improvement in sales, impact on the bottom line will be significant.

-40m cash on balance sheet, no debt, means downside is relatively limited (current market cap is around 70m).

-CEO owns 11% of company; collectively insiders own 25%

-Insiders have continued to purchase shares in the last couple of months

 

Thoughts?

[Haasje]

I own some.

 

-The website look and ease of use has improved a lot. That should help conversion rates.

-Affiliate program has been bumped up a lot to a very generous 15% of sales, that should attract a lot of affiliates and help revenue but it is not necessarily good for margins

-Zazzle is curently ahead of them in design/execution and I think also in the health of its designer community

-Ultimately valuation is so undemanding that if the CEO can get to a positive bottom line, even with a shrunk top line, this allows for good returns

-I like that the CEO is making drastic changes. At least something is going to happen in this name. Risk of it being a value trap is very low.