KJP Posted February 14, 2018 Author Share Posted February 14, 2018 per an article in mergermarket on 12/15/17, Renaissance Learning expected to sell for a high teens multiple of cash net income. a similar biz - Frontline Education - sold to thoma bravo in august for a 19x multiple. I'd say the M&A market implies more upside for the shares. Thanks for the info. Frontline is a back office HR/admin software company, rather than a curriculum company, but Renaissance should be a close comp. It will be interesting to see what it fetches. I think in 2018 a standalone Cambium will generate something like $37 million in pre-tax, pre-interest cash flow and will have little to no debt at the end of the year. I agree that's worth more than the current ~$360 million market cap. Link to comment Share on other sites More sharing options...
swropfef Posted February 22, 2018 Share Posted February 22, 2018 per an article in mergermarket on 12/15/17, Renaissance Learning expected to sell for a high teens multiple of cash net income. a similar biz - Frontline Education - sold to thoma bravo in august for a 19x multiple. I'd say the M&A market implies more upside for the shares. misterkrusty - per mergermarket article on 02/12/2018, Hellman & Friedman (owner of Renaissance) is aiming for a similar valuation Weld North fetched in its sale of two ed-tech businesses to Silver Lake on 4 January, a high-teens EBITDA multiple. Link to comment Share on other sites More sharing options...
misterkrusty Posted February 22, 2018 Share Posted February 22, 2018 thanks for the info. i hadn't seen that Link to comment Share on other sites More sharing options...
voyager Posted February 22, 2018 Share Posted February 22, 2018 These guys are trying to sell off some assets. Voyager Sopris Learning is in the market for sure. There doesn't seem to be a lot of interested parties so I would be warry of using private market value as a valuation basis. Link to comment Share on other sites More sharing options...
misterkrusty Posted February 22, 2018 Share Posted February 22, 2018 who is trying to sell assets? are you saying they're trying to sell VSL, or that Cambium is looking to buy assets via its VSL subsidiary? when I mentioned those multiples, I was suggesting they might be a guide to what Cambium (as a whole) could fetch if sold to another company. If VSL is for sale I'm not too worried about what they could get for it. I value Cambium on a multiple of cash net income, and VSL ain't generating any of that these days. Link to comment Share on other sites More sharing options...
voyager Posted February 22, 2018 Share Posted February 22, 2018 Cambium is trying to sell VSL. Link to comment Share on other sites More sharing options...
KJP Posted March 7, 2018 Author Share Posted March 7, 2018 http://www.investor.cambiumlearning.com/news-releases/news-release-details/cambium-learning-group-reports-fourth-quarter-2017-financial LAZ had 10% full-year bookings growth, Explore Learning at 19%. Margins continue to expand as more sales come from digital products. Their 2018 forecast calls for continued growth in LAZ and EL, continued margin expansion and total cash generation (helped by the NOLs) of around $35-40 million. Not bad for a ~$330 million market cap with $40 million in net debt. Link to comment Share on other sites More sharing options...
given2invest Posted March 7, 2018 Share Posted March 7, 2018 Not surprising they can't fetch much for VSL. No investor values it at anything. My math: LAZ and EL did 45M in cash income before shared costs of 13.5M. If we assume that grows to 50M in 2018 and assume a "clean" shared costs is 10M if you exclude VSL entirely and/or just assume very modest cost savings to an acquirer get to 40M in cash income. Comps have been selling for high teens multiples. Using 17x multiple gets you to $12.50 a share, valuing VSL at 0. Mind you VSL has a pure SaaS product in language live! that has a 10-11M base growing 20% a year. Unclear if that could be tucked into another company but could be worth as much as $1 a share alone. But let's say they don't sell themselves year end 2018. They will be debt free. Assuming they borrowed $150M (would be 2.5x levered) could pay $3 dividend on a $7 stock. The $4 "stub" would be worth $9.50 on trailing #s. I think 2018 will be the year this works again and 2019 could be a banner year w/ EL releasing new product for first time in years. Also VSL gets smaller and smaller and more and more irrelevant. But in reality I see them selling the company - probably in 2019 after they use up most of the tax asset and show LAZ accelerate in growth. BTW on an EBITDA multiple it's trading sub 7x 2018 which is ridiculous for a high margin SaaS company Link to comment Share on other sites More sharing options...
misterkrusty Posted March 7, 2018 Share Posted March 7, 2018 twas a good quarter. if LAZ just stabilizes at 10% growth this should work just fine. But ya just gotta wonder what the CEO is thinking with his stock sales. Yes those options are expiring but he could exercise and sell just enough to cover the tax liability. Most likely this gets sold to a strategic, meaning that shared overhead mostly goes away and this would be roughly a double from here. John spent years (and maybe still does) review potential M&A and did no bad acquisitions of any significance, so one might think he understands valuation, unlike some CEOs. At least these results seem to indicate that these sales aren't a bad omen, as results seem to be stabilizing at a still-interesting growth rate. I agree with given2invest on likely timing of a sale. Link to comment Share on other sites More sharing options...
given2invest Posted March 7, 2018 Share Posted March 7, 2018 twas a good quarter. if LAZ just stabilizes at 10% growth this should work just fine. But ya just gotta wonder what the CEO is thinking with his stock sales. Yes those options are expiring but he could exercise and sell just enough to cover the tax liability. Most likely this gets sold to a strategic, meaning that shared overhead mostly goes away and this would be roughly a double from here. John spent years (and maybe still does) review potential M&A and did no bad acquisitions of any significance, so one might think he understands valuation, unlike some CEOs. At least these results seem to indicate that these sales aren't a bad omen, as results seem to be stabilizing at a still-interesting growth rate. I agree with given2invest on likely timing of a sale. The sales are ridiculous and with the likely exit it makes no sense to be doing them. A real head scratcher that should probably not be a real cause of concern given the 14% quarter LAZ just put up. He doesn't think it's going into decline. He just wants money and wants it now...bizarre. Link to comment Share on other sites More sharing options...
KJP Posted March 7, 2018 Author Share Posted March 7, 2018 At year end, the gross value of the NOLs was still $63 million, so that's probably two full years of a tax shield remaining. But I agree that whether a transaction happens at year end 2018 or 2019, something will happen -- sale, levered recap or debt-financed acquisition. They're not going to give up the tax benefits of debt and run a business like this with no leverage. Link to comment Share on other sites More sharing options...
misterkrusty Posted March 7, 2018 Share Posted March 7, 2018 one should never totally brush off insider sales, but i've seen lots of insider sales over the years that made little apparent sense. I've known some folks (even good operators) who just didn't seem to be able to stomach the volatility of the stock market. Or maybe his wife constantly reminds him how these shares sank to a $1 handle some years back and this is how he keeps his marriage together. Or maybe he's plowing all that cash into cryptocurrencies ;) KJP - I believe somewhere around $23M of the NOLs has sec 382 usage limitations attached to them, making them less valuable per $ of NOL. Link to comment Share on other sites More sharing options...
given2invest Posted March 7, 2018 Share Posted March 7, 2018 Gotta keep in mind both John and Barbara are not "rich" and this is both their first time being CEO/CFO and their salary is modest so the stock compensation is a big part of their overall salary and probably net worth. Link to comment Share on other sites More sharing options...
KJP Posted May 14, 2018 Author Share Posted May 14, 2018 Cambium announces strategic review and is buying another VSS EdTech portfolio company: http://www.investor.cambiumlearning.com/news-releases/news-release-details/cambium-learning-group-reports-first-quarter-2018-financial Purchase price, largely funded by equity, is about 4x bookings and 15x cash income. EDIT: Market reaction isn't surprising, given that this was a conflicted transaction funded with equity, even though the company should easily have been able to raise debt to pay for the acquisition. Link to comment Share on other sites More sharing options...
KJP Posted August 21, 2018 Author Share Posted August 21, 2018 Good Q2 results and commentary Q3: http://www.investor.cambiumlearning.com/news-releases/news-release-details/cambium-learning-group-reports-second-quarter-2018-financial At $13.75/share, I believe it's trading around 16-17x 2018 pre-tax cash income, without accounting for the potential vKidz acquisition. Link to comment Share on other sites More sharing options...
Libs Posted September 18, 2018 Share Posted September 18, 2018 KJP, Given, Congrats (and thanks) for a really good idea. Link to comment Share on other sites More sharing options...
KJP Posted October 15, 2018 Author Share Posted October 15, 2018 Company sold to Veritas Capital for $14.50/share: https://globenewswire.com/news-release/2018/10/15/1621002/0/en/Cambium-Learning-Group-Enters-Into-Definitive-Merger-Agreement-with-Veritas-Capital.html Link to comment Share on other sites More sharing options...
misterkrusty Posted October 15, 2018 Share Posted October 15, 2018 I just love a 3-bagger. (but wish I hadn't sold at $13 of course)/. congrats to all Link to comment Share on other sites More sharing options...
writser Posted October 15, 2018 Share Posted October 15, 2018 KJP is a great poster. Well done sir. Link to comment Share on other sites More sharing options...
KJP Posted October 16, 2018 Author Share Posted October 16, 2018 KJP is a great poster. Well done sir. Thanks for the kind words and glad this one worked out. Link to comment Share on other sites More sharing options...
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