LSYN - Liberated Syndication

[knight933]

Just wanted to see if anyone else out there has done any work on LSYN (Libsyn)? After doing some work on this name, I think Libsyn is one of the most attractive set-ups I have seen in the micro-cap stock universe in quite some time. [We can address management’s in a second].

 

I believe Libsyn at $1.50 - $1.60 is a rare “gift” that Mr. Market gives us with smallcaps. ~$40M market cap podcast hosting company. It is growing revenue ~20% a year, has 40%+ EBIT margins, and is asset-light with minimal capital expenditures. Based on my rough estimates I believe it is trading between 5.5x – 7x normalized earnings (post-tax) after you factor in the most recent acquisition they made. Incremental margins are very high and if you pull the financials you would see this is a cash-generating machine that can grow for years to come with minimal incremental capital. This should trade at LEAST for a market multiple. 

 

The market is clearly pricing this as if it is a media company, when in fact it is the dominant hosting platform in this high-growth industry. Libysn is like a toll-both collector for the podcast industry. LSYN has been a leader at providing detailed operating stats for podcast creators. Over the past few months, there have been developments in the podcast industry to come up with industry measurement statistics that I believe will ultimately bring a lot more advertisers to the format. (Apple recently turned on a long-promised analytics feature) 

 

It does not make sense that despite announcing an accretive M&A deal that will more than DOUBLE Libsyn's earnings, the stock is down -24% from its recent high ($1.80's) right after the deal came out. Management said they are going to host a conference call sometime during Q1 so I expect that to be the next catalyst. I realize there are a lot of concerns around management but the underlying Podcasting business at LSYN is totally separate from the accounting issues that happened at FAB Universal in China. And the fact the bank let LSYN borrow at 3.4% for the Pair Networks M&A deal I mentioned above suggests they believed this to be a strong credit. This is a real business, providing a real service that is dominant in its space. If the stock continues to print FCF like this, the price will not stay this low for long. It seems like only a matter of time before LSYN is acquired by a strategic acquiror.

 

Management incentives are aligned with shareholders to a very high degree. Mgmt stands to get paid if they can get the stock price up to $3, $5, and $7 respectively - compared to a current price of $1.50 - $1.60.

[knight933]

To help others with their research and contribute to the community here, I'm posting my model output here. Would love to get others thoughts but I believe my valuation (see yellow box) is conservative with the stock at 5.4x - 8x earnings, pro forma. LSYN will move to the NASDAQ sometime in 2018 so this should not stay undiscovered for long. (Excel should be attached)

LSYN_Model_2.7.18.xlsx

[writser]

No opinion myself, but this blogger was slightly less enthousiast a year ago: https://www.valueinvestingblog.net/liberated-syndication/ . Might be interesting for you.

[knight933]

Hi - Thank you for sharing that article, and yes I have read it. (Several folks have sent it to me)

 

No disrespect to you other the blogger, but the stock was at $+0.48 last year and now it is $1.50-$1.60 almost a year later, so clearly the author got a LOT of things WRONG here. Haha

 

I am happy to discuss any specific points anyone may have, but the business has grown and gotten a lot stronger since they wrote that blog post. If anyone wants to talk about the present and the accretive M&A deal they recently did, then I am all ears. But I don't see much value in critiquing an analysis that clearly was very flawed.

 

I think a lot of folks have read that blog posted, and never bothered to do any more work. Case in point - at the time of me writing this, this thread has been viewed 150 times but only 2 people bothered to download my spreadsheet which has the actual analysis. 

 

I think that is partly why this stock is still so cheap despite continuing to execute and build up cash; this is a Free Cash Flow machine.

[Tim Eriksen]

I owned some in a personal retirement account late in 2016.  Paid $0.40 and sold out at $0.59 six months later. I clearly sold too soon.  It was cheap when I bought (1.5x earnings net of cash) and still cheap when I sold (3x earnings net of cash).  I sold because of management not valuation. 

 

At $1.60 and net debt, it is now trading at 8 times earnings.  For most companies that is cheap.  But most companies don't have a lousy track record like this management team does -  excessive compensation, poor acquisitions, Nevada incorporation, previous reverse split, etc.  LibSyn is growing, while pair Networks is showing a revenue decline.  Combined they should still grow. 

 

The key here is to meet with management.  I never did, but should have.  Find out if they are trustworthy.  If they are, the buyer will probably do well.  If not, well who knows.   

[writser]

Fwiw when a stock triples I wouldn't instantly dismiss an old analysis as 'WRONG' and laugh about it. From the LSYN insiders one has been detained by Chinese authorities a few years ago and the current CEO and CFO have just settled a case in which they were accused of securities fraud. That's not something you can capture in a spreadsheet. Have you looked at stock compensation the past few months?

[Guest Schwab711]

No opinion myself, but this blogger was slightly less enthousiast a year ago: https://www.valueinvestingblog.net/liberated-syndication/ . Might be interesting for you.

 

I should probably bring the discussion here.

 

Presumably at the time of this post (12/15/2016) LSYN showed up under the Gregory & Associates, LLC (Salt Lake City, UT) listing, but it is now listed under a firm in Ocean City, MD with the same name (unrelated firms).

 

A couple of years ago, I tried to submit information on behalf of a company to OCTMarkets.com to remove the "No Information" label but they refused. They said all information must be submitted by the listed firm through their portal. The weird thing is both of the FABU spin-offs changed the address of auditor. I don't know if it means anything but I thought it was interesting.

[knight933]

FWIW– If we can’t have the intellectual honesty to admit that when a stock moves in the OPPOSITE direction by +200%, MAYBE there was something missing with your analysis, I don’t know what to tell you. If your boss lets you be 200% wrong with no consequences, more power to you. If you think this is a fraud, why don't you short it?

 

Everyone is free to read up on FAB Universal and draw their own conclusions as to where the fault ultimately lies with what went wrong, but from my understanding the shady dealings were going on in China, and with business units unrelated to LYSN.

 

When this scandal in question was happening, Liberated Syndication was a tiny piece of the company at the time, run separately out of Pittsburg. The company has been a pioneer in podcasting since before the iPhone was invented. Long before this management team got involved.

 

Do some more research on the company and they have a real product, with a real value added that is a big player in this growing market. Some of the biggest names in Podcasting are their clients. I think this was a case of good business / bad business.

 

From what I can tell, Liberated was a healthy piece of business that was carved out of the rot that was FAB Universal. The current management team got lucky and fell into a life raft of sorts. There is a reason why this was spun-off as a separate company.

 

And yes – I have looked at stock compensation. Have you? As I said above – if this is a fraud, then management is doing a horrible job at it. Management only stands to get paid if the stock reaches targets FAR higher than it is today. They ONLY get stock if LSYN hits $3, $5 and $7. The stock is at $1.60 today. I do not pretend to speak to their character but the only way they win is if I win along with them.

[Guest Schwab711]

No one said fraud. Fraud does not necessarily mean that no product exists. Fraud does not necessarily mean the financials are incorrect. There are a lot of ways to lose money (despite how well the underlying company is performing) without there being fraud, under the legal definition.

 

The fact that you are getting criticism on your post means that people are trying to help. Most posts on small stocks get no response, ever. Probably 90% of the traffic on this site is from non-members who cannot respond. If all you want is folks to tell you that you are right then what's the point? Just my two cents.

 

Quick thoughts on your model:

1. I have no idea where the 25% synergy is coming from (I checked their filings and I don't see any mention - maybe I missed it?)

2. Extrapolating 1 quarter and 3 quarter results with 10% future growth can make a lot of companies look cheap.

3. The mgmt comp issue brought up by Tim is the reason EBIT margins have declined at LSYN. Since you extrapolated the last Q for LSYN, you are over-estimating LSYN, imo. As a quick reasonableness check, you assume full-year run-rate G&A expense for LSYN is less than actual G&A expense for 9m YTD.

4. If you expect the stock price to hold or increase in the future then your valuation ignore known dilution that would result from that assumption

5. As to the 10% growth assumption, does that assume Pair Networks reverses its decline, LSYN grows by 20%+, or some combination? Your model implicitly assumes the growth is perfectly gross margin-weighted, which is probably not what you meant and seems unlikely.

[knight933]

Trust me, I realize everyone's concerns. But here is some more evidence LSYN is in the “this is not a fraud” category.

 

Attached here is the 8K they filed when they did the latest acquisition of Pair Networks. They took out about $10 million in loans from First Commonwealth Bank.

 

Whenever you apply for a bank loan, the bank does their own deep dive on due diligence on both the parent and the target. Nobody is perfect, but the bank has access to private information that we will never see as investors. After all their due diligence, they did the deal at LIBOR + 175, or 3.44%. (See page 168 of the attachment here)

 

Even in a low-interest rate world, 3.44% is a very low rate by any standards, suggesting that after they looked under the hood, the bank believed this to be a very strong credit. Debt investors are much more savy than equity investors. If this was so "shady" they could have easily charged much more in interest. Pittsburgh-based Capital Foundry, LLC acted as advisor to the Company and Arranger for the Bank Facility. Notice that everyone involved is local and from Pittsburgh. There are not many public companies located in Pittsburgh. I don't think anyone was tricked here. 

 

Having done several of these due diligence processes myself to obtain a bank loan, I GUARANTEE you that the issues with FAB and the CEO/CFO were brought up during the discovery process. I have some comfort that despite all of this, they saw real value in the business. For this to be a fraud, a LOT of people would need to be fooled.

 

Lastly you said 8x earnings, but that is trailing. There are very real synergies to be had once you fold the two companies together. That’s why I think the real multiple here is closer to 5.5x – 6.5x.

2017.12.27_Entry_into_Material_Definitive_Agreement.pdf

[knight933]

Hi Scwab711 – Let me be 150% clear, I am ok with criticism. Fraud/shady/whatever – Word choice aside, I 100% realize some do not trust management and thus why we have the low multiple. You don’t find stocks trading at 6x -8x earnings unless there’s some hair on it.

 

Now…Thank you for discussing the actual business. To your points:

 

1-You are correct - Management did not mention any synergies in the press release, but as someone who works in corporate finance and has written similar press documents, that is a common practice in corporate etiquette. In the PR they said they plan to host a conference call “sometime in Q1” to discuss the deal. Synergies will likely be discussed there. (Also another catalyst less than 2 months away). The goal is to get in before they announce the synergies.

 

If you turn to page 142 of this PDF, you will see the historical financials for Pair Networks. I came up with the $2.2M savings target after reading their financials. When you combine 2 small companies in very similar businesses, located in the same city, there will be a lot of duplicate costs. Management will not always just “tell” this to you. I think my assumption that ~$2 million of costs can be removed is conservative, but feel free to judge for yourself. Also – notice that I give them zero credit for revenue synergies, which I think they can achieve by cross-selling products, so there’s that.

 

2. Extrapolating the last quarter is a very common/correct forecasting method when evaluating subscription businesses. I cannot stress this point enough – about ~70%-80% of the revenue is recurring. If you are a new client and join in Q3, looking at Q1 – Q2 will cause you to understate the revenue going forward. If customers are billed monthly, then it is far more correct to annualize from the latest period. This is not immediately intuitive – yet another reason I think this is cheap.

 

3. I am a little confused by your statement, so I will just explain my logic and hopefully this answers your question. Yes, I am aware that mgmt. comp was elevated for the reasons you mentioned. However issuing stock are 1 time, non-cash expenses. If you look at the Cash Flow statement that is why the costs are added back. That is why I use the latest quarter because that is a cleaner look at the business when there were no share grants. Run-rate G&A expense SHOULD be less than actual G&A expense for 9m YTD for precisely that reason. These were periodic grants, and not everyday occurrences.

 

4. No I did not ignore the new shares. If you look at my share count of 26 million, that is the latest share count that includes the new stock issued to Pair Networks for the deal. Here is where I respectfully disagree. Management’s stock rewards are based on per share targets LSYN must hold for at least 10 days. They only get the shares if the stock touches $3, $5, or $7 for 10 days. The stock is below those thresholds, so you do not include those shares in your calc until they reach them. But by that point, the stock will be 2x – 5x higher than today and this point is moot, you still win big.

 

5. My revenue assumptions are just that – assumptions. Yes, I fully expect old LSYN to grown by 20%+ because podcasting still has a LONG ways to take market share from radio. Libsyn is a dominant hosting platform. They recently changed the reporting standards for ratings to make them IAB (Interactive Advertising Bureau) compliant which I think will bring more advertisers to podcasting now that they have more reliable/universal ratings metrics.

 

As I said multiple times I did not give them any credit for cross-selling opportunities or other synergies with their larger scale. Do not just focus on margins, but focus on INCREMENTAL margins. The next incremental dollar in the door is higher margin than the average because this is a digital product and it does not take much extra to host more podcasts. So for that reason, I think my assumption of gross margin weighted revenue being flat is conservative, because I believe the 2 companies can operate more profitably together than separately. From the line of business where I work, I think that is a reasonable assumption but again feel free to disagree.

2017.12.27_Entry_into_Material_Definitive_Agreement.pdf

[NeverLoseMoney]

Hi - Thank you for sharing that article, and yes I have read it. (Several folks have sent it to me)

 

No disrespect to you other the blogger, but the stock was at $+0.48 last year and now it is $1.50-$1.60 almost a year later, so clearly the author got a LOT of things WRONG here. Haha

 

I am happy to discuss any specific points anyone may have, but the business has grown and gotten a lot stronger since they wrote that blog post. If anyone wants to talk about the present and the accretive M&A deal they recently did, then I am all ears. But I don't see much value in critiquing an analysis that clearly was very flawed.

 

I think a lot of folks have read that blog posted, and never bothered to do any more work. Case in point - at the time of me writing this, this thread has been viewed 150 times but only 2 people bothered to download my spreadsheet which has the actual analysis. 

 

I think that is partly why this stock is still so cheap despite continuing to execute and build up cash; this is a Free Cash Flow machine.

I wrote the post on ValueInvestingBlog.net. I think I pointed out some important issues with this company and I am still happy about my decision not to invest. I ended up buying a major position in Bitcoin instead. Don't worry guys, I sold it all around the ~$19k level. Clearly buying BTC at the time was the right decision and selling near the top was the right thing to do as well. And don't any of you try to tell me otherwise with these flawed analyses I keep reading on this forum and elsewhere, the money in my bank account proves you wrong.

[writser]

If you like management, you might also be interested in FUTU - Future Healthcare of America. Same CEO, same CFO, same board of directors. Market cap is only $0.5m but in 2015 it was supposed to take over a "leader in industrial asset intelligence and 3D visualization". Of course the stock popped 5x and at that point a 10% holder from Liechtenstein shows up who is connected with dozens of pump & dumps. For mysterious reasons the deal was cancelled and the stock cratered over the next few weeks. Also they tried to do a share offering, had to restate financials a few times, the usual. But, you know, that was a few years ago, probably a subsidiary in China that management knew nothing about.

 

Look, I agree with you that LSYN is probably a real, profitable business. I do think the bank did their due diligence. However, I still wouldn't touch this as I absolutely don't believe management has your best interests at heart. It looks nice, their compensation vests when the stock hits $5 and/or goes to the NASDAQ. If that happens: great! But can you trust management to follow up on these promises? And can you expect them not to change their compensation scheme in the future and/or loot the company? I wouldn't bet on it. If these guys were just incompetent: sure. But after some quick armchair research it seems to me there is a big chance these guys are actually malignant. That's also what the blogpost I linked to tried to point out and whether the stock is at $0.50 or $1.50 at that point doesn't really matter for that as far as I am concerned.

[knight933]

I have to say I find it ironic that (to paraphrase) someone basically said “this company is too shady….let me buy Bitcoin”. I guess irony is dead in 2018. Anyways. Let’s actually think through what it would take to actually “loot” said company. It is more than just changing the comp agreement. Let us walk through the steps:

 

1-How is this like a “pump and dump” if the company has done absolutely ZERO self-promotion? If you look at the website and all their public info, the company pretends like they are private. How can you “pump” if you don’t even have an investor relations website? There are no earnings calls. I had to actively search the SEC website to even find their financials. If this is a pump and dump, you have to admit they are doing a horrible job at it.

 

But again, agree to disagree. I think the risks here are more than priced into the multiple.

 

2- “Sure, it looks nice, their compensation vests when the stock hits $5” – Again, this would be a reasonable question to bring up were the stock anywhere near close to $5. It is not. The stock could double to $3, and you would get out long before your theory. There is only 1 class of stock. If management juices the business to $5 /share, you go along for the ride. Again, agree to disagree.

 

3. Full disclosure – I work in the media industry and am not a full-time investor. Sometimes I think stock investors fail to think like a corporate buyer. If you believe the financials (you said you trust the bank DD) – there would be a LONG list of corporations who would love to buy this asset. They could pay far above what the market would ever give LSYN.

 

In fact, if I were in management’s shoes and trying to “loot” this company, I would do the following:

 

A) I would grow earnings organically, do M&A to buy out smaller competitors, and grow my earnings (Ongoing)

B) I would grant myself less cash, and more shares. (Check) If you do the math, the dilution you get for growing the company 2x – 5x is quite reasonable relative to the value created. 

C) Lastly, I would sell the business to a larger digital media company. If you take out management’s salaries (which I admit are high), then this is even MORE profitable than it looks.

 

Podcasting is hot, and a lot of companies want to get involved. The business would sell itself and you could fire management, and have a growing, high margin, recurring revenue business for way less than 10x earnings.

 

I expect management to be selfish. Selling to a larger Media company (Spotify, iHeart Radio) or an internet hosting company (Go Daddy, etc) would give them the biggest possible payday. I do not assume management is ethical...but I assume they are rational. They know their tainted reputation means this stock will never get the full earnings multiple it probably deserves otherwise.

 

I see the endgame as selling to a strategic that could rip out costs and pay way more than $5-$7. At $1.50 I see very little downside from here. 

[Tim Eriksen]

CEO and CFO comp has been high for a number of years.  I don't know if they are actively involved or milking a valuable stub they just happened to own after their previous screw ups.  They don't even report comp consistently.  Fiscal 2015 shows a $400k bonus for the CEO in the prospectus but only a 150k bonus in the 2016 proxy statement.  Which is it?? 

 

Please don't make it sound like management is not getting much additional comp until the stock hits $5.  It is not true.  They are getting additional comp at that level, but they just received huge share grants a year ago.  They trigger 25% for hitting market cap of 25mm, 50mm and 75mm, plus NASDAQ listing. 

 

Management drove the stock into the toilet by making a bad acquisition, which they received a huge bonus for at the time.  They spin off a stub which trades at a depressed level and then issue stock to themselves at 2x earnings net of cash.  Is that acting in shareholder interests or their own?  They get paid when they fail and paid when something good happens.  Good gig.

 

There are better managed companies trading at 8 times earnings than this.

[iambagman]

I want to like this - I owned it for a few minutes and made some money on it.  LSYN has all of the trappings of an overlooked nano cap - jewel that was hidden within a fraud that could rise like a phoenix.  Maybe it all goes down that way - but there is an issue of management taking a lot of the economics between comp and equity issuance. 

 

I kind of made peace with the crony board and management over compensating themselves - and maybe this is a small thing, but I could not let it go.  This company is trying to overcome the stench of fraud because of everything that happened in China that may or may not have been their fault.  Let's put fault aside and just say establishing legitimacy should be important and would improve the multiple. 

 

Here is the address of the auditor they hired - 4397 South Albright Drive, Salt Lake City, UT 84124 - put it in google maps and look at the picture of the office they operate out of.

 

Here is the Audit Oversight board report on the firm - they have 3 clients

 

https://pcaobus.org//Inspections/Reports/Documents/2015-Gregory-LLC.pdf

 

I am not saying that you have to use a big 4 firm, but if you are trying to overcome the stench of fraud and you are totally clean - why would you possibly pick this audit firm??

 

There is a real product here, real customers, a tailwind for podcasts, and a non-demanding valuation which are all great - but if this is anything more than a trade - buyer beware.  Look at the returns for all of the other companies the CEO and CFO have been involved with - their track record is horrible.  You are literally betting that this will be the one - the non zero - and they will let you keep some of the economics - stranger things have happened - but is this the best risk-adjusted bet you can find?

 

 

[Foreign Tuffett]

I want to like this - I owned it for a few minutes and made some money on it.  LSYN has all of the trappings of an overlooked nano cap - jewel that was hidden within a fraud that could rise like a phoenix.  Maybe it all goes down that way - but there is an issue of management taking a lot of the economics between comp and equity issuance. 

 

I kind of made peace with the crony board and management over compensating themselves - and maybe this is a small thing, but I could not let it go.  This company is trying to overcome the stench of fraud because of everything that happened in China that may or may not have been their fault.  Let's put fault aside and just say establishing legitimacy should be important and would improve the multiple. 

 

Here is the address of the auditor they hired - 4397 South Albright Drive, Salt Lake City, UT 84124 - put it in google maps and look at the picture of the office they operate out of.

 

Here is the Audit Oversight board report on the firm - they have 3 clients

 

https://pcaobus.org//Inspections/Reports/Documents/2015-Gregory-LLC.pdf

 

I am not saying that you have to use a big 4 firm, but if you are trying to overcome the stench of fraud and you are totally clean - why would you possibly pick this audit firm??

 

There is a real product here, real customers, a tailwind for podcasts, and a non-demanding valuation which are all great - but if this is anything more than a trade - buyer beware.  Look at the returns for all of the other companies the CEO and CFO have been involved with - their track record is horrible.  You are literally betting that this will be the one - the non zero - and they will let you keep some of the economics - stranger things have happened - but is this the best risk-adjusted bet you can find?

 

Gregory & Associates is the same one man accounting firm that audits Armanino Foods. Odd that of the three "issuer audit" clients Gregory has, two of them have threads on this board.

 

Someone should call Alan Gregory and see if he will make a special guest appearance on the board since he's basically a COBF celebrity at this point.

 

 

 

[Guest Schwab711]

The CEO of AMNF is the father of Robert Pera, CEO of UBNT. AMNF is a really interesting company for the wrong reasons.

[rpadebet]

The CEO of AMNF is the father of Robert Pera, CEO of UBNT. AMNF is a really interesting company for the wrong reasons.

 

Schwab711 could you pls elaborate

[voyager]

I know someone who tried to take this company private.  It's a nice business.  I can confirm that management is a little bit off their rocker though.

[knight933]

*NEW M&A* deal today implies the private market value of LSYN is very likely much higher than the current stock price.

 

Triton was sold for $185M or ~13.2x 2017 EBITDA (EBITDA was $10.5M for 9months of 2017; annualize that gets you to $14M for full year). Compare this to the pro-forma LSYN/Pair Networks which I believe trades at 6.0x 2017 EBITDA (assuming $1.46 stock price, no NOL's, no synergies). I think this is a relevant comp because these are similar businesses in terms of operations, scale, and margins (Triton EBITDA Margins ~35% vs. PF LSYN/Pair ~32%, all $ trailing, with no synergies). If LSYN traded at Triton’s trailing multiple, that would mean an Enterprise Value +121% higher than today. (Yes, stock return would be lower, after factoring in some dilution for mgmt. comp, but you get the point).

 

Background: It was announced this morning on the London Stock Exchange, Audioboom (BOOM.L) will be buying Triton Digital, through a reverse takeover, for US$185 million. While not exactly the same business, Audioboom is probably the only other publicly traded podcasting hosting/services company out there.

 

From the Press Release:

 

Link here: https://audioboomplc.com/wp-content/uploads/2016/04/Statement-re-Potential-Acquisition-and-Suspension-of-Trading-on-AIM-announcement-FINAL.pdf

 

“Launched in 2006 ….the Directors believe Triton to be one of the largest technology and service providers to the online audio industry. Triton’s offering represents a broad suite of audio technology services and tools that support over-the-air, online and on-demand audio publishers.”

 

"Triton’s software as a service based offering includes three main product lines: 1) Audience measurement, 2) streaming platform and services and 3) audience engagement." (Sounds very similar to Liberated)

 

Bottom line: There is a large private-market disconnect with the public price for LSYN, which I expect will close over time when others figure out that this is a real, growing business and they establish some much-needed credibility. I am still trying to learn more about management - I never said this was not a legitimate concern. However, I will admit I am a little less worried about the choice of auditor right now, given this was a TINY company a few years ago, and by most measures, still is a tiny company, so I don't expect everyone to use E&Y. I appreciate everyone's contribution to the message board. Will continue to monitor this as it proceeds, but I think it is hard to lose at $1.50. Obviously others are free to disagree. 

[EricSchleien]

Was anyone from here on the call today?

[knight933]

I realize no one cares about this micro-cap, but just wanted to point out that despite LSYN having a great year, the stock is even cheaper than before due to the high free cash flow generation through the year.

 

I blame the lack of IR from the company and the low liquidity. But this is what micro-cap investors live for. I spoke with the company and they said they did not hold a Q3 conference call because "there was nothing new to say". They were similarly surprised this has traded so weakly, as they said "We thought investors would see the cash build up"

 

https://www.sec.gov/Archives/edgar/data/1667489/000165495418012729/lsyn_10q.htm

 

From Q1 - Q3 (2018), LSYN has generated $5.4M in free cash flow. At $1.30 per share, the entire Enterprise Value today is only $38.1M. (29.7M shares outstanding, cash balance of $9.4M, debt of $8.7M, and not including $50M+ of NOL's). This is a hosting business - they get paid per podcast, not by hours listented or advertising. So revenue has grown QoQ ($5M in Q1, $5.3M Q2, $5.7M Q3).

 

Let's assume zero growth, and annualize the current FCF, you get an est. $7.2M of FCF for 2018. A 19% FCF/Enterprise Value yield is crazy for a business that is still growing, proftiable, sticky customers, no debt, and not in crisis.

 

Am I missing something here?

[valuedontlie]

I like the business quite a bit... I realize many are skeptical on management, can they issue equity to achieve their gross market cap targets for incentive comp?

 

The cash continues to build. One of the things I liked about companies like GDDY and WEB. Wonder how they will spend the money... sounds like M&A a priority but I wonder what they could buy in their core business? I'd like to see them grow organically as the industry continues to expand and then pay out a large dividend with the excess cash. This is highly unlikely though.

 

They'll soon be a cash tax payer as well. Just something to note.

[knight933]

Hi - Thank you for replying:

 

1. It's my understanding that they cannot issue equity to reach the target (although I could be wrong). I think that's doubtful as they would only be diluting their already high insider ownership. Mgmt said they would do a reverse-split in order to uplist to NASDAQ...not sure when that will happen, but I would imagine sometime in 2019.

 

2. Good point on the NOL. Although I think we still have some time...As of Dec-31-2017 they had $18.4M in NOL's. Even with a good 2018, that's at least another year of profits they can shield from taxes. And it will probably take longer since now with corporate tax rate at ~21% vs. ~35%.

 

3. I've been following this for almost a year now and while I totally get the skeptical view of management....for 2018 the company has been pretty clean. They haven't done any big stock grants, or anything out of the ordinary this year. Everything has a price, and so I am just wondering out loud how much of a discount does this deserve to pay for management's past sins with FAB Universal? Cash just builds and builds and builds as you say. That's gotta be worth something.

 

4. They have proved they can grow organically, and more importantly the current cash flows are STICKY. That's what I like the most about it. As for what else could they buy - the podcast hosting landscape is very fragmented. Libsyn (depending how you measure it) is either #1 or #2, but there are at least a dozen or so smaller targets they could go after if they ever wanted to consolidate the space.

 

Good luck to everyone involved.