Self-Introduction From GrizzlyRock

[Green King]

10+ year life is from management estimate. Management has extensive experience in the direct-response-advertising industry so I give them the benefit of the doubt.  Secondly, based on quarterly run-off data investors can get a sense for the life cycles of customer segments (in the report)

 

Liberator is nothing like Netflix - that is a straw man argument. Liberator provides device manufacturers another way to sell product in the B-to-C market place. Liberator's model is direct-response customer acquisition. Liberator owns the customer relationship.

Thank you for your response

 

Sorry If i miss worded my questions. I just wanted to know how wrong i was. Since there is only 3 10-k so far.  So how did you test it to get the 10 years life? I would like to learn how one do that ? Based on past customer consumption patterns and the life span of the technology ? Not trying to be passive aggressiveness or anything. I've just started learning the Craft and i am just learning. So don't know much. I am just asking questions so i can bond the investments correctly.

 

If this is not Netflix than it can be Geico which can be a home run.  I just try to learn the difference through your analysis. Just trying to learn i don't know much and mean no offence.

 

Cheers

 

(trying to make this not sound passive aggressive but i don't know how. Trust me i am a good person.)

:)

 

[GrizzlyRock]

Perhaps I came on a little strong. Let me try to talk from a higher level.

 

Liberator is a good business (definitely not weak and not great per se) in a good industry trading at an an insanely inexpensive valuation. Given the size of its current segment, Liberator will not be able to compound equity at double digits rates forever without address markets other than urological products.  However, it will be able to grow at a run rate of mid-single digits annually while providing substantially higher margins than they are currently showing.  The sensitive nature of the product also helps a direct-response advertiser vis-a-vis buying at a drug store.

 

I wouldn't put it in Geico territory due to only a fair moat (customer relationships) and limited market size.  I also wouldn't put them in the Netflix box as Liberator owns the customer relationship.  While the product (catheters for Liberator and content for Netflix) is made by other firms, Liberator is the delivery mechanism for the product while Netflix doesn't own the delivery either (uses telco / cable infrastructure to deliver content). As such, Liberator should return a fair ROA on the intangible customer acquisition lists.

 

In regards to your question about length of customer relationship some estimation is required if you choose not to believe management's commentary.  Look at the chart at the top of page 5. This graphical representation of quarterly revenue was derived from me breaking down their chart from page 11 of the most recent 10-K.  Let's analyze the 2008 vintage. This vintage generated roughly 10% less revenue in 2012 than it did in 2011.  These customers have been around for 4 years and still generating $9.3 million of revenue for Liberator. If they lost $1.5 million each year hereafter (way more than they lost last year) if would take another 6 years to fully expire this customer tranche giving a total life of 10 years.

[LC]

Let's analyze the 2008 vintage

I prefer their '06 cabernet. Sorry, couldn't help myself!

 

But I believe the calculation is:

 

Take year 2 revenue. This comprises Year 1 revenue + New Revenue - Lost customers. I believe management provides new revenue, therefore you can derive the amount of revenue attributed to the lost customers and therefore the percentage of non-recurring customers. Do this over the course of the data to get a general sense of retention rates.

 

[Green King]

Thanks for the explanation

I didn't Feel comfortable trusting the management after reading the wall street transcript interview.

 

I will take a second look.

[bookie71]

FYI

LBMH to be taken out at 3.35

https://finance.yahoo.com/news/liberator-medical-holdings-acquired-c-122434482.html