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$FTLF
Q3 fully diluted EPS of $1.45
YTD fully diluted EPS of $2.63 (9 months)
Share price of c. $16.
Well managed, growing company.
Positive commentary: Dayton Judd, the Company’s Chairman and CEO, commented “The third quarter was one of the strongest in the Company’s history. I am proud of our team and the results they generated in a difficult retail environment. While the fourth quarter is traditionally our slowest, we continue to see increasing demand for our products online and in GNC franchise locations. And in addition to growing organically, we continue to look for opportunities to grow through prudent, accretive acquisitions.”
Very strong quarter by FTLF indeed.
The press release includes a lot of detail which allows you to model the next quarter.
I get to more than $0.5 per share, which is very good considering all the headwinds from COVID-19.
The balance sheet is very strong, also a big plus in this environment.
I have owned shares for several years and sold those today.
This is the second shabby and large related party transaction.
Is the price paid fair? I don't think so. Buying back shares seems a way better way to deploy the capital.
After the Matrix transaction I requested the "independent" fair value assessment. They were not willing to share it. Also, gross margin didn't improve (it even detoriated) while it should have improved significantly due to the Matrix deal.
New 52 week highs for FTLF. Now at $14 per share trading at c. 7 times earnings.
The prospects for continued growth look pretty solid, in summary:
Offline:
- Product launch in Walmart in Oct '19
- Rebranding of NDS brand this quarter, and Sirenlabs in 2020, the rebranding of PMD in YTD19 had a positive impact on sales
Online:
- YTD19 the Company launched 1 online exclusive product
- Q4 '19 the Company added 2 online exclusive products with more to come in 2020
- In November, a new E-commerce manager was hired to support further online sales growth
Recently the company bought back a significant amount of shares at c. $12.50 per share.
The repurchases, combined with the above, still makes me believe that there is significant upside.
Thanks! Q3 and especially Q4 are indeed seasonally slower.
I think that the stock remains really cheap, even after the 30% run up.
The stock trades at a PE<6 with several areas of potential growth:
- Further online sales growth (the company introduced a new online only product in october which grew to one of the top rankend products quickly).
- additional sales via Walmart, if succesful could open the door to add more products
- Small acquisitions (I believe that there are plenty of sub-scale competities)
The 10Q also shows that current shares outstanding are 77k lower, than the number used in the EPS calculation of Q3.
With regard to illiquidity risks, I agree that this can be managed by position size. It is also my experience that highly liquid stocks quickly re-rate with bad news and therefor not always provide the opportunity to sell with a limited loss.
FTLF volume of 50k shares today (c. 12% of remaining float). Last week they posted an 8-K which showed that they:
- Repurchased c. 42k shares
- Increased the share repurchase program from $0.5m to $1m
- Entered a new credit agreement for a $2.5m loan at LIBOR + 2.75% and paid off $0.6m in loans at 9%
All quite bullish IMO.
Proper earnings indeed. They forgot to update the share count in the P&L. They bought the shares at an attractive price.
I still don't trust the owners. The drop in margins is even worse if you consider that they bought Matrix (a related party) which should have increased margins significantly. I still suspect the owners that they bought Matrix at a way too high price.
FTLF CEO Dayton Judd bought another 48,000 shares (c. 4% of shares outstanding) at $9.75 per share. His latest purchases were at $8.50 per share. Q2 earnings to be released next week.
The reduction in backlog is all low margin CAATS revenue (less than half the GM of other revenue). I don’t Expect margins to go back to Q1 levels.
ORBT increased earnings (excl. impact of deferred tax asset) from $0.05 per share in Q2 2018 to $0.16 per share in Q2 2019. Based on further comments from management the business seems to be doing good. Buyback program once again further increased. No love from the market (yet?).
The CEO of FTLF bought another 4.1% of fully diluted shares outstanding at $8.50 per share.
https://www.sec.gov/Archives/edgar/data/1374328/000141588919000827/xslF345X03/form4-07102019_030709.xml
This company's financial control is a joke, which is very dangerous. They might do very well operationally, but if you cannot trust the figures you are basically gambling.
Apart from the major difference in performance as mentioned by ORCA, a 1 min scan also shows that they forgot to include details on the $6m line of credit. Understanding the conditions of this line of credit is super relevant in my opinion.
And also if a 1 min scan reveals this, this tells us something about their financial people.
I suggest to read the following section: Management’s Report on Internal Control Over Financial Reporting in the Q1 filing.
I believe management to be promotional. Earlier this year they communicated a full year revenue target of 15-20m. Let's see what they will achieve.
Anyway, it remains a very interesting opportunity with potentially a very good risk / reward. I will remain on the sideline until I can trust the presented figures.
Volume in FTLF is picking up a bit. This undiscovered turnaround still presents a very compelling risk/reward in my opinion. They did $1 in earnings in Q1 and can easily do more than $2 per share in FY19. If they will do so a share price of $20 should be achievable in my opinion.
Shares returned to the low $9's after shortly hitting $11 after the Q1 report.
Based on some KPIs I am measuring (e.g. amount of feedback on Amazon) Q2 online sales should be comparable to Q1.
I wrote a Seeking Alpha piece a couple of weeks ago, before the Q1 results, further detailing the turnaround and return to growth.
https://seekingalpha.com/article/4263434-fitlife-brands-show-full-turnaround-impact
I just submitted an article to Seeking Alpha about Fitlife Brands (FTLF/FTLFD). They are about to report Q1 2019 financials, most likely on May 15 or 16. The article will hopefully be released prior to the release of Q1 results.
Q1 is their seasonally strongest quarter which will show the full effect of turnaround measures implemented in 2018. They also indicated in their last press release that they returned to revenue growth and that they provide a breakdown into wholesale and online revenue for the first time. This to me indicates that online sales have become material.
I believe that they are able to post $0.50 per share in Q1 2019 and ~$1.50 for the full year (2018 margins, 10% yoy revenue growth, current run-rate operating expenses). If they decide to invest more resources in the build up of ecommerce capabilities this might be a bit lower.
Also from the latest 10-K: Management also believes that its focus on developing its ecommerce capabilities will drive additional incremental sales in the short-term, while yielding substantial benefits in the longer-term.
The company implemented a reverse/forward stock split on April 16 in which they cashed out minority shareholders at the volume weighted average trading price of the last 5 days. In my opinion a very aggresive and minority shareholder unfriendly move by the CEO to buy back shares at a low price before posting good results. Normally these cash-outs happen at a premium with a fairness opinion of a independent company. Based on comments from the CEO I believe that they bought back ~9% of shares in this reverse/forward stock split.
Indeed. Online sales continue to growth and they will split it out in the Q1-19 financials. Really curious how much revenue they have generated via the online channel.
They also just revamped their website and now sell all products at one place. www.fitlifebrands.com, looks way better than all the individual brand websites.
We need an activist to push for a dividend / buyback / improved transparency. Without any improvements on the above it can remain undervalued for a very long period.
I am most worried about a potential other related party acquisition like the Matrix one a couple of years ago.
It is indeed unusual, but not the first time for this company. They skipped 2 quarterly reports in 2013 without explaining why.
Anyway - this behaviour by management explains the current valuation. I still hold a small position.
Normal shareholder communication and a tiny dividend would easily double the share price IMO. However, these is no reason to believe this will happen anytime soon.
Did you manage to get in contact with the company?
FTLF CEO bought > 1M shares a couple of days ago. This on top of a lot of buying in 2018. He also replaced the factoring agreement by a personnel loan recently. I can’t remember the last time I saw such strong conviction by insiders. Combined with growing EPS (0.07 over the last 3Q) and a share price under 0.50 this really looks like a no-brainer.
Customer concentration risk with GNC, which is somewhat troubled, remains. So would never make it a very large position.
Also the next quarter (Q4) is seasonally weak.
PFHO now trading at an ex-cash PE multiple < 5. CEO continues to buy shares (at a slow pace, which makes sense with the low liquidity).
No immediate catalyst. Just cheap.
What do you think about the 17m in accounts receivable? > 200 days sales outstanding. Could be an indicator of clients with payment problems and result in large write-offs.
Exactly, will there be more deals and was the matrix deal fair? Which I believe it wasn’t. We should have seen improvement in cogs as % of revenue because of this deal and that is not the case. I don’t trust them until they provide clarity.
FTLF Impressive quarter, 3.3ct EPS versus -4.6ct last year and 1.5ct in the previous quarter. CEO bought another significant amount of shares in a private placement on top of all the open market purchases. At too favourable terms though in my opinion. Expect a good day tomorrow.
FTLF You don't get the opportunity often to buy into a turnaround story where the cost base has already been rightsized and growth seems around the corner for a run-rate PE of ~6 (at a share price of 0.50).
The CEO continues to buy shares (for prices up to $0.50 recently). This share purchase program was activitated on the 28th of September. It won't surprise me if they post good nr's in November.
It remains a position with a high risk profile due to the large customer concentration and the competitive industry of nutrition supplements.
FTLF - share price 0.50 USD
Pro's:
- Recent return to profitability with 0.04 EPS in last 6 months
- Start of omni-channel strategy with promising early results on Amazon
- Significant insider buying of new CEO
- CEO also owns far out the money options/preferred stock and is thereby well incentivized
Con's:
- High customer concentration
- Very competitive market
I have a small position in this company. There is one major issue which is holding me back from adding to my position. That is a large related party transaction (acquisition of Matrix in 2016) of which I am not sure the purchase price paid was fair.
The acquisition of Matrix should have reduced cost of goods sold significantly as AYSI paid Matrix fees on goods purchased (3.3m USD in FY15 and 1.7m USD in FY16).
However, cost of goods sold (as % of revenue) increased by >60% compared to FY15. I asked the CFO for an explanation but haven't received an answer so far.
ORBT - continues to buy back shares (new program for another 2.8% of shares outstanding) and continues to grow earnings. Record high back-log. Revenue from new contracts will start in 2 quarters.
Some background on the purchases: https://alphavulture.com/2014/12/20/betting-against-biglari/
Does anyone know what the debt looks like?
What is the amount, what is the interest %, what % is convertible and at what prices etc.?
Forgot to mention that there is no press release about the contract award yet. They share all significant wins via press releases.
ORBT
Orbit International has been awarded a 22m USD IDIQ contract by the navy of which 12M has already been obligated.
The company has a very healthy balance sheet, bought back 13% of shares so far this year and has significant operating leverage.
A very good risk/reward IMO.
https://investmentlonglist.com/2017/09/18/orbit-internationals-operating-leverage-part-2/
Amazing that it is not trading higher!
Thinking about adding, but not sure due to high customer concentration.
750k shares bought by an insider
TKOI worth checking. 50% of market cap in cash. Fast growing company in internet of things market. Expect profitability by year end. Significant insider buying.
One not so patient seller, selling 50k shares in a minute.
If sold over a week or two he/she would probably have saved quite some money.
Indeed, seems very undervalued. However, a couple of uncertainties prevent me from making it a large position.
The deal is subject to adjustments such as working capital adjustments. Each 1m USD change is very significant on the value / share.
They also haven't explained to the public what they will do next. Will they return the cash to shareholders?
Anyway, the risk reward is very good here. Downside is not fully protected IMO.
ORBT buys back 3.8% of shares in one week. Continues to repurchase shares. Wins a new order on an already record backlog. There cost base is much lower than a couple of years ago (consolidation of manufacturing facilities and some other cost cutting). If they manage to increase revenue by a bit, the operating leverage will result in a good boost to EPS.
Management is very conservative. They have been looking for acquisitions for quite some time now and passed all because they had to bid too much. They are currently looking at 2 targets for an EBITDA multiple between 3 and 4 if I remember correctly (NobleCon presentation Jan 2017). They have the intention to integrate the operations of potential acquisitions in their own manufacturing facility which operates at 70% utilization.
60% of the company is owned by officers and directors. I wouldn't spend cash on a sinking ship if I was in their position, but rather sell/liquidate the company. Anyway, just my view.
Approximately 35.1% of the Company’s revenues were attributable to this agreement with IBM in the year ended December 31, 2016.
Pretty material.
I don't think they will recover from this customer loss. Even taking into account potential cost savings of a de-listing isn't enough to cover this customer loss. A delisting would whipe out a lot of cash because of all the arbitrageurs.
If I was the owner/operator I would cancel the reverse split and go for a liquidation. Recent customer losses (IBM is not the first big loss) show that their product just isn't good enough.
I believe that there is a good possibility that the reverse split will be cancelled for above reasons.
In a liquidation scenario 30 cents is the max.