SIF - I share other's disappointment in the bottom line for the 4th quarter. It was positive to see revenues increase to about a $100 million annual run rate, though I was anticipating better profitability. It's certainly possible that it was a "kitchen sink" type quarter, looking to start a clean slate for fiscal year 2024, but that is just speculation on my part. I have not sold any of the shares I have, but at the same time, I will not be buying any more until we see some improvement to the bottom line.
The company's balance sheet continues to be a problem, with the elevated debt levels, they need to operate profitably quickly if they have any chance of digging out. While I am not a fan of the Silk $3 million loan given the high interest rate and closing fee, it was likely needed in order to get the senior lender to amend their credit agreement further and extend the maturity date until October 2024. It looks like Mr. Silk also needed to personally guarantee the senior debt, in exchange for a guarantee fee of $760k.
I'm willing to give them another quarter or two to show progress towards achieving a $5 million EBITDA year. With the backlog they have in place, its certainly possible to see $105+ million in revenue in FY 2024. A 5% EBITDA margin is certainly achievable (they averaged 9%+ in 2010-2020).
If they're able to generate that level of earnings, it should put them in position to refinance the debt when it all comes due in October 2024. They also own their 280,000 square foot facility in Cleveland. which could be worth as much as $40-$50 per sq foot, or $11-$14 million. I'm surprised they haven't looked at potentially monetizing this asset to help improve the balance sheet.
