Author Topic: LSYN - Liberated Syndication  (Read 5768 times)

knight933

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Re: LSYN - Liberated Syndication
« Reply #20 on: February 13, 2018, 10:56:31 AM »
*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.   


Og

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Re: LSYN - Liberated Syndication
« Reply #21 on: April 05, 2018, 11:53:15 AM »
Was anyone from here on the call today?

knight933

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Re: LSYN - 5x FCF, net cash, ~30% EBITDA margins, asset light – Any takers?
« Reply #22 on: December 21, 2018, 09:03:23 AM »
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

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Re: LSYN - Liberated Syndication
« Reply #23 on: December 21, 2018, 10:43:09 AM »
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

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Re: LSYN - Liberated Syndication
« Reply #24 on: December 21, 2018, 11:05:21 AM »
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.

Schwab711

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Re: LSYN - Liberated Syndication
« Reply #25 on: December 21, 2018, 11:57:02 AM »
https://www.thestreet.com/story/12189340/1/ceo-with-uncanny-timing-takes-a-shine-to-a-penny-stock.html

As writser said previously, management is sketchy. The stock will always have a material discount so long as the current CEO remains at the helm. It's uninvestable to many.

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.

valuedontlie

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Re: LSYN - Liberated Syndication
« Reply #26 on: December 21, 2018, 12:05:15 PM »
https://www.thestreet.com/story/12189340/1/ceo-with-uncanny-timing-takes-a-shine-to-a-penny-stock.html

As writser said previously, management is sketchy. The stock will always have a material discount so long as the current CEO remains at the helm. It's uninvestable to many.

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.

I don't disagree... many have said the same of BBX and things there have gone (fairly) well... this is a better business and I do think cash will build quickly... as mentioned, my biggest concern is management issuing shares in an attempt to game their incentive comp... anyway, this seems like a name worth watching at the least...

stockspinoffinvesting

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Re: LSYN - Liberated Syndication
« Reply #27 on: December 21, 2018, 01:39:22 PM »
I've followed this one for a long time and owned it from $0.44 to $1.57. I sold after the Pair acquisition.  Here were my thoughts at the time:
https://stockspinoffinvesting.com/lsyn-closing-out-position-with-257-gain/

I am closely watching it and am tempted again, but don't think I will bite.

A couple thoughts for people who aren't as familiar with the story.

1. Management and the board of directors issued themselves 6.25 million shares of restricted stock in 2017, diluting equity holders by 30%! Some of the awards were tied to an eventual NASDAQ up-listing and some were tied to split adjusted share price targets but 2.7 million shares issued earlier in the year were tied to market cap goals which looked good at first blush but can be easily achieved by issuing additional restricted stock for equity compensation (which management did later in the year) and by issuing shares to make an acquisition (LSYN issued 1.6MM shares as part of financing for Pair).  Management hasn't issued themselves any shares in 2018, but I would bet that the share issuances continue in 2019 and 2020. So expect more dilution. Also, if the restricted stocks grants expire because targets aren't hit, management will just issue themselves additional restricted stock grants. Finally because management and the board of directors owns over 20% of the company (even though they didn't buy a single share in the open market), they have effective control of the company and activist involvement would be difficult.

2. You should think of the LSYN management team as anti-outsiders. They will make terrible capital allocation decisions and are focused on additional acquisitions. I attended the 2017 annual meeting and the CEO Spencer told me he wanted to get back to being a $200MM revenue company. He is an empire builder and he wants to build his company back up. His last company Fab Universal collapsed after a fraud was exposed. That means lots of acquisitions. The Pair acquisition wasn't a disaster but it is a much worse business than Podcast hosting. Prior to the Pair acquisition, I estimate that LSYN, a 20%+ revenue growth pure play podcasting company with ~40% EBITDA margins was trading at 6.7x '18 EBITDA. It was a steal. After the acquisition, the pro-forma company (LSYN + Pair) was trading at 6.9x '18 EBITDA. LSYN should have done a massive share buyback instead of buying Pair. Currently, the stock is trading at 5.4x '18 EBITDA. So definitely cheap. But this year, Pair revenue declines are offsetting podcast revenue growth, so net net, we are seeing no growth. Further, Spencer will make additional questionable acquisitions which will continue to dilute the exposure to the podcasting market.

On the Q2 conference call, Spencer said he is on the hunt for more acquisitions. Here's the replay:
https://www.investornetwork.com/event/presentation/37193?utm_campaign=in-migration&utm_source=ic








Foreign Tuffett

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Re: LSYN - Liberated Syndication
« Reply #28 on: December 21, 2018, 02:03:58 PM »
I've followed this one for a long time and owned it from $0.44 to $1.57. I sold after the Pair acquisition.  Here were my thoughts at the time:
https://stockspinoffinvesting.com/lsyn-closing-out-position-with-257-gain/

I am closely watching it and am tempted again, but don't think I will bite.

A couple thoughts for people who aren't as familiar with the story.

1. Management and the board of directors issued themselves 6.25 million shares of restricted stock in 2017, diluting equity holders by 30%! Some of the awards were tied to an eventual NASDAQ up-listing and some were tied to split adjusted share price targets but 2.7 million shares issued earlier in the year were tied to market cap goals which looked good at first blush but can be easily achieved by issuing additional restricted stock for equity compensation (which management did later in the year) and by issuing shares to make an acquisition (LSYN issued 1.6MM shares as part of financing for Pair).  Management hasn't issued themselves any shares in 2018, but I would bet that the share issuances continue in 2019 and 2020. So expect more dilution. Also, if the restricted stocks grants expire because targets aren't hit, management will just issue themselves additional restricted stock grants. Finally because management and the board of directors owns over 20% of the company (even though they didn't buy a single share in the open market), they have effective control of the company and activist involvement would be difficult.

2. You should think of the LSYN management team as anti-outsiders. They will make terrible capital allocation decisions and are focused on additional acquisitions. I attended the 2017 annual meeting and the CEO Spencer told me he wanted to get back to being a $200MM revenue company. He is an empire builder and he wants to build his company back up. His last company Fab Universal collapsed after a fraud was exposed. That means lots of acquisitions. The Pair acquisition wasn't a disaster but it is a much worse business than Podcast hosting. Prior to the Pair acquisition, I estimate that LSYN, a 20%+ revenue growth pure play podcasting company with ~40% EBITDA margins was trading at 6.7x '18 EBITDA. It was a steal. After the acquisition, the pro-forma company (LSYN + Pair) was trading at 6.9x '18 EBITDA. LSYN should have done a massive share buyback instead of buying Pair. Currently, the stock is trading at 5.4x '18 EBITDA. So definitely cheap. But this year, Pair revenue declines are offsetting podcast revenue growth, so net net, we are seeing no growth. Further, Spencer will make additional questionable acquisitions which will continue to dilute the exposure to the podcasting market.

On the Q2 conference call, Spencer said he is on the hunt for more acquisitions. Here's the replay:
https://www.investornetwork.com/event/presentation/37193?utm_campaign=in-migration&utm_source=ic

Thank you for taking the time to write that, it's very helpful.

knight933

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Re: LSYN - Liberated Syndication - New 13D, Camac reports 5.2% activist stake
« Reply #29 on: January 09, 2019, 10:14:00 AM »
Looks like someone else has realized how absurdly cheap this micro-cap had become. Yesterday, a 13D was filed as Camac Partners took their stake in LSYN over 5%. In the filing, they specifically referenced their concern with corporate governance, mgmt compensation and how best to utilize all of that cash flow - all common concerns to the bear thesis.

https://www.sec.gov/Archives/edgar/data/1516478/000114036119000583/formsc13d.htm

"The Reporting Persons intend to review their investments in the Issuer on a periodic basis and may from time to time engage in communications and discussions with management and the Board of Directors of the Issuer (the "Board") and other stockholders of the Issuer concerning, among other things, Board composition and corporate governance, appropriate compensation levels of management and the Board, and the proper utilization of cash flow."

The 13D was triggered now as more shares were purchased during the first week of January (~43K shares traded on Jan 3rd and 7th at about $1.34). The fund obviously must have owned the majority of its stake well before this time. Stock currently near that price today.

Does anyone know Camac, or what is their style? The PM looks to be formerly of Kingstown Capital, which itself came out of Gotham Ctapial a while back, so I figure this PM is probably special-situations focused.

Regardless, I take this as a positive development and a sign that the valuation (5x - 6x FCF) had become far too punitive for what is fundamentally a great business, with a not-so-great CEO/Board.