Author Topic: CMPR - Cimpress  (Read 78765 times)

kab60

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Re: CMPR - Cimpress
« Reply #160 on: March 12, 2020, 02:14:15 PM »
I am, but I don't think it's all that cheap when one considers leverage, their poor execution and lack of growth... So many other things seems priced so that one should make quiet a bit of money if/when we get to the other side of this coronavirus thing (not talking Airlines...).


KCLarkin

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Re: CMPR - Cimpress
« Reply #161 on: March 12, 2020, 06:41:57 PM »
Their customers are small businesses that will get killed if there are prolonged quarantines. But if not, it is pretty cheap.

flesh

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Re: CMPR - Cimpress
« Reply #162 on: March 23, 2020, 10:45:43 AM »
Time to kill cmpr, selling at 45/share.... 6 year low. 5x ttm eps. Tell me how CMPR goes bk. Please.

kab60

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Re: CMPR - Cimpress
« Reply #163 on: March 23, 2020, 11:05:00 AM »
EBITDA craters, they trip covenants, vulture HY investors refuse to give them a waiver? What do you think about their leverage? Aren't they pretty close to their covenants before zombie apocalypse hit?

kab60

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Re: CMPR - Cimpress
« Reply #164 on: March 31, 2020, 12:12:23 PM »
Bonds trade around 82. Can these Guys somehow NOT trip their covenants? Generally I think most viable Companies will get a waiver from their banks when they trip convenants due to coronavirus, but not sure whether things are as straightforward with bond investors. Does anyone have a take on that?

Gregmal

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Re: CMPR - Cimpress
« Reply #165 on: March 31, 2020, 01:06:27 PM »
This is a situation ripe for some jerk off fund like Aurelius Capital. I wouldn't touch. You can have a ton of relief from good actors, but all it takes is one greedy scumbag with lack of a moral compass to really put one of these companies in a bad spot.

kab60

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Re: CMPR - Cimpress
« Reply #166 on: March 31, 2020, 01:12:29 PM »
This is a situation ripe for some jerk off fund like Aurelius Capital. I wouldn't touch. You can have a ton of relief from good actors, but all it takes is one greedy scumbag with lack of a moral compass to really put one of these companies in a bad spot.
Yeah, that is what nags me somewhat. And that Cimpress blew a ton of money on buybacks around 125 which kept leverage close to covenants... These Guys and capital allocation is a pretty sorry sight. They say all the right things, I am sure intentions are good, and then they just fumble- again and again. At least they owe up to their mistakes. And they have obviously done some right things recently.

widenthemoat

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Re: CMPR - Cimpress
« Reply #167 on: March 31, 2020, 03:36:08 PM »
Their current total leverage ratio is 2.9x compared to a maximum of 4.75x (senior secured is 2.1x compared to a max of 3.25x). Based on my numbers, assuming they did not need to draw down on their revolver to get through this crisis (this analysis completely falls apart if they did), LTM EBITDA would need to drop to $300m (~35% in one quarter) to trip their senior secured covenants. At face value, a 35% drop is not a whole lot of cushion - especially with a complete economic shutdown this quarter (maybe even longer). I think itís important to understand two things here:

1) The covenants are based on TTM EBITDA and the cost structure is highly variable:

Based on my figures, TTM EBITDA as of 12/31/19 was ~$460m. Historically speaking, ~80% of EBITDA is earned in Q4 - Q2, so we can assume that ~$370m of EBITDA has been earned this year from Q4 - Q2. This means that Q3 EBITDA will need to drop to -$70m before their senior secured covenants are tripped. Again, this seems very possible in this environment, but lets run the numbers anyways.

Q3 revenue was ~$660m in 2019, so let's assume that drops 40% and gross margin also contracts to 40% (50% historically). That leaves us with $160m of gross profit. Operating costs (inclusive of depreciation and amortization) have historically run at about $280m per quarter. That leaves us with a $120m operating loss. Add back depreciation and amortization of $45m and youíre now at EBITDA of -$75m for the quarter. Management has historically estimated that $225m of annual operating expenses are growth investments, which is roughly 10% of revenue, or ~$60m for Q3. Add back half of this to be conservative and we are now at -$45m, just barely within covenants.

About a year ago the CFO walked through a similar analysis:

Quote
Our total gross leverage at the end of last quarter was 3.21x our trailing 12-month EBITDA. So just for simplicity, let's just assume that in the following quarter we didn't generate any free cash flow that we could use to pay down our debt, net debt 3.21x total gross leverage, for us to reach or breach our maintenance covenant of 4.75x, which, of course, we would never want to get close to, in the following quarter, we would have to have our trailing 12-month EBITDA drop by about 27%. If you assume -- every dollar of EBITDA decrease also increases our debt balance. We feel that a drop of that magnitude in our trailing 12-month EBITDA in one quarter is more than enough room to work with given 9 of the 12 months of that calculation are already known. And that's because to have such a drop in our trailing 12-month EBITDA that would mean that the actual percentage drop for that quarter would, of course, be far higher. Given the amount of discretionary investment that we have, coupled with the amount of time to respond, we believe this gives us many options to deal with the type of, again, "very adverse scenario" that the person who asked the question is asking about.

2) Management is extremely incentivized to avoid a covenant default:

This company has essentially been Robert Keaneís life work and the vast majority of his net worth is tied up in the equity. Additionally, the Board of Directors all have substantial equity exposure. This is no basis to make an investment decision on, but I have total confidence that management will be scratching and clawing to save the equity at all costs. This is not the case for every company, so it is worth mentioning and in my view very important.

Iíll be the first to admit - this is way too close for my personal comfort. Iím posting these numbers as a sanity check and to get everyone's thoughts.

Thanks,
Dan

widenthemoat

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Re: CMPR - Cimpress
« Reply #168 on: March 31, 2020, 05:24:35 PM »
Their current total leverage ratio is 2.9x compared to a maximum of 4.75x (senior secured is 2.1x compared to a max of 3.25x). Based on my numbers, assuming they did not need to draw down on their revolver to get through this crisis (this analysis completely falls apart if they did), LTM EBITDA would need to drop to $300m (~35% in one quarter) to trip their senior secured covenants. At face value, a 35% drop is not a whole lot of cushion - especially with a complete economic shutdown this quarter (maybe even longer). I think itís important to understand two things here:

1) The covenants are based on TTM EBITDA and the cost structure is highly variable:

Based on my figures, TTM EBITDA as of 12/31/19 was ~$460m. Historically speaking, ~80% of EBITDA is earned in Q4 - Q2, so we can assume that ~$370m of EBITDA has been earned this year from Q4 - Q2. This means that Q3 EBITDA will need to drop to -$70m before their senior secured covenants are tripped. Again, this seems very possible in this environment, but lets run the numbers anyways.

Q3 revenue was ~$660m in 2019, so let's assume that drops 40% and gross margin also contracts to 40% (50% historically). That leaves us with $160m of gross profit. Operating costs (inclusive of depreciation and amortization) have historically run at about $280m per quarter. That leaves us with a $120m operating loss. Add back depreciation and amortization of $45m and youíre now at EBITDA of -$75m for the quarter. Management has historically estimated that $225m of annual operating expenses are growth investments, which is roughly 10% of revenue, or ~$60m for Q3. Add back half of this to be conservative and we are now at -$45m, just barely within covenants.

About a year ago the CFO walked through a similar analysis:

Quote
Our total gross leverage at the end of last quarter was 3.21x our trailing 12-month EBITDA. So just for simplicity, let's just assume that in the following quarter we didn't generate any free cash flow that we could use to pay down our debt, net debt 3.21x total gross leverage, for us to reach or breach our maintenance covenant of 4.75x, which, of course, we would never want to get close to, in the following quarter, we would have to have our trailing 12-month EBITDA drop by about 27%. If you assume -- every dollar of EBITDA decrease also increases our debt balance. We feel that a drop of that magnitude in our trailing 12-month EBITDA in one quarter is more than enough room to work with given 9 of the 12 months of that calculation are already known. And that's because to have such a drop in our trailing 12-month EBITDA that would mean that the actual percentage drop for that quarter would, of course, be far higher. Given the amount of discretionary investment that we have, coupled with the amount of time to respond, we believe this gives us many options to deal with the type of, again, "very adverse scenario" that the person who asked the question is asking about.

2) Management is extremely incentivized to avoid a covenant default:

This company has essentially been Robert Keaneís life work and the vast majority of his net worth is tied up in the equity. Additionally, the Board of Directors all have substantial equity exposure. This is no basis to make an investment decision on, but I have total confidence that management will be scratching and clawing to save the equity at all costs. This is not the case for every company, so it is worth mentioning and in my view very important.

Iíll be the first to admit - this is way too close for my personal comfort. Iím posting these numbers as a sanity check and to get everyone's thoughts.

Thanks,
Dan

The more I think about this, they probably already had January and February numbers baked in for the quarter prior to the economic standstill. What am I missing here? I know this is only a short term band-aid and if this is prolonged they will certainly have issues, but it seems to me they should be fine on covenants this quarter no?

KCLarkin

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Re: CMPR - Cimpress
« Reply #169 on: April 01, 2020, 06:58:05 AM »
If they were in danger of tripping covenants, they would be doing massive layoffs already. They are fortunate that they had a few good quarters to boost their TTM. Bigger issue is that their business takes a long time to recover. Too early to tell. But either way, they should be able to raise debt/equity to avoid default.