ldiamond's  Instablog

They went from having 9.62mm in tangible equity at the end of last quarter to having -26.54mm in tangible equity at the end of this quarter. 

Where did the 36mm go?  They bought back 38.41mm of shares last quarter.

We knew about 20mm of share repurchases from MSD Capital, but the other 18mm was something of a big increase over previous quarters.  They've had a habit of buying back shares, but they've come to a new method of buying back shares - issuing debt in order to do it.

They've never had long term debt before, and generally never run debt for more than a quarter or two.  This is a change of behavior for the firm, and something that investors should be paying attention to.  Now they're a company that is beginning to leverage themselves in an environment where they acknowledge the customers are taking longer to sign contracts.

The receivables were fine, the accrued expenses were not.  They ran up 40.88mm of expenses, and in the past four quarters their high point was 26.11mm.  Their cash is stretched and they have to pay their accrued expenses and debt back sometime.

None of my clients have this in their portfolios, and I dont think I'll be adding it anytime soon.  They're at 20.50 as I write this, with a 52 week high of 22.19.  This company does not deserve a P/E of 30.27 right now. 

Give credit to MSD Capital for lightening up here.  They still own 3mm shares.  The firm cant simply buy them all back with their cash flow and that would take a while to liquidate with an average share volume of 192k.

If management were to reduce the accrued expenses and the debt, it would make me feel better about committing client funds to this firm.  I'd like to see positive tangible equity as well.  Considering how the US has slower growth prospects compared to other countries, international diversification would be nice to see too.

Who's on the board here?
John M Yeaman - Chairman of the Board
John S Marr - President and CEO
Donald R Brattain
J Luther King
G Stuart Reeves
Michael D Richards
Dustin R Womble

Nobody on this board seems to have anything objectionable in their past


Disclosure: No position in TYL. No client positions in TYL.