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David heads the daily operations of Clear Research and oversees marketing strategy. David sits on the Board of Directors at Research Connect. Before joining Clear Research, David was CEO of DAGA, LLC, where he headed the design and development of an online social network. David also has... More
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  • E-Learning Contenders: Blackboard and Renaissance Learning Inc. Comparison

    February 23, 2010

    This article, as well as other stock reports is available for download when you sign up for a free 4-month membership with CR Investor. If you would like a free trial membership, please email me at For more information, please visit

    If you are in school, or recently graduated, you are probably familiar with educational software applications. One of the more popular ones in the United States is Blackboard Inc (NasdaqGS:BBBB). What most people do not realize are the potential investing opportunities in this growing industry.

    E-Learning basically concentrates to learning that is facilitated and supported via information and communications technology (ICT). E-Learning is a broad set of applications and processes which include web-based learning, computer-based learning, virtual classrooms, and digital. Much of this is delivered via the Internet, intranets, audio- and videotape, satellite broadcast, interactive TV, and CD-ROM. The definition of e-Learning varies depending on the organization and how it is used, but basically it involves electronic means of communication, education, and training. Distance and e-Learning programs are becoming more and more vital in the world of higher education. Through the use of new technological resources, e-Learning programs make it possible for more people to reach their educational goals. 

    As education continues to evolve, as does software used to accompany it. The 3 key U.S. companies in this sector are Plato Learning, Inc. (NasdaqGM:TUTR), Renaissance Learning Inc. (NasdaqGS:RLRN), and Blackboard Inc (NasdaqGS:BBBB).  A quick glance at revenue from 2004 to 2009 would indicate that Blackboard is the clear winner in terms of size and overall market penetration.

    When EBITDA is taken into consideration, the investment thesis of each company become more prominent and discriminatory. The clear winner of the three when considering EBITDA margin is Renaissance Learning Inc.

    It becomes immediately obvious that the companies with a clear potential for growth are Blackboard and Renaissance Learning. But the analysis should not stop here, especially with such a diverse and changing market available to both companies. Consider each of the main contender’s strategy

    The competitive advantage of RLRN lies in an intelligent and interactive technique to evaluate the user’s interest in the products. It’s product primarily consists of Accelerated Reader*, STAR Reading, STAR Early Literacy and Read Now Power Up! The company’s flagship product, ‘Accelerated Reader’, tracks the amount of reading practice achieved by calculating points based on the length and difficulty of the book. The ‘Renaissance Place’ platform meets the needs of district-wide installations such as: scalability, remote access, centralized database and server for multiple campus use, sophisticated statistical analysis, ease of administration and support, and integration with student data from other district systems. ‘Renaissance Place’ products are sold primarily on a subscription typically for terms of one year. The company also offers a full line of professional services to it’s customers. It’s services include support plans for software solutions, technical services, product training and multiple professional development options. The Training and Professional Development services provide leadership development opportunities, instruct educators in proven best practices to enhance their curriculum and instruction, and inform educators on how to most effectively use the products and the information they generate. Nearly all service categories achieved growth, with the largest increases in the remote technical services, primarily hosting and installations.

    Blackboard provides collaboration software to educational institutions, which makes it easy for institutions to adopt it’s tools, giving the company an advantage in winning new customers. It’s Blackboard Learning System can be integrated with complementary software tools already in use. The company’s policy of providing a hosted option enhances its software management efficiency, in which the software is installed at Blackboard's own premises and faculty and students gain access to it over the Internet. Operating margins in Blackboard have improved during the last five years because the company has increased its volume of business with existing customers by selling upgrades and cross-selling. The hosted learning management solution offering increased significantly, with the total number of hosted customers increasing 19% year over year to 678. The company has also adopted inorganic growth route to increase market share. In May-09, the company acquired ANGEL Learning, a leading developer of e-Learning software for the U.S. education industry. The integration may accelerate the pace of innovation and interoperability in e-Learning. It has also ventured into mobile e-education business through the acquisition of business assets of Terriblyclever Design. It’s Blackboard Mobile platform offers comprehensive suite of mobile Web applications for education and enables educational institutions to deliver education and campus life services and content to mobile devices to connect students, parents, faculty, prospective students and alumni to the campus experience. Blackboard’s solutions are largely sold by its direct sales force, which is comprised of two groups: (1) a new sales group (regional sales managers) focused on generating/qualifying new leads and closing sales with new customers and (2) an existing customer sales group focused on renewals and generating follow-on business with the company’s established relationships. In order to re-align its products to cutting edge technology, in Jan-09 the company launched Blackboard 9.0, its next-generation version of its e-Learning solution. The new release represents a more open, flexible standards as well as a redesigned, highly customizable user interface. Enhanced functionality includes Web 2.0 and social learning tools and enhanced notification capabilities.

    There are several other aspects that are worth looking at for both Blackboard and Renaissance.

     First is liabilities. The debt levels are vastly different for each company. Renaissance has no debt; Blackboard is highly leveraged with $156.2 million in debt, and a debt-to-equity ratio of 47.1%. There is a very big different between the two companies. In this situation though, there is another liability that should be considered - Unearned Revenue. The loser in Unearned Revenue is still Blackboard $56.7 million in unearned revenue, while Renaissance has only $7.56 million. The COGS associated with that unearned revenue should also be considered. The average 5-year COGS margin for Blackboard is about 29.4%, Renaissance is 21.1%. Of these two key companies Blackboard has a lot of debt, and a significantly higher cost of unearned revenue than Renaissance. Blackboard is also a significantly larger company, but Renaissance has a much cleaner and healthier balance sheet.  An ironic situation indeed. Is there an investment opportunity here? Difficult to say without considering EPS and multiples.

    Both companies have similar EPS stories. Both Blackboard and Renaissance have had some very volatile EPS numbers over the last 5 years, and both have come back pretty close to where they were 5 years ago as well. Who is better of using EPS? It still seems like Renaissance is giving you more bang for your buck.

    The last item being looked at is the EV/EBIDTA multiple of Blackboard and Renaissance. Both are trading at about 50% to 60% to their high in Sept 2008.

    Ultimately Renaissance appears to be the stronger pick, but is it worthy of actual investment. The company is doing very well for the most part, but is not that cheap in terms of key multiples. The stock appears to be ready to offer some nice returns but looks as though it lacks a strong margin of safety. Are you going to lose money it? Probably not. Are you going to make a 50% return? Doubt it. But overall the stock seems to have a clear potential for some great returns.  


    This article, as well as other stock reports is available for download when you sign up for a free 4-month membership with CR Investor. If you would like a free trial membership, please email me at For more information, please visit


    Thank You for being with CR Investor!



    David Raskin



    Disclosure: No positions held in any companies mentioned
    Feb 23 6:08 PM | Link | Comment!
  • Q3 2009 TCG Industries (TGE) discussion of earnings

    I just had the chance to review the Q3 2009 transcript and the 8-K for TGE. I am still waiting for the 10-Q to be filed.


    In essence, all hell broke loose and the company took it right on the chin. TGE saw its revenue decline by 25.4% vs. Q3 2008 and EBITDA decreased 86.3% vs.  Q3 2008 ouch L


    In my wildest dreams I would have not expected EBITDA to decrease so significantly.


    The table below highlights the quarter:


    Ugly results. Think about that for a moment - the company’s EBITDA decreased by 86.3%.  I will say it one more time, EBITDA decreased by 86.3%. Wow, that’s ugly. The stock subsequently took a bath.  However, let’s briefly discuss the key highlights of the quarter.


    • The poor results in the top-line led to the company operating with four crews for the entire third quarter which kept utilization high. Revenue per a crew was roughly $4.0 million, which is good.
    • The company was able to produce $5.8 million in cash flow from operations. The 10-Q is not available, but I assume that most of the cash flow came from collecting on A/R since the A/R number is down significantly from the prior quarter.
    • The company was able to reduce long-term debt to $7.6 million from $8.4 million in June. Debt reduction is always good. We can learn a lesson here folks with our own credit cards.
    • The company is very excited about the Eagle Canada Inc. acquisition. The company believes this acquisition improved their overall strategic position within the seismic industry, and furthermore gave them entry into the Canadian market. More so, this makes the company more leveraged to oil markets vs. natural gas. More on this later.   
      • The acquisition gives the company exposure to 3C data acquisition technology, which is useful for the Canadian oil sands.
      • Exposure to a new client base of  Potash Mining Companies,
      • The company believes the acquisition should start contributing to earnings in 2010. We think so too, but we want to wait and see.


    Management has demonstrated the ability to manage working capital.  Cash on the balance sheet sits at $34 million.  The fact that they were able to reduce debt is impressive given they were operating in a very difficult market.


    The company had a tough quarter. This is due to a number of factors. The most glaring is that the company is levered to the wrong commodity - natural gas and not oil. Also, a full blown price war is taking place and the company’s margins have taken a hit. It’s funny how companies start acting irrational in difficult markets. This is actually a good thing because competitors of TGE do not have as strong of a capital position as TGE does, and this impacts them even more. This should allow TGE to easily capitalize on any upcoming opportunities.  


    Management stated that commodity prices have impacted the company quite significantly, and we believe this to be true.  The price of natural gas is currently at $3.29 (Wellhead price). A year ago this commodity was priced at $8.74.

    The price of oil is starting to recover and is starting to enter into the sweet zone in terms of price stability.

    In the long-term, the government sees higher oil and natural gas prices. I agree that this will occur. A number of alternative energy projects were abandoned during the current economic crisis and I am confident that emerging counties such as China and India will require more energy which will result in supply shortages and higher energy prices.


    This leads us back to the Eagle Canada acquisition. I really feel that this acquisition makes a lot of sense. During the earnings call, management indicated that the company has the ability to operate five crews but is only currently operating 2 in Canada. Each crew does roughly $4 million in business.  The Eagle Canada acquisition gives the company additional leverage to oil prices which I like. More so this gives the company international exposure.  In essence, I think the acquisition was smart and I see very little downside.


    So where does this put TGE as in terms of an investment?


    First I just want to let everyone know that myself and the team looks at a number of different outcomes. Ultimately a base case scenario is used.


    Here is the breakdown of the first nine months of operations vs. our 2009 Projections.

    The company will most likely hit the top-line number but remain doubtful about the bottom line especially given the latest results.


    Therefore, the base case projections were significantly adjusted to ensure a strong margin of safety.


    Projected expenses were raised and I expect no EBIT and EBITDA contribution for Q4. The likely hood of this occurring is minimal though but I wanted to be in the safe side. Furthermore, the required expected return was raised to 15%.


    The result is a new price target of $7.25. This is a reduction of 16.2% from the original price target. This represents an upside of 58.3% from our buy in price of $4.58. The stock is currently trading at $4.13 (11.04.09) which represents an upside of 75.5%. For those who have not opened a position, today’s stock price looks very attractive. We are currently thinking about adding up additional shares at today’s price.


    Key Thoughts:


    Oil prices have steadily increased in 2009 and trade at roughly $78 to $80 a barrel as of 11.4.09.


    The company has performed better for the first 9 months of 2009 vs. 2008. Also, the first half of 2009 was simply unbelievable.


    Don’t panic. One bad quarter means nothing in the long run. The key is to focus on the business and not the stock price. TGE operates in a very important industry. We own the best pure player in the seismic industry. The only reason we were able to gain such an attractive entry price is due to uncertainty, and the fact that the market is focusing on the short-term and not long-term outlook. Real money is made when one is able to disconnect themselves from all the noise and focus on the future outlook.


    If you are interested in these type of ideas please visit or e-mail me at


    Alexis Evidente

    Nov 09 8:26 PM | Link | Comment!
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