Seeking Alpha

moneymcbags'  Instablog

moneymcbags
Send Message
Money McBags is the preeminent financial humorist and money maker in the world. While known for his ability to find and invest in undervalued equities, Mr. McBags is also a world class dick joke teller, an aficionado of lovely ladies, and avid reader of books without pictures in them. With... More
My blog:
When Genius Prevailed
  • Small Company Update: KITD Rolls Up a Joint Acquisition

    One of Money McBags’ favorite little companies, KITD, got their acquisition on again yesterday and bought a pu pu platter of video asset management technology companies in a flurry of transactions that surprised Money McBags more than protesters surprised the Egyptian government or this answer surprised the game show world (and Money McBags was surprised because he was expecting one big acquisition, not three separate ones).  KITD announced that for ~$77M they acquired Kyte, Kewego, and Kick Apps in their new strategy of buying only companies that start with the letter K (which means Kara’s Adult Playground is likely eagerly waiting by their phone, and google that one for yourself).

     

    But before Money McBags gets to the analysis, he has to give the company props for finally shoehorning the term “cloud” into their business description by calling themselves “a leading global provider of cloud-based video asset management solutions” (and seriously, Money McBags believes it is the first time they have used the word “cloud” in their business description based on his due diligence of looking at their last two releases).  Like the term “internet” in the 1990s, “LBO” in the 1980s, or “Key Party” in the 1970s, adding the word “cloud” to your business plan is worth at least 3 multiple points, so well f*cking done.  With just the flick of a pen, KITD has increased their value by ~$120MM.

     

    Anyway, since their transcript is not yet up, Money McBags did what he vowed never to do again (and he doesn’t mean a fat chick, because he can make no such promises, you hear that Crystal Renn?) and that was to listen to the conference call, so you all should thank him for wasting 70 minutes and 2 seconds of his life so you won’t have to do it yourselves (and Kaleil, you know Money McBags loves you and everything in the most heterosexual of ways, but dude, you bought three dinky little companies to fold in to what you do, you didn’t create cold fusion or figure out how to get a money shot in to lesbian porn, so really, no need to be so f*cking garrulous.  Seriously, after 10 minutes of a conference call most investors are so engrossed in Spider Solitaire that they are more tuned out than Jonathan Knight at a Rick’s Cabaret, so can you think about the kids next time?  Jeesh, it looks like Money McBags picked the wrong week to quit sniffing glue).

     

    Anyway, without further ado (and as always, Money McBags has no idea what “ado” is, but he is glad there will be no further of it), here are Money McBags thoughts on the acquisition/call:

     

    1. This isn’t even the transformative transaction:  That’s right, KITD raised ~$100MM in equity a couple of months ago for a big transaction, and this isn’t it, so holy f*cking sh*t.  A ~$520MM market cap company ($13.75 share price x 38MM shares now) dropping $77MM on an acquisition that isn’t transformative is quite an interesting thing (though not as interesting as this thing).   So Money McBags guesses this is just a slight transformation, like moving to a gaff, whereas the “transformative” acquisition to come will be like going for the full on nut slicing.

     

    2.  The deal seems kind of expensive:  ~$77MM (plus $4MM in earnouts) for ~$25MM in revenues (growing between 20% and 35%) so ~3x trailing revenues and with 24% EBITDA margins, that equates to ~13x revenue to EBITDA (and at 13x revenue to EBITDA, KITD would be worth somewhere between a lot and a f*cking lot, but yes, revenue/EV is a more full of sh*t way to value a company than a DCF model, but whatever).  After the last equity raise, CEO Kaleil Tuzman said he hoped to buy ~$50MM to $60MM of revenue with the ~$100MM they raised (and they still have the cash for that deal), but based on the multiples here, Money McBags wonders if that is still possible (he also wonders if it is still possible to fix his flux capacitor to go back in time and switch himself at birth with Andy Roddick, so take it for what it is worth).

     

    3.  As always, you can’t spell “dilution” without KITD: Ok, you can, but lets pretend it is a silent K.  In the deal, they are paying ~$14MM in cash and ~$62MM in stock which equates to 4.6MM more shares coming on to the market (there will now be ~37.9MM total shares), so yippe ki-yay, shareholders now own 10% less of the company.  Sure the deals are supposed to be accretive, so we can take some solace in that, but there is just something that Money McBags finds a bit off-putting in CEO Tuzman promising they won’t add more shares again after every time KITD raises equity, and then before the 8K has had time to get hidden deep in the bowels of Free Edgar, KITD is issuing more shares.  Money McBags now has one easy way to figure out if KITD will raise shares, if Kaleil Tuzman’s lips are moving, he’s diluting.

     

    4.  They are getting some more management talent by appointing Alex Blum, the CEO of Kick Apps, as their new global COO.  It was a bit hard to hear Mr. Tuzman’s ballwashing of his former AOL and JumpTV crony Alex Blum over the hum of the Xerox machine in the background as Thomas Wittig furiously ran off copies of his reusme, but it sounds like Mr. Blum will tap in to his experience of having led some kind of product strategy at AOL (and we all know how successful AOL was with the products they developed, like dial-up internet, and um, they had that dial-up internet thing too) to help guide KITD’s operations.

     

    5.  Kick Apps was the the kick ass part of this transaction:  From what Money McBags understood, and again, he had to listen to the call as he had no transcript so he spent minutes 20 through 40 oscillating between deep sleep and wondering why Bristol Palin was uninvited to sex week (because if Money McBags were having a sex week, the first thing he would do is invite every girl who put out at age 16), Kick Apps is basically a cool as sh*t mobile platform that helps combine video with social networking so all of your friends can enjoy your dickflashing.  Kick Apps somehow allows social reaction to video, including commenting, sharing, embedding, and other built in social features (perhaps pointing and laughing and constructive criticism).  KITD paid ~$45MM for this piece which had only $12MM trailing 12 month revenue but this sounds like more of a technology acquisition than KITD’s usual geographic or customer-based acquisition.  Social media video is apparently growing a sh*t ton faster than regular video (duh) and what they called the enterprise social software industry is supposed to be ~$1B next year, so KITD management seemed pretty jazzed up by this company.  That said, it wasn’t clear that Kick Apps will be accretive day one, which is rare for a KITD acquisition, so Money McBags hopes Kick Apps’ platform can form the peanut butter to KITD’s chocolate (or the brazilian wax to KITD’s vagina) and thus enhance the overall offering.

     

    6.  Kewego and Kyte do something too.  To be honest, this is where Money McBags was 100% focused on wondering why he never tried out for the swim team, so he caught like every fifth word, but these two companies seem like the typical KITD acquisitions.  Paying a little under...READ THE REST AT THE AWARD WINNING WHEN GENIUS PREVAILED.

    Tags: KITD
    Feb 01 9:36 AM | Link | Comment!
  • A Visit From St. Bernanke

    Twas the night before Christmas, when all through the White House

    Not a politician was stirring, not even a louse;

    The economy was flung by Timmy without care,

    In hopes that St. Bernanke soon would be there;


    The regulators were nestled all snug in their beds,

    While visions of trannies danced in their heads;

    And Obama in his ‘kerchief, listening to his rap,

    Had just started contemplating the US debt trap;


    When out on the lawn there arose such a clatter,

    Tea partiers? Femen? What was the matter?

    Away to the window Obama flew like TARP cash,

    Which even Kashkari now admits was too rash.


    The buffoon with the breasts, you know the dodo

    Was heard in the back, cackling on her fake news show,

    When, what to Bill Clinton's wandering eyes should appear,

    But a man with no toupee, who loved to interfere,


    This bald little man, who kept the economy in the tank,

    Obama knew in a moment, it must be St. Bernank.

    More rapid than quant easings his governors they came,

    And he whistled, and shouted, and called them by name.


    "Now Dudley! now, Bullard! now, Tarullo and Yellen!

    On, Duke! On, Raskin! Leave Hoenig, don't tell him!

    To the top of the press! We hear the call!

    Print money! Print money! Print money for all!"



    The policies of Keynes they say will certainly fly,

    And if it meets with an obstacle, make Greenspan the fall guy.

    So up to the money printing press, the governors they flew,

    The sleigh full of jobless; Goldman bonuses too.


    And then, with a crashing, Obama heard on the roof,

    The crumbling of Fannie Mae, gone with a poof.

    As Obama drew in his head, PIIGS falling all around,

    Down the chimney St. Bernanke came, holding interest rates cockposterously down.


    He brought a wealth transfer, the middle class under foot,

    But hoped to keep the market rising with the Bernanke put;

    A bundle of papers he had flung on his back,

    Shares of Netflix and Apple, T-Bills in a stack.



    His policies confounded, his balance sheet so scary!

    Mortgages under foreclosure, tax payers be wary!

    His droll bankster friends, who thought up CDOs,

    Could be heard partying in back, with their lobbyist hos.


    Fillings of gold he held tight in his teeth,

    While visions of Japan circled his head like a wreath.

    He had a currency to debase, it was said on the Telly,

    And lucky for taxpayers, a bowlful of jelly!


    The economy he would hump, like another old elf,

    And Obama laughed when he saw him, as if he sold an AIG shelf!

    A wink of his eye and a nod to the Fed,

    Mo' money, mo' money, mo' money to dread.


    He spiked the yield curve, claiming that surely will work,

    And created moral hazard for banks, what a fucking jerk.

    And laying his middle finger aside of his nose,

    And laughing at the suckers, up the printing press he rose!


    He sprang to his sleigh, to his team gave a whistle,

    And away they all flew, giving common sense a dismissal.

    But Obama heard him exclaim, ‘ere he drove out of sight,

    "Buy the fucking dip, and it all will be right!"



    Money McBags has plenty more at the award winning When Genius Prevailed...



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: This poem kicks the shit out of anything on your site.Hugs,Money McBags
    Tags: GS
    Dec 22 10:09 AM | Link | Comment!
  • Small Company Update: KIRK Off So Much That Market May Go Blind

    Oh KIRK, you schlock-teasing little minx.  Money McBags has defended you over the past few quarters as an undervalued gem (like the delightful, and yet soon to be overvalued Hayley Atwell thanks to her role in the upcoming Captain America movie) as you seduced him with your expanding margins, your bouncing back sales, and your new real estate strategy.  Yet all you have done since then is go down on him in ways more painful than a snaggle toothed Amy Winehouse with mangled braces and a severe case of mouth herpes.


    In the history of the award winning When Genius Prevailed, Money McBags has only been wrong about a stock like this on 2 or 3 occasions (and yeah Money McBags is looking at you IBKR), so it is time to reevaluate, say our mea culpas, and wish very bad things on everyone in the Southeast who failed to buy a wine bottle tart burner (and Money McBags isn't just puzzled that he recommended a company that sells something called a "wine bottle tart burner," but also that according to the link, the tart and burner in the "wine bottle tart burner" are sold separately.).


    So where has it all gone so wrong?  Is it the fact that in this economy people no longer feel that buying statues of pedophiliac giraffes is a status symbol or is it that KIRK's improved margins and management changes were just a fata morgana mirage (as opposed to a fatty Morganna massage)?  Money McBags is trying not to take it personally, but KIRK has assraped his poor earnings model to the point where it has imploded on it self in a mass circular reference.


    So Money McBags will attempt to objectively take a look at KIRK's quarter and see if the business can fool him for a third time (though to be fair, KIRK did way outperform Money McBags' worst case scenario after last Q in which he thought the stock was cheap, so the 18% sell off feels more overdone than Heidi Montag's face or dong shots on chatroulette).


    The Positives:


    1.  Net Sales were up .4%. Ok, this is positive in the same way that learning that your health insurance company is going to be picking up a higher percentage of your AZT prescriptions is positive (because either way, you will still fucking have AIDS) as it screams pyrrhic victory with same store sales down, discounting up, and pseudo competitor PIR putting up 11% comp sales last Q (they report this Q in a few weeks).  But up sales are better than down sales Money McBags guesses.


    2.  New stores still going strong. This is one of Money McBags' drivers for liking the stock as they have been moving out of their expensive shitty mall locations (where they were getting way too much traffic from people simply trying to find the mall's glory hole) and in to cheaper, better located off-mall stores.  So this is something we can feel good about, especially as they plan on opening 38 new stores (net 20ish) in 2010 and grow store count by ~10% in 2011.  The benefits of this strategy show up as store occupancy costs decreased by 77 bps, so good on them.


    3. EPS was positive. They earned $.11 per share, only $.01 below analyst guesses and only 50% less than last year's eps (so um, scratch that last one as a positive).


    4.  They still have a fuckload of cash. $60MM to be exact and they are forecasting $85MM for the end of the year.  With a current market cap of ~$220MM, that is a hella nice cushion, even nicer than the cushion on their Cheetah bar stool or Jessica Simpson.


    5.  Malin Akerman will be taking over the role of Linda Lovelace from Lindsay Lohan in the upcoming biopic.  This has nothing to do with KIRK, but we can all agree it is very positive as Ms. Akerman is quite an upgrade.


    Negatives (and this may take a while):


    1.  On average, fewer people were buying shit and at lower prices. Comp store sales were down 2.4% despite a 6% uptick in traffic which lead to 1.6% more transactions but a lower average ticket price as their conversion rates dropped despite increased discounting.  This is a more worrisome trend than people on reality shows thinking they have talent (and Money McBags has no idea who that person is but watching 1 minute of that caused his tympanic cavity to more than tym-fucking-panic).  KIRK said a few of their categories which had been fueling growth showed declines such as their Art category because $70 pictures of Santa Claus are somehow falling behind spending on food, clothing, and well, anything fucking else in consumer's hierarchy of needs.  They say they are working on this, but not being aligned with customer trends and needs is bad fucking news.


    2.  Gross margins were not just gross, put bordering on disgusting.  Gross margin were down from 41.1% in Q3 last year to 38.8%. with 200bps of it due to higher inbound freight costs.  Though inbound freight costs weren't the scariest part of the rise, rather it was that...


    3.  Markdowns were up. As mentioned in #1 above, they had to reduce prices to get shit out the door.  To Money McBags, this is the most worrisome event because if they are not offering a compelling item or if consumer trends have passed them by, no amount of cost cutting, new store openings, or half off merchandise can fix this.  And this has been one of the core positives of Money McBags' thesis.  With staycations increasing faster than Kate Middleton's bank account, people should be buying little trinkets for their homes to make those long days waiting in the unemployment lines feel special.  So even though poor people (KIRK's target market) are still fucking poor and not spending on shit, the middle class is trading down which has caused an uptick in sales at dollar stores, Target, McDonald's, and Tara Reid's pants.


    The point is, Money McBags thought that part of the middle class trade down would involve buying some of the cheap tchotchkes KIRK sells but apparently becoming poorer doesn't affect taste as much as Money McBags thought.  So while the middle class is struggling, perhaps pineapple doormats just aren't the thing to cheer them up.  This is something very important to which to pay attention to because if KIRK can't get the trade down crowd, they may be in for a rough next few quarters.


    4.  Operating expenses were up, profitability was down. Operating expenses rose from $26.8MM to $29MM due to higher marketing costs (which is a bad thing since that extra marketing spend seemed to be less effective than any of Lyndon LaRouche's presidential runs) and more transactions using credit/debit cards (which may be positive as a sign that the middle class is trading down).  All in, combined with the gross margin deleveraging, this led to operating income down from 8% of sales to 3.8% of sales and eps down from $.23 to $.11.


    6.  Guidance sucked dick (not that there is anything wrong with that for Money McBags' vagina challenged brothers), but it didn't just suck any dick, it sucked a scabies infested donkey dick.  Full year 2010 guidance was reduced from 4% to 6% top line growth to 2% to 4% topline growth (which implies mid to high single digit sales DECLINE in Q4, so fuck you very much) and Q4 operating margins forecast to be down 350 to 450 bps.  EPS guidance was given as....READ MORE INCLUDING VALUATION AT THE AWARD WINNING WHEN GENIUS PREVAILED......

    Disclosure: No Position
    Tags: KIRK
    Nov 22 9:29 PM | Link | Comment!
Full index of posts »
Latest Followers

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.