5 Comments

Great cash pile. But they're burning through that cash like crazy. I don't think it offers much downside on a forward-looking basis

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Did you see their RIF, though? Hopefully they can get expenses under control to get to FCF breakeven.

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I did. But for a business that small, a reorganization can tough. A lot of uncertainty.

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This sounds great and as you say, the cash protects the downside. But is the target price realistic? 13x EBITDA is a) well above MONY 9.4x fwd / NRDS 7.5x fwd which could need justification b) at such narrow EBITDA margins, would there even be real profits/cash flows (there's probably SBC, some capex even if they expense software, office leases not in EBITDA, etc.). Maybe there's something about their markets which prevents a properly-profitable lead-gen website working?

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Hey Ex-L. Thanks for the comments!

A few thoughts on this. So, the 5-10% EBITDA margin target is what they think they can be at in 12-18 months, so not necessarily mature margins. MONY, for instance, is at 30% EBITDA margins, while Nerdwallet is at 20%. Also, both of these companies grew really fast during COVID, so they are going through a period where growth has slowed to MSD. So, if MNY can keep putting up these growth numbers, 13x EBITDA doesn't strike me as a crazy multiple. SBC did look a bit high in 2023 ($7m or so), but it's not clear how they will compensate their team now that they are public. Cap software costs were ~$2m in 2023, but that was a step down from 2022/2021, so unclear if they will level out there or a bit higher.

I think the point, more so, is that 0.2 ev/sales is not the right multiple for the business. If you think this biz is worth more like ~8x EBITDA, then that would imply a 0.6 EV/sales multiple., and more like a $3 stock.

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