Simple Takeaway - Distribution Scale Hi folks,
Lots of moving parts in this business; however, my key takeaway is that the distribution network and supporting infrastructure is in place; however, Knight needs to push more volume through in order to get the economies of scale needed to generate sufficient operating income margins.
Simply, move more volume (at the right margin) through the existing network.
Management is providing guidance for 14% to 15% EBITDA margins; however, this target needs to evolve to be high teens.
I don't know how they view the market share of Knights products but it would be good to get some better insight around that. They did mention that the generic business is facing competition; however, I haven't been able to get a sense of whether or not they feel they are achieving the right levels of market share. Please comment if I have missed something.
We need some movement from the business development team this year. The market is undoubtedly providing opportunities given interest rates and credit tightening. Does anyone have any insight into M8 or others? Conceptually, loans previously done at mid-teen rates when interest rates were ultra low would now be priced at the high-teens to low 20's.
Best of luck,
LR