RE:Conversation ? It is very simple. Patents expire. WiLans Crown Jewels were expiring. Instead of taking the cash from the crown jewel payments and replenishing patents they took the cash to buy ITS companies and to continue to fund a bloated corporate team.
They put $63 Million into IRD (including a $20M premium) and $75M of equity into ETC and $75M of debt (including $100M premium to what Align Capital paid just one year before).
Only $138M of equity was put into these ITS firms. The big issue is the huge overpayment ($125 of acquisition premiums), especially when you see that these firms currently lose money. They would get nowhere near what they paid for it if they tried to sell now. Take a look at what has happened to Rekor.
If the last quarter's burn rate sustains, they have 475 days of cash left based on my count.
And they aren't operating with urgency. Cash makes people lazy. The best cost takeout program is a $3M goal by the end of next year. That is virtually nothing and doesn't even offset one quarter inflation of SG&A. They need to be hacking hard at the cost base and eliminating 50-75% of corporate.
So should you hold or should you sell? That is up to you. But, if this is a long recession, they will run out of cash before the patent sale completes as it took more than two years for Blackberry - and that still failed! Or you have to believe that the supply chain issues and inflation will subside quickly and IRD and ETC will grow exceptionally. But no one knows anything about these forms and the situation. Management completely duped everyone as ETC and IRD are in real trouble, missing revenue targets by a mile and delivering negative EBITDA. ETC had to pay a customer a fee last quarter for some unexplained reason. That doesn't sound like a strong firm. And how can you trust management when they haven't delivered anything close to what they promised?
And all bets are off if there is a Taiwan escalation. The key inputs into IRD and ETC sensors and products or semiconductors that will take a while to find a new set of suppliers - and at much higher costs.
As I previously reported roads and bridges cost 50-60% more in one year more than offsetting the infrastructure program support. The toll cost per mile are so exorbitant for new highways and bridges I don't see governments tolling their constituents.
And there is nothing like an Apple settlement Hail Mary in the WiLan litigation pipeline. There are only a few defendants left. The only one with significance is Micron, but if they take that all the way to a jury trial and then an appeal, the company doesn't have enough cash to see the result. And a judge could deliver a fatal blow with his pen in signing a SJ of non infringement in a couple of weeks.
The key point at the last quarters call was that Kidd nervously read the scripted remarks that last years forecast could become reality if the macroeconomic picture improves.
Hope is the strategy. Not taking action and cutting costs. Hoping for a buyer looking for chaff. Hoping for the Ukraine war to end. Hoping for oil to collapse. Hoping for a district judge to support a patent troll.
Here is a hint. Don't look at EBITDA, don't listen to forecasts. Don't read misleading press releases mentioning things will follow due course (due course took blackberry more than two years). Look at the cash flow. Cash flow doesn't lie. That is where your answer is.
Some people on this board think they will make it to the other side of this recession. Unless there is dramatic action in the cards, I don't see how they make it.