RE:I dig deeptamaracktop wrote: My case arguing that Xebec's multiples should increase markedly is very strong.
The discount to book value and the depressed EV/Sales multiple are warped by a misguided market.
Let's compare the highlights of Xebec's press release announcing Q1 with Greenlane's release, warts and all....
Xebec: Revenues of $41.2 million compared to $20.6 million
Greenlane: Revenue of $16.3 million, a 33% increase over the $12.2 million reported in the first quarter of 2021.
Xebec: Gross margin of $4.6 million (11%) compared to $4.2 million (20%)
Greenlane: Gross profit of $3.6 million, gross margin (gross profit excluding amortization) of $4.0 million (25% of revenue).
Xebec: Adjusted EBITDA of ($9.0) million compared to ($4.9) million
Greenlane: Adjusted EBITDA of $0.03 million1.
(Please note that here Greenlane makes some adjustments in arriving at their ebitda as detailed in the appendages to financial statements. Xebec doesn't)
Xebec: Backlog of $260.5 million on May 11, 2022 compared to $88.5 million on May 12, 2021
Greenlane: Sales order backlog2 of $35.7 million as at March 31, 2022.
Xebec: No mention of " Sales pipeline"
Greenlane: Sales pipeline3 valued at over $900 million as at March 31, 2022.
( look at note 3 attached to Greenlane's financials. )
Xebec: As at March 31, 2022 the company had $34.7 million of cash and restricted cash
Greenlane: Cash and cash equivalents of $23.1 million and no debt, other than payables and bonding resulting from normal course operations, as at March 31, 2022.
Xebec: Working capital of $66.6 million on March 31, 2022 for a current ratio of 1.83:1, compared to working capital of $82.1 million and a current ratio of 1.96:1 on December 31, 2021
Greenlane: Greenlane doesn't highlight or mention their working capital in their press release
I found the omission of any mention of Greenlane's working capital odd, so I took a closer look at their financials than I had previously.
Greenlane shows current assets before deferred taxes, property and equipment, intangibles, and goodwill of $55,193,000
The same exclusions make Xebec's equivalent number $147,242,000
I would suggest Greenlane is in far more need of financing than is Xebec.
As well, Greenlane doesn't have the powerful financial partners that Xebec does in the way of the Fonds and the CDPQ.
There's also a solid case that Xebec is in a much better position to improve margins than Greenlane is.
Xebec has far more fat to trim.
Far more redundancies have resulted from far more acquisitions.
It astounds me that Xebec trades at .481 times book value while Greenlane trades at 1.895 times book.
Xebec is sadly lacking in market respect vs Greenlane by almost any metric to an extent that isn't warranted by even the absolute worst-case scenario.
New low on Greenlane today
Nothing against Greenlane, it's the market we're in.
Very likely best to do nothing at all in this market, but Xebec's discount to book is hard to overlook.
Greenlane is tradiing at 1.842 X book value, Xebec at .492 X.
Notwithstanding Greenlane's skinny working capital and apparent lack of credit facilities in place,
another reason I expect to see a financing from Greenlane before anything from Xebec.
Some might consider dodging the 30-day superficial-loss rule by changing horses from Greenlane to Xebec.
A tax-loss carryforward won't hurt anyone when the bear ends.
Could always be wrong of course, but I see this as a good tact in the long run.
Of course, some might decide to go the other way.
I can't see much advantage in that.