ADF Group Inc T.DRX

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[retiredcf]

In response to multiple questions. GLTA

Revenue was $107.4M, well ahead of estimates of $91M. EPS was 47c vs 16c last year (34c estimate). Revenue rose 34%. Gross margin went to 29.2% from 16.8% in the prior period. Backlog was $427.5M not including $90M announced after the quarter. EBITDA was $23.1M, up 130% ahead of estimates of $17.2M. DRX announced intention to double the dividend. The company is buying back 3M shares. Results are very strong and commentary wqas quite positive. The buyback is essentially insiders selling to the company, with shares to be cancelled. Insiders have indicated they do not intend to sell more, and considering the 404% gain over the past year of course the insiders have much more dollar exposure to the company than they did a year ago and we are entirely comfortable with this plan. 
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Instead of buying back shares, would it not have been better for the company insiders to sell some of their shares to increase liquidity?

It could be debated. With the company buying the shares earnings leverage (per share) increases, and with a buyback the 'sting' of insider selling is reduced. Management is likely still confident on growth and specifically noted the company currently has too much cash, so the buyback makes some sense to us versus increasing liquidity. 
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And finally, a likely reason for current weakness was a negative article written in Simply Wall Street. 

The author has been negative on DRX for some time. It is true that cash flow was lower in the Q1 versus the prior year. But the reason for this is a large increase in accounts receivables, and contract liabilities. It also paid down debt which hurt cash flow. The receivables relate to a very big increase in sales ($27M higher) and do need to be watched to ensure that customers pay their bills on time. But because of the high growth we would not consider it a red flag unless receivables become an issue (not being paid) over the subsequent three quarters. We do not think it is correct to simply assume there is a problem, when the 'problem' is high growth. (5iResearch)

[matt2018]

I believe the negative investor reaction is not from buying the shares but not allocating the buyback equally between both classes of shares. I realize the earnings per share leverage is the same but only 500k of the 2.7M shares were the SVS. If you take out 1.35M shares from both the MVS & the SVS, it removes bigger chunk of the trading shares and makes the trading float tighter. I am

[smartmoni]

Simply Wall Streets article makes no sense whatsover. if they have been negative on DRX for a while, then they seriously should have their heads examined. The share price has gone from $4 to $20 in less than a year...and much more to come! Its normal that AR increases on the BS as sales increase 27M. They should enroll in a basic Accounting course. When a company pays down debt, it should not be