7/9/2010 Midafternoon Report: Investors get excited and take off their shorts to allow long exposure to grow

It's a quiet day newswise and thus the market is deader than the Cleveland Cavaliers as it awaits the start of earnings season next week.  Dominating the news today are non-financial matters like LeBron James betraying his home town team (and Cavs owner Dan Gilbert is said to have slept with his johnson in a freezer as he has promised revenge and literally believes in the old adage that it is a dish best served cold), the US and Russia are trading captured spies (and it's a good thing Money McBags never ran in to accused spy Anna Chapman because he would have spilled his state secrets right to her face, and her chest), and as always, Hannah Hilton remains retired.

The only US macro data released today was slightly positive (unless you actually read the release and not just the headline) as wholesale inventories rose by .5%, though that will likely be revised downward like last month's number (and every other data point released in the past two years) which was revised down from .4% to .2%.  The good news is that the inventory to sales ratio is only 1.14 which is near a record low, the bad news is that people aren't buying shit because they don't have jobs and their money is becoming more worthless by the day.  While the headlines tout the increase in wholesale inventories (which is mildly positive), they bury the part about wholesale sales decreasing by .3%, and yes Money McBags understands the difference between a leading indicator and a lagging indicator, but this is the first decline in over a year so is likely the reason why inventories to sales remain so low (ie. the people in charge of stocking up see sales slumping in the future and thus are keeping inventories thinner than OJ's alibi or an Olsen twin) .

Internationally, other than a sumo wrestling gambling scandal throwing Japan in to a tizzy (and Money McBags would hate to be the officer in charge of the cavity searches in that case), news remains light.  Jean-Claude Trichet was out talking again about the EU's financial crisis and he said that it is too early to claim the crisis is over, that bank stress tests should help the recovery process (wink, wink), and that there needs to be stricter penalties for countries who ignore the EU's deficit limits such as having to move to Latvia, having to hand copy the entire novel Pride and Prejudice while listening to the melodic soul singing of Celine Dion, and having all pictures of Zita Gorog taken away.  Most interestingly, Monsieur Trichet maintained that austerity measures and cutting government spending will not hinder economic growth thereby figuratively pissing on John Maynard Keynes' ashes and Paul Krugman's soul (though Krugman clearly sold his soul to Mephistopheles years ago as it is the only way to explain his ascent to NYTimes columnist).

In the market, China renewed Google's license to operate in the country instead of revoking it or simply giving it to Sum Dum Gai.  Google could have been forced to shut down their chinese operations but instead they will continue to allow users to opt-in to receive either censored or NSFW uncensored search results.  In other news, RIMM is rocketing up today as NTP has filed a lawsuit against AAPL, GOOG, and others claiming their wireless handsets infringe on NTP's patent of awesomeness.  RIMM had settled previously with NTP for $612MM so they are free from this round of lawsuits and thus, for a day at least, can enjoy their declining market share and substandard product in peace.

In small cap news, two ridiculously cheap stocks that Money McBags has written about before have started rallying proving the old value investor theory that what goes down, must go up (unless it's ZAGG).  One of those is NTZ which a month ago and 20% above its open today, Money McBags said: 

"buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson.  You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets."

As Money McBags explained before, NTZ (or more commonly known to longterm holders as NTZero) sells high end furniture, mainly in Europe, and seeing as how Europe is instituting a little something called austerity measures and high end furniture is a more expensive and discretionary purchase than caviar infused lobster tails or a night with Heather Vandeven, that doesn't bode well for the company.  That said, NTZ is trading at <3.5x EV/EBITDA and has 1/3 of their market cap in cash (even though they burned some last Q).  The point remains that this company is either going to blow through their cash and go out of business (5% chance), is eventually going to come out of this and be worth a fuckload more than it is today (70% chance), or is a total fraud since Italy's version of the SEC is likely more hands off than Richard Simmons at a Rick's Cabaret (25% chance).  Money McBags will wager a couple of Vietnamese dongs (as always, his currency of choice) that this is a real company and while he has absolutely no idea when it will turn around, has no faith in the global economy rebounding, and still thinks owning a high end furniture maker in a global recession/depression is as wise as covering yourself in chocolate and shouting "fire" while standing in the doorway of a crowded theatre filled with overweight arsonphobia sufferers, at some point this stock should trade for at least 7x EV/EBITDA which makes it a double from here (unless the EBITDA falls off a cliff, though if it does, there is more of a cusion right now than in Jessica Biel's pants) but that may not happen until 2025, so act accordingly.

The other name that is runnning now is TSYS and Money McBags first wrote about them in February and since then they have done nothing but go down like they were auditioning for a role in The Curious Taste of Benjamin's Button.  Their last quarter was decent enough and their guidance has been fine but margins have been compressing, there has been concern about government spending drying up, and it is harder to get one's arms around their business than it is for a young lass to get her arms around Whitezilla's "business" (and you can google that at your own risk).  They have a number of sort of related yet disparate businesses including a mobile location based software business, a text message enabling license selling business, and a government satellite communications software business.  The company announced a new deal with the Army last night that could pay them as much as $9.8MM through 8/2011.  TSYS's EV is ~$325MM and their guidance remains for $80MM-$85MM EBITDA, so it is currently trading at ~4x EV/EBIDTA and oh by the way, they just grew EBITDA by 45% last Q and revenue was up by 30% (though most of it was driven by acquisitions in the commercial segment).  Again, this is a bit of a confusing company and portfolio managers just don't want to spend the time learning the different businesses and the complicated way in which results are reported (honestly, try reading one of their quarterly earnings releases, it makes Thomas Pynchon seem like Dr. fucking Seuss).  That said, it is ridiculously cheap and with the new contract, perhaps there is more faith that government spending for their technology will continue.  The stock has pretty much spent all of 2010 dropping but it may finally have bottomed out (because how much lower can it really go?) so this might make a nice short term trade.

With the market rallying, if you're itching to go long it's best to pick up these already beaten down names than ones that can still fall when the rally ends next week.  So if Money McBags were you, the first thing he would do is empty your bank account and take one hella long trip to Vegas, but the second thing he would do is spend some time this weekend trying to get a better handle on TSYS because there is a very good chance of a solid return at these levels.

So enjoy your weekend and remember to follow WGP on Facebook and Twitter.

7/8/10 Midday Report: More bulls hit

The market jolted up on unemployment news this morning before remembering it had already gone up yesterday and thus quickly settled in like an environmentally friendly squatter in Al Gore's mansion.  The big macro news is that new claims for unemployment dropped to 454k or some number higher than that depending on how much the (No) Labor Department manipulates/readjusts numbers next week.  Money McBags is not a betting man (unless there is money to be won or young ladies to impress) but he is willing to wager that next week we learn that new claims for this week should have actually been 459k.  Anyway, claims were down by 21k, unless you use the number the (No) Labor Department released last week of 472k (not the 475k they redjusted it to this week) and in that case claims were down 18k (though when this week's number gets manipulated up to ~459k, this week's drop will go down in the books as only a 13k drop, but whatever).  Regardless of what the number actually was, it likely beat analyst guesses of 460k which would be great if 450k+ new unemployment claims didn't signal an economy less healthy than a Grilled Cheese Burger Melt topped with a spread of Crisco and Pam Anderson's hepatitis.

To be frank (and if Money McBags is going to be frank, he only hopes it is the awesomely named Frank AllCock and not Frank Stallone), the high unemployment rate and the inability of the global economy to bounce out of this is more confusing to Money McBags than a condom is to Shawn Kemp or the definition of securities fraud is to SEC promoted Meaghan Chung.  Money McBags understands there are unkowns, half-knowns, and can't-knows in a dynamic global economy, but there are 15k+ PhDs of economics in just the US alone so either all of them are complete idiots or that degree is more worthless than the smallest Vietnamese dong.  Seriously, how can we have all of these people who trained for years on this one specific topic not have any fucking answers?

For fucksake, a solar powered plane just flew for 26 consecutive hours and while Money McBags is not a heliologist (though he ardently studies Page 3 of The Sun), he is pretty sure for many of those hours the sun wasn't even fucking out.   So let me get this straight.  The human race can build something that goes 28k feet in the air and flies around for 26 hours, powered by nothing but the sun and will continue to fly when there is no fucking sun, and yet we can't figure out how to find jobs for 20MM people?  WTF?  Money McBags is officially announcing the death of the entire field of Economics until one of the 15k+ US PhDs can figure something the fuck out.  What other discipline awards titles for studying theories that don't work and coming up with hypotheses that can't be proved?  Just think about it.  The profession of an economist is a more worthless calling than an Amish computer camp instructor or Heidi Montag's singing instructor.  Anyway, the economy continues to struggle and economists continue to watch it melt as they are more helpless than a dyslexic trying to use a calculator set for reverse polish notation (as opposed to reverse polish cowboy).

In other US news, retailers announced same store sales and results were mixed despite discounts, warm weather, and a flurry of unconventional sales efforts including Sam's Cub making small business loans, Office Depot selling items for a penny, and Hot Topic giving away free canwiches with every purchase of a Twilight t-shirt.  The Gap led the disappointments with flat sales compared to guesses of up 3.4% as apparently the late 1990s are officially over.

Internationally, the IMF raised their growth forecast  from none to none +1, or 4.2% to 4.6% for 2010, whichever you prefer best.  They also warned that risks of a calamity have increased faster than the popularity of the high school girl who puts out first and that growth will slow at the end of this year and next year.  To quote the release:

“In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk, this could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates.” 

So no biggie, right?   Sign me up for the 4.6% revised upwards growth, nothing to see here.  Unfortunately the IMF was not so positive on US growth prospects estimating that growth will fall short of 3% annually for at least the next five years and urged the US to raise taxes, cut spending, and give Alice Eve her own 24 hour cable channel.

Also internationally, the ECB and the Bank of England held rates at historic lows in order to allow already toxic banks to continue to not lend to people and Greece approved a pension overhaul which will raise the retirement age to 65 from birth, will calculate retirement benefits on average pay rather than highest pay, and will cut annual vacation days from 365 to 340.

In US stock news GPS has a bit more than a gap in their strategy (one may call it a hole more gaping than whatever is in the Octomom's pants) as it is plunging like Lara Bingle's neckline.  As mentioned earlier, their same store sales disapointed with Old Navy posting flat comps, Banana Republic up 6% after a 20% down in the year ago quarter, and The Gap seeing same store sales drop 3% on top of a 10% down comp.  Wow, that is so bad that not even Johnnie Cochran would have defended it.  Finally, tax preparer HRB was down ~7% to a 9 year low due to the surprising resignation of their CEO who claims he is about to get a CEO job at a bigger company and HRB should just write-off the losses anyway.

In small cap stocks, news is light today as investors wait for earnings and try not to panic sell everything as they think about the challenges of the economy and the illiquidity of most of these names.  LHCG had its second strong day in a row after getting clobbered last week on news that competitors AFAM and AMED were being investigated for false medicare claims.  Money McBags broke them down for you last week and thinks it is an ok entry point right now if you need some healthcare exposure.  They are in a growing market, offer a superior service, and are relatively cheap for their growth.  Sure they don't have control over the majorty of their pricing, sure they are a roll up story, and sure these companies have been dicier than a night in the Baghdad Hilton Suites, but people aren't getting any younger or healthier and hospitals aren't getting any bigger.  So if you want a way to play the "we're all getting old and sick and can't pay for it" trend, this is a company to do that with and at a reasonable mulitple.

7/6/10 Midafternoon Report: Heat wave melts market rally, or maybe it was common sense

Holy crap is it hot out today.  It's so hot that the only difference between the East Coast and hell is that Jim Cramer isn't in hell, yet.  Anyway, the market was rebounding a bit after downing several vials of muscle relaxant to help cure the severe case of lockjaw it developed from going down so much and so frequently over the past few weeks, but that all changed in the afternoon when reality sunk back in to investors' portfolios.  While this was likely a minor temporary relief rally, like Mel Gibson's career after his first anti-semitic tirade but before his second tirade where he told his wife that that he was going to burn the house down among other colorful and completely insane ramblings, you should all trade in to it carefully.  And yes, things have now gotten so bad that Money McBags is forced to use Mel Gibson's racist rants as analogies for the market, so we've got that going for us, but at least we'll always have the dot-com boom.

The main problem today is that macro news is lighter than Suze Orman's resume and that is why the market tried to rally a bit.  The ISM released their non-manufacturing index which measures 90% of the legal economic activity in the US and to the surprise of no one (other than analysts, economists, and CNBC), it fell to 53.8 which was a 4 month low and below the 55 guess of analysts.  Out of the 11 metrics the ISM measures, 10 slowed down and one stayed the same (something called Supplier Deliveries, and in this economy all deliveries are being supplied in the rear). 

Internationally, Australia kept interest rates at 4.5% claiming “uncertainty about the pace of future global growth."  Though if you read the fine print, they say the uncertainty is whether it will be 0%, negative, or global economy crushing.  Finally, the market waits for Thursday's ECB policy meeting where Jean-Claude Trichet will try to the soothe the market's fear of european banks failing by assuring them that stress tests will be run and then offering the market a nice sitz bath.  While it's nice that the ECB is contemplating stress tests (which will no doubt show that european banks need to add more fish oil to their diets, start running for 30 minutes a day, and clean up their fucking balance sheets to try to get healthy), there is absolutely no way that european banks don't get a clean bill of health and there is absolutley no way the ECB's assessment will be correct.  151 banks just rushed to get funding from the ECB which is the most in a year and if that is a signal of health, than my name isn't Money McBags.

In large cap stocks, a report from the Semiconductor Industry Association showed chip sales were up 47% last month thanks to demand from China, India, and the Lawson family.  This has helped lift chip stocks and regardless of the economy, Money McBags is a believer that the pace of technological advancement will continue to accelerate and thus having some semi exposure in your portfolio should be a longterm benefit like windpower should be a benefit to the environment,  saving should be a benefit to the economy, and a tracheotomy to Lady Gaga should be a benefit to ending noise pollution.  Also, BP was up today after an upgrade by RBS from "Hold" to "Buy."  In addition to that upgrade, RBS announced they will be dropping the "R" from their name to hereby just go as "BS" and are retroactively initiating coverage on Enron with an "Accumulate" and Kate Beckinsale with a "Sell."

In small cap news, it is ugly out there.  Money McBags favorites KITD and KIRK continue to get pounded even though they are so cheap that if they were materials, not even China would use them.  KITD is a bit funky because so much of their revenue is Euro driven so Money McBags has no feel for their upcoming revenue because a lot will depend on the average fx rate they use in conversion as well as the actual revenue split.  So he expects them to miss analyst revenue estimates in the short term but long term, this company is growing 50%+ ex. currency effects, it is in a fast growing market, and they are among the biggest players with cash to spend to continue the roll up.  This is the time to be building a position here even though the market is totally full of shit.  You wait for chances like this to buy good companies cheaply, same with KIRK, so keep KITD and KIRK front of mind.

One interesting name which continues to fall and is becoming more appealing is IMAX.  Money McBags broke them down a few months ago but basically they have been able to grow rapidly due to a JV theater strategy that has allowed them to open more theatres and take less risk.  The did $42MM of adjusted EBITDA in Q1 but that was driven by a little something called Avatar which has now passed through the theater system like a kidney stone through a urethra only with less pain and with more aliens.

In the quarter prior to last, the company did ~$20MM in EBITDA (so $80MM annual run rate) and estimates are for $100M both this year and next year with the Avatar business leaving but new theaters picking up that lost growth.  The current EV is ~$800MM so the company is trading as 8x to 10x EV/EBITDA which isn't terribly cheap on the high end, but at the low end, it is getting to be attractive (not quite Alice Eve attractive, but probably Amber Lancaster attractive, and Money Mcbags is ok with that).  The problems are that there has been a lot of retail money in this name which needs to get out, there is fear of pricing pressure killing their high ticket premiums, it is unknown how many JVs they opened this Q, and the business still relies on content and content is fickle (as noted by the brilliant WGP which every now and then misses the mark, like perhaps today, but in Money McBags' defense it is very very hot).

The most recent Shrek movie underperformed because at some point even little kids can only take so much of Mike Myers so that, on the heels of Avatar going CGbye, is setting up IMAX for a top line miss.  Today, the stock was down 10%+ on no news other than pretty decent numbers for the latest Twilight movie which is sure to slowly, unoriginally, and vapidly kill pre-teen brain cells everywhere.  IMAX brought in $9MM from that likely abortionally bad movie in the opening week which is certainly at least as good as they could have expected.

Look, Money McBags could talk about EBITDA, revenue growth, and Ashley Greene in 3D, until he turns bluer in the face than a depressed smurf but the issue with IMAX stock is not the fundamentals, it's the investor base.  The stock was a high flyer, a momentum trendy name that drew in a lot of retail investors who institutional investors and hedge funds were able to continue to milk until deciding to blow out.  Basically, once Avatar left and the story went from "we have the hottest fucking movie in history in a unique format" to "come watch an animated donkey in 3D," growth investors ran.  They bought the rumor and sold the news as if the news had slept with Magic Johnson.  So now IMAX is in that weird stage where momentum investors have left and it is not yet cheap enough for value investors to buy.  That thesis makes less fundamental sense than string theory, but it is what it is.  So with institutions having puked this out, retail sellers are now taking their losses and when they wash out, value investors may start to kick the tires, check the oil, and make sure all of the company's johnson rods are in order.

So look, Money McBags thinks this company is certainly on pace to do $80MM-$100MM of EBITDA this year and will likely at least hit those same numbers next year as JVs grow and people take even fewer vacations and thus spend more money on cheap family entertainment.  So if you are a longterm owner, you don't need to ditch anything here.  That said, this should trade down with the market as people take gains and value investors probably won't get interested until ~6x EV/EBITDA and if they earn $80MM-$100MM of EBITDA, that is still 25%-40% down to go, so you can probably still find a better entry point.  Now it is possible for the company to earn much more than $100MM of EBITDA next year, but one has to make a few leaps of faith on JV openings, content, and the economy not going to $0, to get there, which is why Money McBags prefers to use the safer $80MM-$100MM run rate.  The company basically needs to show they can perform without Avatar and while Money McBags thinks it is likely they will continue to drive traffic, he would hold off buying for another 20% down (and if it rockets up and you miss it, you need to be ok with that) because no matter how much you try there are four things you shouldn't do in life:  Spit in to the wind, start a land war in Asia, forget to look for the Adam's apple, and fight the market.  So keep IMAX on your watch list and get ready to pounce when it washes out.

And don't forget, When Genius Prevailed recently joined Facebook to make it easier to spread the gospel.

6/2/10 Midafternoon Report: Market runs in the late afternoon as it attempts to get home in time for Oprah

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5/17/10 Midafternoon Report: The Euro is falling! The Euro is falling!

The market was somehow flat today after spending most of  the day down again as the perilousness of Europe's debt situation continues to worry investors like laryngitis worries Pavarotti or like coming in to contact with Paris Hilton worries osmophobes.  Not only is Europe raining ash on the market's parade (both literally and figuratively, though to be fair, the market's parade today was in honor of Norwegian Constitution Day (better known as pedophilia Christmas for the tradtion of children's parades), which ranks somewhere between the invention of nose hair clippers and the launch of the Edsel in the pantheon of modern events, so not a big deal) but US macro news was mildly disappointing as well.  The NY Fed released their monthly manufacturing report and the gauge of general business conditions fell to empty.  The business index dropped from 31 to 19 and analysts had guessed it would be 30.  As always, Money McBags has no idea what the difference between 31 and 19 is (other than maybe a few kids and a meth problem), but he knows that they're both legal.  The new order index also tried to make this a Blue Monday by falling from 29 to 14 as inventories have been restocked (or un-destocked, whatever).  One positive aspect of the report though was that employment strengthened as payrolls grew the fastest they have in six years as NY manufacturing plants try to keep up with demand for tools and building materials to help batten down foreclosed on houses.  In other US macro news, home builders' sentiment hit a 2.5 year high as apparently delusion has finally creeped in to lift their spirits.  The index rose to a whopping 22 while analysts guessed it would be 20, so the difference is a rounding error or a stutter.  The bigger issue is that 50 or greater means more people are optimistic, so with the index only at 22, people are just slightly less negative, like a guy who breaks up with Amy Winehouse to date Mayim Bialik.

Internationally, the Euro continues to sink today as if it were a Brazilian Real in 1999 or had just hired Ted McGinley to star in its new TV drama (tentatively to be called The Big Crash Theory).   The ECB was out buying 16.5B of sovereign debt and in order to try to show they aren't just printing Euros, they will be taking in 16.5B of deposits from banks and paying out interest.  Wow.  So the banks get some free money while the ECB gets worthless bonds and has to pay interest on the money they didn't "print."  Seems a bit odd but then again, so does Rene Zellweger's face and that's never seemed to hinder her.  Also, bank lending in Europe is taking a significant hit as the rates banks charge each other for loans in dollars rose to a nine month high.  The Libor-OIS spread (which isn't nearly as interesting as the rumored Rachel Uchitel Playboy spread) increased to 24 basis points, the most since August, thus signaling that banks in Europe are as interested in lending as the FED is interested in transparency or as Ellen Degeneres is interested in penis.

In stock news, GM posted their first profit as apparently people can now only afford shitty cars.  GM earned $865MM and proved that all you need to do to succeed in business is suck badly at your job, lose a ton of money, and then get bailed out by good old Uncle Sam and his magic printing press.  Money McBags only laments that he missed that class during his business school days.  Not only did GM post a profit, but they are on course to go public again in Q4 to try to see if the investors have learned the old adage "Fool me once, shame on you, fool me twice, go fuck yourself."  Additonally, GM is said to be looking to get back in to the financing business which is a bit like letting Bernie Madoff handle the prison finances, filling the Goodyear blimp with hydrogen, or hiring Roman Polanski to babysit your 14 year old daughter.  In other earnings news, LOW beat earnings forecasts but like all companies in the past week, gave guidance more disappointing than Nicole Eggert's movie career (and Money McBags had so much hope).  CEO Robert Niblock said that 2010 will be a "year of transition" while significant growth won't happen until 2011, and if it doesn't, no one will remember he said it would.  Guidance for Q2 was $.57 to $.59 per share which was below analyst estimates of $.62 per share and sent the stock down for the day.

In small cap news, KITD had their quarterly earnings release today and you all know Money McBags loves KITD like Joanie loves Chachi or high frequency traders love turning off liquidity when the market is tumbling.  The stock is trading down heavily thanks to some block trades around midday where someone just wanted to puke this out like a bulimic with emetophilia at an all you can eat Sizzler buffet.  Money McBags hasn't had a chance to listen to or watch their call, though he will tonight or tommorow, but he did go through their Q and hear the last 20 minutes of Q&A.  To be honest, their Q was a bit lighter on the revenue side than Money McBags would have liked to see.  Revenue of $17.4MM was up 80% y/y but up only 8% sequentially, though management explained that this is typically a sequentially down revenue Q due to reduced digital media consumption in the industry.  That said, EBITDA margins were only 17% after being 19% last Q and accounts receivables continue to be higher than John Belushi at a Chateau Marmont casino night.  Management explained that as they are a small company with Fortune 500 clients, they have about as much leverage in bill collecting as He Ping Ping does on a see saw with Shaquille O'Neal (and that's not just because Mr. Ping Ping was so small, but also because he is dead).  As they explained, they have been getting business in towards the end of the Q which causes A/R to spike right before the Q but their larger clients get around to paying them within 45 to 60 days typically since KITD's services are usually a small expense for them.  An interesting point made by CEO Tuzman was that they could factor their receivables but they choose not to because they are not worried about collecting and thus don't want to give up the economics.  Their customers are going to pay as they are big, established companies, but they just take a bit longer.  Three other interesting points:

1.  In the press release they say: "In answer to a couple of investors' questions, we have not seen any slow-down in IP video-related expenditures in Europe as a result of the Greek fiscal crisis."  This is good news as most of their revenue comes from Europe, so Money McBags is happy to see this and hopes it holds.

2.  They purchased a company called Benchmark which gives them a presence in Singapore, mainland China, and Southeast Asia.  Benchmark is supposed to have $10MM in revenue in the next 12 months and they paid ~$11MM for it if Money McBags did the math correctly.  The deal should be immediately accretive and will open up opportunities in Asia for them where there are two main competitors who they hinted that they may already be in negotiations with to do JVs or acquisitions.  Money McBags is glad they are finding shit to buy with all of the dilutive equity they just raised.

3.  Kelly Brook is hot.

Anyway, guidance for this year which was released a few quarters ago was $75MM+ revenue but since then they have added Multicast which should be ~$12MM revenue and 9 months of Benchmark which should be ~$7.5MM revenue, so they are now on pace for ~$94MM in revenue.  However, they only earned $17.5MM this Q so in the next 3 Qs they are going to have to average ~$25MM revenue which seems a bit like a stretch.  In terms of earnings, gross profit was up to 61%, a number they said will likely continue to climb a bit depending on mix and after stripping out merger, restructuring, non-cash stock comp, and integration expense, Money McBags has KITD with ~$1.5MM of operating income this Q and with the 23MM shares they now have, that would have been ~.07 EPS.  So not great, but on the right track.  To give you an idea about the leverage though, if they had earned $25MM in revenue, they would have had another ~$4.5MM of gross profit and even if op ex rose $1MM, that would have earned another $.15 putting them at $.22 eps or ~$.88 eps run rate and they are trading at ~15x that with today's sell off.  As highlighted earlier, guidance and acquisitions now get us to $25MM revenue quarters so over the next year that type of operating EPS is possible, and with 50% growth, KITD remains very cheap.