With EPS guidance from Skullcandy's 2/8/13 press release at $0.93 on about 28M shares, income guidance comes to about $26M for the company. But in 2011 EPS was $0.93 on only 18.6M in income.
So the company's management is telling us to expect more than a 35% increase in income ... but on flat EPS. What's up? Will Skullcandy continue to leak shares, or was this a one-time dilution? Where did all the extra shares come from?
If you read the filings, you'll see: Virtually all the extra shares came from the IPO!
What's up is this: 2011 EPS is not based on shares outstanding at year-end 2011. EPS is based on the weighted average shares outstanding for all of 2011. The IPO was on July 20, 2011. New shares issued at the IPO were outstanding for less than half the year, so 2011 EPS had to use a blend of pre-IPO and post-IPO shares outstanding. That's it. That's where virtually all the extra shares came from.
Have shares been leaking out since the IPO? Judge for yourself:
Shares outstanding Dec 2011, five months after the IPO: 27.26 million
Avg shares outstanding Q3 2012, most recent reported: 27.46 million
Most recent mgt estimate for 2012 avg (2/8/13 press release): 28 million fully diluted
Shares outstanding since the IPO have been stable.
There is concern about the amount of shares being issued through stock options. Higher % than most public companies, although the drastic drop in share price has put most of these under water.
I think the concern is now around expenses. One analyst is forecasting a 1Q13 loss of 1 cent despite a 10% increase in sales from 1Q12. That tells me expenses and margin shrinkage are more than offsetting the sales increase. No company with at least a 45% gross profit margin should be losing money with continued sales increases.
I don't believe the hype on losing market share as that can't happen when sales increase 15-20% a year. But there is an expense problem which I think can be fixed pretty quickly.
One analyst projects something, which somehow you then take as factual, and then you use it as a basis for your personal analysis to show that there _must_ be some sort of issue with expenses? That's a stretch to say the least.
I did not read the analyst report you are talking about. Was there justification given for the projection or was it a made up number because the analyst has his own agenda? What is your agenda? Why don't you mention that the Q1 range is from negative 1 cent to positive 6 cents? Why no love for the 6 cent projection?
SKUL is working hard on several initiatives to improve margins, especially with international sales. I believe that these initiatives will work in the longer term. Some initiative will certainly have upfront costs and long term gross margin benefits. Is the analyst projecting some of those upfront costs to hit in Q1?
No, there aren't a whole lot of options outstanding. I think it's normal for people to try to rationalize the low share price by "adjusting" fundamentals in their minds. For example the very stable figure on shares outstanding since the IPO becomes your "concern about amount of shares being issued;" management's guidance that income will likely increase by more than 35% 2012/2011 becomes your "concern around expenses " the 26M in 2012 income guidance becomes your "losing money;" the 30%+ revenue increase expected for 2012 becomes your "15-20% a year."
You might want to think carefully about whether your strategy is to try to protect yourself by hypnotizing the 12 people who read this board, or by reading the numbers and getting informed yourself.
Another way to look at it: if we divide 2011 income by 28M shares outstanding, we get around 66 cents earned per share in 2011. Sixty-six cents in 2011, say 93 cents in 2012, I feel ok risking a big position at $6.57.