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Allergan plc Message Board

fishingfishedfish 5 posts  |  Last Activity: May 28, 2015 4:33 PM Member since: Feb 27, 2013
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  • Reply to

    Cash on the books

    by billkahn55 May 26, 2015 12:17 PM
    fishingfishedfish fishingfishedfish May 28, 2015 4:33 PM Flag

    To assume that CLUB has to pay off its debt now is ludicrous. Carrying debt is efficient given its cheaper cost than equity and it's a tax shield. They should use leverage in the normal course of operation of their business as long as they can pay the interest - which they can. Luckily they don't have to refinance the $300m until 2020. Along with $110m in cash they have a significant runway to get the HVLP strategy to show revenue growth and develop the BFX Studio into a real revenue generating business.

    If things were as bad as you say they are they would not be spending the Capex that they plan to.

  • Reply to

    Cash on the books

    by billkahn55 May 26, 2015 12:17 PM
    fishingfishedfish fishingfishedfish May 28, 2015 2:15 PM Flag

    Upfront fees range...not sure which locations are $300, but the irving place location I used to go to is $100...still a good deal...even paying the $40/mo with no upfront fee is HVLP...and obviously they attracted new subscribers given they added 21k last quarter so to assume its all current subs trading down is wrong

  • Reply to

    Cash on the books

    by billkahn55 May 26, 2015 12:17 PM
    fishingfishedfish fishingfishedfish May 28, 2015 9:15 AM Flag

    Look at the most recent quarter: they added 21k users. They also generated 25m of operating cash (mostly from changes to working capital but this has much to do with upfront fees generated that are accounted for as deferred revenues so not recognized fully on the income statement) and spent 6m in capex...19m in FCF...on a quarter when the stock tanked. doesn't make a whole lotta sense. Also the capex and opex is elevated because they are essentially launching an entirely new brand in BFX Studio - think of it as a high growth cash burn company within a zero to negative growth mature company. If the stopped growing BFX Studio or sold it off the financials would look much better for CLUB...

    Sentiment: Buy

  • Reply to

    Cash on the books

    by billkahn55 May 26, 2015 12:17 PM
    fishingfishedfish fishingfishedfish May 27, 2015 1:11 PM Flag

    I believe it's an easy sell at this price, plus they have plenty of time to figure it out. And it seems to me that the HVLP strategy could work out given the inherent churn and the high upfront joining fees (which are recognized as deferred revenues - and a significant reason why they still generated cash in the quarter even though their income statement shows losses) even with lower monthly dues.

    The short momo traders are making it seem like more of an urgent situation than it really is. There is long term value here...

  • Reply to

    Cash on the books

    by billkahn55 May 26, 2015 12:17 PM
    fishingfishedfish fishingfishedfish May 27, 2015 11:10 AM Flag

    I see 2 real issues that have moved the stock significantly lower since Q1 earnings.

    First, management stopped issuing forward guidance. This is a real shock. Even though they offered words of running near plan, it would be really helpful to know what that plan looks like over 2015 in terms of margins.

    Second, a significant percentage of the float is tied up with three hedge fund firms, 2 of which have agreements in place that stop them from accumulating more shares (up to 17.45% of the company). They cannot step in to support shares. Also having 3 big hedge fund investors controlling over 10m shares shows huge concentration risk if one of them must dump. These funds now have 5 of 8 board seats though and the company is seeking strategic alternatives.

    To say the co has a lot of cash is true. To say CLUB has a lot of debt is also true. However the company is still generating enough cash from operations to pay all of the bills even in the midst of the transition to HVLP - check the cash flow statements. Given owners and board are now aligned and they are likely are working to get up to speed with management, I'd assume at this point this is a somewhat risky, long term opportunity for significant share gains.

    Sentiment: Buy

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