great gross margins in canada. 14.5%, which is huge for truck broker. huge executive bloat. management has been paying themselves well and diluting the other shareholders. lousy gross margins in US but should rise once traffic flows through us line haul network. overall 5% margin is very doable, that's $15M. more is possible.
crain doesn't like to be levered more than 2.5x ebitda. according to the initial figures on this deal of $30M ebitda, that would put max debt at $75m. But . . . there's now about $90m of debt. at 2.5 that is 36M ebitda. how to get to 36? figure 18m of legacy radiant ebitda (prob higher) take 300 of wheels revenue figure 12% blended gross margin at 50% ebitda margin gets you to $18M wheels ebitda.
any thoughts on the radiant acquisition of wheels? looks like wheels runs a decent business in canada (14% margins) but a lousy business in US (sub 10%). so the idea is to merge Radiants US forwarding/ltl business with wheels in US and boost margins.
what if natgas bottoms this summer or spring? wouldn't that be a perfect time to buy nka? assuming that nka can last that long
mobile is just a better business. direct relationship with consumer, more growth, instore and advertizing revs doubled. declining desktop (and leakage) isn't a big deal, mobile revenues are more valuable. ongoing issue = big opportunity to improve business model
the app and the instore and advertizing are superior businesses. the conversion problem is a tech problem with a tech solution due to more consumers using multiple devices and not converting with the same cookie. it won't be that hard to fix. trading at 8x adjusted ebitda.
"in-store is roughly 18 months in, it could not be going better and I think it's beaten all of our internal expectations, it's now truly a meaningful part of the business and is only going to become an increasingly a larger part of business."
the consolidation of forwarding is over because radiant already in 100 cities - acquiring new network would mean agents tripling or quadrupling up in some cities, a recipe for defections. so crain has shifted to consolidating truck brokers and "end to end" merger ie Canada. truck brokers was Jacobs original plan, but then xpo got too big. lots of cheap opportunities in truck brokerage, flow it through the ote and msm line haul networks.
rlgt is aiming for $1B in next few months (by end of the year, but deals will probably happen sooner) Here's the difference between xpo and rlgt. rlgt already has significant freight forwarder, now it's adding truck brokerage. easier to do vertical integration of forwarder (take truck brokerage in house) than it is to expand into forwarding from brokerage. a fundamentally superior strategy. rlgt is order of magnitude cheaper than xpo but only about .4x revenue if factor in new deals
Jacobs pretty much confirms the above. XPO has no way in to forwarding. too much concentration/competition in forwarding. little overlap in clients with brokerage. XPO is consuming ton of cash . . . new busineses are consuming far more working capital and requiring much more IT spend. "asset light" maybe but still huge capital hogs.
There are 105M shares outstanding fully diluted, now that might be as bad as it looks, depending on stuff, but that still a $4B+ valuation, so trading at more than revenue in an industry (truck brokerage) where XPO has made deals for less than 20% revenue (wasn't Kelron like 8% revenue?) So yeah, it's grossly overvalued. But a typical roll-up buys at low multiple and rolls up into a higher multiple. But that's not what Jacobs is doing. He's buying at full value and expecting magic to strike.
Here is Jacobs plan:
Buy at full muliple
Even assuming XPO beats target and does $600M in 2017, that means it's already trading at 7x 2017 ebitda. But mature XPO won't trade at 12x multiple, it's a much higher capex business with higher working capital. More like an 8-10x instead of the 12x that logistics firms usually get. So it means that XPO is already trading pretty close to full 2017 valuation.
some ceo named barry said on cnbc that hiring is very tight in texas, hard to find good people. that's probably why it zoomed up ayesterday. the fact is that oil is spread out across us and texas has diversified. in any case I would bet few of these houses are bought by oil industry people, these are lower-income properties.