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Old 11-08-2016, 01:54 PM   #126
BCI23
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Re: PDEX - My Largest Position

earnings will probably be out this week.

My expectation is $5.3m rev, $1.4m gross profit, $1.17m SG&A, $.23m OI, $.36m EBITDA.

Also, here is one of the other products PDEX launched last year, this one with KLS Martin: https://www.youtube.com/watch?v=phXYXF__Yro
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Old 11-08-2016, 07:53 PM   #127
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Re: PDEX - My Largest Position

BCI - looks like you're anticipating a quarter in line with the past 3 quarters, where GP has been $1.4 or $1.5 million. EPS of likely $0.05, maybe $0.06 if they've repurchased shares?
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Old 11-09-2016, 01:12 PM   #128
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Re: PDEX - My Largest Position

Yes, next two quarters should be similar, February release will probably be worse than this November release but then the big jump will be that May 2017 earnings release.
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Old 11-10-2016, 06:35 PM   #129
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Re: PDEX - My Largest Position

Looks like 5.4M revenue, 3.8M COGS, 1.6M Gross Profit.

1.31M SG&A, .29M Operating Income, 7 cents a share net income.

The additional lines (OMS, Fineline, ESD) have really turned around, OMS/ESD are breakeven, Fineline turning a profit.

Interesting notes on the lawsuits, looks like both parties have filed claims against each other in October. Not sure what the impact is.
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Old 11-10-2016, 07:32 PM   #130
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Re: PDEX - My Largest Position

Fineline seemed to turn around nicely indeed, ebitda 36k vs last quarter loss of 38k.

Pro-dex segment increased sales 300k this quarter. ebitda of 613k

Did I understand correctly that they are started shipping this new product in this quarter for 150 units?

They last bought stock in July average price of $5.38 for $49k total, skipping august when the price dropped to mid $4. I'm guessing the program expired in July?
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Old 11-10-2016, 07:54 PM   #131
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Re: PDEX - My Largest Position

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Fineline seemed to turn around nicely indeed, ebitda 36k vs last quarter loss of 38k.

Pro-dex segment increased sales 300k this quarter. ebitda of 613k

Did I understand correctly that they are started shipping this new product in this quarter for 150 units?

They last bought stock in July average price of $5.38 for $49k total, skipping august when the price dropped to mid $4. I'm guessing the program expired in July?
I read it as 150 units/month, but they're not quite there yet and are in the process of ramping up to that level.

I believe the shares were purchased on/around Sept 7th when the 8-K was filed. I'm a bit surprised they haven't purchased more lately with the price hovering around $4.00.
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Old 11-10-2016, 09:08 PM   #132
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Re: PDEX - My Largest Position

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I read it as 150 units/month, but they're not quite there yet and are in the process of ramping up to that level.
that makes more sense

Quote:
I believe the shares were purchased on/around Sept 7th when the 8-K was filed. I'm a bit surprised they haven't purchased more lately with the price hovering around $4.00.
It broke down the purchases monthly in the report in the report showing only purchases in July. Nothing in August or September. Though I remember that 8-K in Sept I think it was for a new buyback program. So maybe their old buyback program expired in July, and they set up a new program in September?

I also would be suprised if they are not buying back shares now with these prices (they bought some in july at $5.38) but I'm not sure how these programs are designed to buy back shares or if they can buy back stock in the week or so before or after an earnings report release.
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Old 11-10-2016, 11:41 PM   #133
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Re: PDEX - My Largest Position

Cash flow from operation items look good, net income + D&A + impairment = 0.525 compared to 1.341 for the 12 months last year. This represent the fashflow operation before working capital adjustment. If they can keep at this pace, it will be at a yearly run rate of $2.1 mil which would be significant improvement. Capex came in at 0.316 while it was 0.311 for the whole year last year. Anyone know how this came about?
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Old 11-11-2016, 12:19 AM   #134
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Re: PDEX - My Largest Position

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Cash flow from operation items look good, net income + D&A + impairment = 0.525 compared to 1.341 for the 12 months last year. This represent the fashflow operation before working capital adjustment. If they can keep at this pace, it will be at a yearly run rate of $2.1 mil which would be significant improvement. Capex came in at 0.316 while it was 0.311 for the whole year last year. Anyone know how this came about?
Purchase of manufacturing equipment in the amount of $316,000, most notably a vertical milling machine purchased to increase our throughput of sales to our largest customer.
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Old 11-11-2016, 01:28 PM   #135
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Re: PDEX - My Largest Position

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that makes more sense



It broke down the purchases monthly in the report in the report showing only purchases in July. Nothing in August or September. Though I remember that 8-K in Sept I think it was for a new buyback program. So maybe their old buyback program expired in July, and they set up a new program in September?

I also would be suprised if they are not buying back shares now with these prices (they bought some in july at $5.38) but I'm not sure how these programs are designed to buy back shares or if they can buy back stock in the week or so before or after an earnings report release.

You're right about the shares being repurchased in July. Also went back and read back through the 8-k and the new repurchase program started Sept 8, 2016 and goes for a year, expiring in Sept 2017.

The May 27, 2016 8-k stated that the current repurchase program would expire on 10/1/2016 so what you were thinking about the new one replacing the old one would seem to be spot on.

Solid move up today, but a lot lighter volume than I expected after the earnings came out.
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Old 11-12-2016, 10:47 PM   #136
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Re: PDEX - My Largest Position

so results we basically what i expected except gross profit rate was much better than i expected. They called out that margins would be compressed in Q1 and Q2 due to lower sales price of the orthopedic hand piece but Q1 gross margin was actually up so kind of interesting. I'm not sure why no repurchases have been made since september, obviously if they were buying at $5.38 back in July the new plan should be buying. Really only explanation is that this new buyback plan didn't kick in until Oct 1st when the old one expired or until after this November earnings release. Q2 Revenue i'm expecting somewhere between $4.5-$5m and maybe $100-$200k ebitda and then Q3 should be $6.5m ish with probably $850-900k+ of EBITDA. If you want to trade this, might be a decent idea to sell before Q2 earnings but make sure you get back in before Q3 earnings in May.
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Old 11-13-2016, 03:44 PM   #137
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Re: PDEX - My Largest Position

Hi BCI23, Can you help provide source for the information on margin compression for Q1 & Q2? Tnanks.
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Old 11-13-2016, 07:11 PM   #138
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Re: PDEX - My Largest Position

"During the first half of fiscal 2017, we will be delivering 500 handpieces to this same customer at a reduced sales price, which will consequently reduce margins."

http://www.irdirect.net/prviewer/release/id/2093877
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Old 11-13-2016, 09:36 PM   #139
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Re: PDEX - My Largest Position

Thanks, BCI23.
So in the 2016 year end release, it was stated that there will be 1800 pieces for $24mil revenue in total for FY2017 and 2018. It also mentioned that for the 1H 2017, it was to deliver 500 pieces. Now we have Q1 release and we see this customer generated rev 2.2mil. If we can extrapolate linearly, we should have 19.5 mil to deliver in 2H2017 + 2018 so each Q during this period should generate additional $1mil+ revenue compared to Q1 2017, with improved margin. Now I see where your rev and EBITDA estimates come from.
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Old 11-14-2016, 01:19 AM   #140
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Re: PDEX - My Largest Position

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Thanks, BCI23.
So in the 2016 year end release, it was stated that there will be 1800 pieces for $24mil revenue in total for FY2017 and 2018. It also mentioned that for the 1H 2017, it was to deliver 500 pieces. Now we have Q1 release and we see this customer generated rev 2.2mil. If we can extrapolate linearly, we should have 19.5 mil to deliver in 2H2017 + 2018 so each Q during this period should generate additional $1mil+ revenue compared to Q1 2017, with improved margin. Now I see where your rev and EBITDA estimates come from.
The $24m total is for Calendar 2017 and 2018 (Jan-Dec) not fiscal 2017-2018 (July-June). The 500 hand pieces is for H1 of fiscal 2017 (July-Dec 2016).
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Old 11-14-2016, 11:56 PM   #141
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Re: PDEX - My Largest Position

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so results we basically what i expected except gross profit rate was much better than i expected. They called out that margins would be compressed in Q1 and Q2 due to lower sales price of the orthopedic hand piece but Q1 gross margin was actually up so kind of interesting. I'm not sure why no repurchases have been made since september, obviously if they were buying at $5.38 back in July the new plan should be buying. Really only explanation is that this new buyback plan didn't kick in until Oct 1st when the old one expired or until after this November earnings release. Q2 Revenue i'm expecting somewhere between $4.5-$5m and maybe $100-$200k ebitda and then Q3 should be $6.5m ish with probably $850-900k+ of EBITDA. If you want to trade this, might be a decent idea to sell before Q2 earnings but make sure you get back in before Q3 earnings in May.
Ok so i take basically all of this back. Sounds like the company has exceeded their own expectations in terms of getting up to speed on being able to deliver units to their largest customer at a faster rate and are going to be able to hit their 150 units/month target faster than expected and that will probably mean they will start getting close to 150/units per month in Q2 here. Shipments to their largest customer were $2.1m in Q1, i wouldn't be surprised to see that hit $2.7m in Q2 here and then $3m/qtr for the rest of 2017 and 2018. I could see a $5.4-5.7m rev in Q2. The gross margin improvements and manufacturing floor efficiencies are hitting as well driving up GP % in Q1 so we should expect for that to continue.
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Old 11-15-2016, 07:53 PM   #142
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Re: PDEX - My Largest Position

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Ok so i take basically all of this back. Sounds like the company has exceeded their own expectations in terms of getting up to speed on being able to deliver units to their largest customer at a faster rate and are going to be able to hit their 150 units/month target faster than expected and that will probably mean they will start getting close to 150/units per month in Q2 here. Shipments to their largest customer were $2.1m in Q1, i wouldn't be surprised to see that hit $2.7m in Q2 here and then $3m/qtr for the rest of 2017 and 2018. I could see a $5.4-5.7m rev in Q2. The gross margin improvements and manufacturing floor efficiencies are hitting as well driving up GP % in Q1 so we should expect for that to continue.
Then we'd be looking at roughly $0.11 - $0.12/share in earnings assuming your $5.6 million sales estimate. Assuming a 30% margin on incremental sales and no Impairment charge, those two would add about $170k in NI ($200k in add'l sales going from $5.4 mill to $5.6 mill x 30%) plus $113k (no impairment)).

Sound reasonable?
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Old 11-15-2016, 10:38 PM   #143
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Re: PDEX - My Largest Position

Yeah. Sometime during Q2 they will start shipping all of the orthopedic hand pieces at a higher selling price something like $6,666 each instead of $6200 ish so that will help margins. Then also in Q3 they are launching a new product that will probably have run rate revenue of $600k/qtr at probably 35% margin. So from Q1 to Q3 orthopedic hand piece rev will go from $2.1m at say 28% gross margin to $3m at 33% gross margin, add new product $600k at 35% margin, no $113k impairment, remove CEO/CFO bonus grants of $40k from Q1, former largest customer will probably decline from $600k to $200k at 30% margin. So Q3 bottom line should be $635k better than Q1. So EBITDA around $1.05m/qtr starting in Q3 (which they report in May)? If they put up numbers like that a $10-12 stock not unreasonable at all ($4m ebitda * 10x multiple + $5m cash in September = $45m / 4m shares = $11/share.

Last edited by BCI23; 11-15-2016 at 10:46 PM.
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Old 11-18-2016, 09:36 AM   #144
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Re: PDEX - My Largest Position

The numbers look strong. Maybe the three are just disgruntled employees, but does this concern anyone?

https://www.glassdoor.com/Reviews/Pr...iews-E5003.htm
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Old 11-18-2016, 10:59 AM   #145
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Re: PDEX - My Largest Position

3 negative reviews within a 30 day period out of 4 total reviews points to one disgruntled employee.
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Old 11-18-2016, 11:10 AM   #146
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Re: PDEX - My Largest Position

I take Glassdoor reviews with a very large grain of salt on small companies. It naturally skews toward the negative and small companies never have a large enough sample size anyway. And if you've ever signed up for Glassdoor, you realize how easy it is to make multiple accounts and give multiple reviews.
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Old 11-18-2016, 11:16 AM   #147
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Re: PDEX - My Largest Position

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3 negative reviews within a 30 day period out of 4 total reviews points to one disgruntled employee.
Just 2 of 3 in 30 days. However, I would argue the other is definitely the most positive of the 3.
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Old 11-18-2016, 03:02 PM   #148
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Re: PDEX - My Largest Position

Its hard to know when those employees worked there. If they were there in the 2010-2013 timeframe i'm sure it was a bad place to work. They let go of something like 40% of employees in 2013 so that is never a fun environment to be in.
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Old 12-02-2016, 03:00 PM   #149
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Re: PDEX - My Largest Position

Hi BCI23,
You may want to take a look at VRS. Howard Marks took a good sized position recently.
It will earn $220mil in EBITDA next year. It only has a EV of ~$500mil (in addition to ~$600mil pension obligations). After substracting $30mil in interest payment, $60mil in maintenance capex and $55mil in pension, it will earn $75mil in FCF.
SAPPI, a german company in the same business scores a EV/EBITDA of 6.
Its an easy double if nothing changes and with a bigger potential if the business turns around (say if the prices rises by 5%.)
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Old 12-05-2016, 09:25 AM   #150
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Re: PDEX - My Largest Position

I read in the quarterly that they may be releasing the valuation allowance on their deferred tax assets in the next year. Am I right in thinking this means we can expect an extra 3.7m added to book value?

Who are PDEX competitors? Wanted to compare multiples that were applied to similar companies, and also try to get an idea of what sort of beta to use for PDEX.
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