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1he 8oad Less 1raveled:

Speclal SlLuauons lnvesung


uslng 1echnology Lo Screen for Speclal
SlLuauons

8uckley CaplLal arLners
ulsclalmer
DISCLAIMER IMPORTANT NOTICE

The information contained in this presentation The Road Less Traveled: Special Situations Investing is highly confidential and is being
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The views, opinions, and assumptions expressed in this presentation are as of April 2
nd
, 2014, are subject to change without notice, may not
come to pass and do not represent a recommendation or offer of any particular security, strategy or investment.

The Presentation does not purport to contain all of the information that may be required to evaluate the matters discussed therein. It is not
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None of the information contained herein has been filed or will be filed with the Securities and Exchange Commission, any regulator under any
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this offering or the adequacy of this document. Any representation to the contrary is unlawful

3/16/14 value lnvesung Congress 2
lnLroducuon
Well-deslgned screens are a powerful Lool Lo ald value
lnvesLors ln Lhelr search for bargalns
Cen allow you Lo ldenufy opporLunlues overlooked
by Lhe resL of Lhe markeL
8y spomng, researchlng, and lnvesung ln Lhese before
oLhers, you can beaL Lhe markeL subsLanually over ume
1oday l wlll dlscuss companles l currenLly own or
prevlously owned ln order Lo hlghllghL Lhe lnvesLmenL
opporLunlLy and how l dlscovered lL (keep ln mlnd l dld
noL always Lrade Lhe companles as well as Lhe charLs
lndlcaLe)
3/16/14 value lnvesung Congress 3
PlsLory of 1echnology use
lnvesung has evolved greaLly over Lhe years
1930s: value lnvesung ls born as Lhe Craham-newman
parLnershlp buys neL-neLs"
1930s-70s: Warren 8ueu conunues Lhe neL-neL"
approach, uslng Moody's sLock gulde Lo manually nd
opporLunlues
1962: CompusLaL launches rsL nanclal daLa source
1996: all SLC llngs become avallable onllne
LaLe 1990s: arrlval of lnLerneL provldes wldespread access
Lo free nanclal daLa
1oday: lmmedlaLe lnformauon and advanced screenlng
capablllues make ndlng ldeas easler Lhan ever before
1okloq oJvootoqe of tecbooloqlcol ptoqtess ls oow o ctlucol tool to
qololoq oo eJqe ovet tbe motket
3/16/14 value lnvesung Congress 4
Speclal SlLuauon Screens
Cne parucularly useful famlly of screens are
speclal slLuauon screens
Cenerally search for a parucular evenL raLher Lhan
on Lradluonal valuauon meLrlcs
1echnologlcal advances have greaLly reduced Lhe
legwork Lhey lnvolve
Source: CaplLal lC
3/16/14
value lnvesung Congress 3
l Lhlnk Lhese Lypes of screens can be parucularly
useful Loday wlLh Lhe markeL near all-ume hlghs
and many sLocks approachlng falr value

Source: lacLseL
3/16/14 value lnvesung Congress 6
ldea Cenerauon
!oel Creenblau: Speclal SlLuauon Curu
!oel Creenblau
Co-founder of Lhe value
lnvesLor's Club and a pasL
conference speaker
Compounded caplLal aL 30 per
year from 1983-1994 largely by
lnvesung ln speclal slLuauons
lf yoo speoJ yoot eoetqles lookloq fot ooJ ooolyzloq
sltoouoos oot closely followeJ by otbet lofotmeJ lovestots,
yoot cbooce of foJloq botqolos qteotly locteoses! #$% #&'() '*
+,(-./0 1$,*% ,22,&13/'.%*
3/16/14 value lnvesung Congress 7
Source: ?ou Can 8e A SLock MarkeL Cenlus
Several Lypes of speclal slLuauon opporLunlues (such as splnos and
rlghLs oerlngs) are dlscussed ln !oel's excellenL book ?ou Can 8e a
SLock MarkeL Cenlus"
l personally Lry Lo follow all speclal slLuauons !"#! % !"&'( )&** +&,*-
#! *,#.! /', 0//- &'1,.!2,'! /33/4!5'&!+ 3,4 +,#4
1oday l wlll dlscuss a varleLy of addluonal sources of opporLunlLy
wlLhln Lhe speclal slLuauon space
- SLraLeglc AlLernauves/M&A
- AcuvlsL lnvesLors
- lnslder 8uylng
- 13 u/C llllngs

3/17/14 value lnvesung Congress 8
- value lnvesLor's Club webslLe
- 8uybacks
- n1 10 C/k
- uuLch 1enders
- uellsungs
1oday's CpporLunlues
6789%:; 6%<=:<%>?
69@88?%?A >B8@B%8C
Source: lacLseL
3/16/14 value lnvesung Congress 9
Source: leedly
6<@:<8A%9 :;<8@?:<%B86 :?D EF:
3/16/14 value lnvesung Congress 10
SLraLeglc AlLernauves and M&A
AnnouncemenL LhaL a company ls conslderlng
or acuvely seeklng Lo make a ma[or change ln
Lhelr buslness
Selllng a dlvlslon
Selllng enure company
lnformauon sources: CaplLal lC, 8loomberg,
lacLseL, and Coogle AlerLs
3/16/14 value lnvesung Congress 11
Source: CaplLal lC
Source: Coogle
3/16/14 value lnvesung Congress 12
Lxamples
Case SLudy: Mlndspeed
Mlndspeed 1echnologles (MSu)
ueslgner and developer of
communlcauon semlconducLor
soluuons
Announced ln Aprll 2013 LhaL Lhey
had hlred a nanclal advlsor Lo asslsL
ln a revlew of sLraLeglc alLernauves
ManagemenL even dlsclosed LhaL
Lhey had been approached by
poLenual buyers
lnLrlnslc value was $3.00+/share
MarkeL Cap (M):
$119.4
Shares
CuLsLandlng (M):
43.2
3/16/14 value lnvesung Congress 13
SLraLeglc AlLernauves Case SLudy
1hls lnformauon was avallable nearly slx
monLhs ln advance, glvlng people plenLy of
ume Lo nd and research Lhe opporLunlLy
Source: CaplLal lC
3/16/14 value lnvesung Congress 14
8esulL
Mlndspeed was boughL ouL ln november aL nearly
a 70 premlum Lo Lhe prevlous closlng prlce
Source: Coogle llnance
3/16/14 value lnvesung Congress 13
:9<%B%6< %?B86<>@6
3/16/14 value lnvesung Congress 16
AcuvlsL lnvesLors
use Lhelr equlLy ownershlp of a corporauon Lo
puL publlc pressure on managemenL
Cen propose speclc suggesuons for value
creauon or requesL a seaL on Lhe company's 8oard
of ulrecLors
1helr lnuence can be a caLalysL for company
acuons LhaL unlock subsLanual value
3/16/14 value lnvesung Congress 17
Pow 1o llnd CpporLunlues
lnformauon sources: CaplLal lC, 8loomberg,
lacLseL, and Coogle AlerLs
Source: Coogle
3/16/14 value lnvesung Congress 18
Case SLudy: xyraLex
ln CcLober 2012, 8aker SLreeL lnlually led
a 13u dlscloslng a x81x posluon (Lhen aL
14) aL ad[usLed $6.30/share
1he followlng !anuary, Lhey led anoLher
13u LhaL showed Lhey now owned 23 of
x81x shares
Also senL a publlc leuer wlLh Lhls llng Lo
Lhe 8oard of ulrecLors LhaL made Lhe case
for why Lhe company's sLock was
slgnlcanLly undervalued, and suggesLed
several alLernauves Lo recufy Lhe slLuauon
MarkeL Cap (M): $230
/18v: 0.7
Shares
CuLsLandlng (M):
27.7
Source: SLC.gov
3/16/14 value lnvesung Congress 19
AcuvlsL Case SLudy
ln Aprll of 2013, 8aker SLreeL was granLed Lwo
seaLs on Lhe x81x board
ShorLly aer, Lhe company sLaLed ln a llng
LhaL lL had formed a SLraLeglc Commluee Lo
evaluaLe posslble alLernauves
1bos, tbls oppottoolty coolJ bove beeo foooJ
tbtooqb o 1J u/C scteeo, o sttoteqlc oltetoouves
scteeo, ot oo ocuvlst scteeo
3/16/14 value lnvesung Congress 20
8esulL
8esulL: ln uecember 2013, less Lhan a year from
Lhe lnlual leuer, xyraLex was acqulred aL a
roughly 30 premlum Lo lLs lasL closlng prlce
lncludlng Lhe speclal dlvldend pald aL Lhe end of 2012,
Lhe LoLal shareholder reLurn was over 100 ln [usL
over a year
Source: Coogle llnance
3/16/14 value lnvesung Congress 21
%?6%D8@ G=H%?A
3/16/14 value lnvesung Congress 22
lnslder 8uylng
When lnslders (generally Lhe mosL
knowledgeable people abouL a glven company)
acqulre sLock, lL can be a bulllsh slgn
lndlcaLes Lhey belleve Lhe sLock Lo be undervalued
Acuons speak louder Lhan words- many managemenL
Leams LouL Lhelr company, buL fewer are wllllng Lo rlsk
Lhelr own money on lL
lf you nd a hlgh quallLy company, lnslder
buylng ls a sLrong slgnal LhaL Lhe currenL prlce ls
auracuve
3/16/14 value lnvesung Congress 23
Pow 1o llnd
Senlor managemenL ls requlred Lo reporL all
Lransacuons Lo Lhe SLC (lorm 4)
lnformauon sources: lnslderscore.com.
lnsldercow.com, secform4.com, sec.gov 8SS
feed, CaplLal lC, 8loomberg, lacLseL, and
Coogle AlerLs
ltee foooce websltes (socb os oboo lloooce) olso ptovlJe tbls
lofotmouoo, bot tbey ote qeoetolly less telloble
3/16/14 value lnvesung Congress 24
Source: SLC.gov
Source: lnslderscore.com
3/16/14
value lnvesung Congress 23
Lxamples
Case SLudy: 8adlanL Loglsucs
ln november 2012, Lhe CLC of
LransporLauon servlces company
8adlanL Loglsucs (8LC1), 8ohn Craln,
led a lorm 4 dlscloslng Lhe purchase
of addluonal shares of sLock
noLable because Lhe sLock was near
mulu-year lows
8y buylng aggresslvely, he lndlcaLed hls falLh
ln Lhe company's fuLure
A buyback (anoLher useful slgnal
dlscussed laLer) was also announced
around Lhls ume
MarkeL Cap (M): $43.7
Lv/lCl: 8.3
Shares
CuLsLandlng (M):
36
Source: SLCform4.com
8LC1 lnslder 8uylng PlsLory
lurLhermore, Craln had a hlsLory of maklng
savvy and opporLunlsuc purchases
Also purchased when sLock was near all-ume lows
ln 2009 and 2010
Source: SLCform4.com
3/16/14 value lnvesung Congress 27
2009 lnslder urchases and 8esulLs
WlLhln monLhs of hls 2009/2010 purchaess, 8LC1 was a 4-bagger
Anyone who recognlzed Lhls would have vlewed hls november 2012
buylng as a very bulllsh slgnal
Source: lacLseL
3/16/14
value lnvesung Congress 28
8esulLs: Second 1lme Around
8esulL: anyone who recognlzed Lhe dlp as a
buylng opporLunlLy has been handsomely
rewarded over Lhe pasL 17 monLhs
Source: Coogle llnance
3/16/14 value lnvesung Congress 29
PlsLory 8epeaLs lLself
1wo blLes aL Lhe apple
Source: lacLseL
3/16/14
value lnvesung Congress 30
IJ DKA L%;%?A6
3/16/14 value lnvesung Congress 31
13 u/C llllngs
SLC llng LhaL requlres reporung of ownershlp
changes by anyone who holds more Lhan 3
of a publlcly-Lraded securlLy
1racklng Lhese llngs can alerL you when
smarL shareholders nd a company auracuve
enough Lo Lake a subsLanual sLake ln lL
3/16/14 value lnvesung Congress 32
Pow 1o llnd 1hem
lnformauon sources: lnslderscore.com, CaplLal
lC, 8loomberg, lacLseL, SLC.gov 8SS feed,
Coogle AlerLs
Source: lnslderscore.com
value lnvesung Congress 33
uullzlng 13u/C llllngs Lo ?our AdvanLage
Cnce you see a shareholder wlLh a sLrong
Lrack record Laklng a 3+ posluon, lL's oen
worLh spendlng some ume undersLandlng
whaL Lhe lnvesLmenL Lhesls ls
uo your own work: everyone ls wrong aL umes, lf
you're noL comforLable wlLh Lhe slLuauon [usL walL
for Lhe nexL opporLunlLy
1here are no called sLrlkes on Wall SLreeL"
3/16/14 value lnvesung Congress 34
Case SLudy: SLarLek
SLarLek, lnc. (S81)
rovlder of buslness process
ouLsourclng servlces
ln March 2012, a 13u llng lndlcaLed
LhaL Lhe rlveL lund had Laken a 19
sLake ln Lhe company
8oseJ oo ltlvets sttooq ttock tecotJ, lt moJe seose fot loJlvlJools to
tty to ooJetstooJ tbelt teosooloq ooJ see lf tbey oqteeJ
MarkeL Cap (M):
$33.8
Lv/lCl:
n/a
Shares CuLsLandlng
(M):
13.2
11M 8evenues (M): $220M
L8l1uA Margln 8
Source: SLC.gov
3/16/14
value lnvesung Congress 33
A very Cheap 8uslness
lL was qulckly apparenL LhaL Lhe buslness was
lndeed very cheap
Lv/11M normallzed L8l1uA* = 1.4
S81 was also Lradlng well below Langlble book
value (0.3x), provldlng subsLanual downslde
proLecuon and mlnlmlzlng Lhe rlsk of permanenL
caplLal loss
3/16/14 value lnvesung Congress 36
*normallzed L8l1uA based o 8 L8l1uA marglns
8esulL
8esulL: anyone who Look Lhe ume Lo
undersLand Lhe slLuauon was rlchly rewarded
S81 has more Lhan Lrlpled slnce Lhe llng daLe
1be stock coolJ bove olso beeo foooJ by ooyooe toooloq tbe loslJet boyloq
scteeos JlscosseJ eotllet, os tbe 5k1 cO wos olso boyloq otoooJ tbe some ume
Source: Coogle llnance
3/16/14
value lnvesung Congress 37
B:;=8 %?B86<>@M6 9;=G C8G6%<8
3/16/14 value lnvesung Congress 38
value lnvesLor's Club webslLe
lnvesLmenL webslLe where hlgh-quallLy value
and speclal slLuauon ldeas are shared on a
dally basls (hup://www.valuelnvesLorsclub.com/value2/)
lL requlres a membershlp, buL guesLs can access
all ldeas 43 days aer Lhelr lnlual posung daLe
Many Lheses remaln fully lnLacL even aer Lhls delay
lor example, Mlndspeed (whlch l myself found on
vlC) could have been seen and proLed from by a
guesL
3/16/14 39
G=HG:9N
3/16/14 value lnvesung Congress 40
8uyback
Cccurs when a company decldes Lo
repurchase lLs own shares on Lhe open markeL
Llke lnslder buylng, lL oen lndlcaLes LhaL
managemenL belleves Lhe sLock Lo be
undervalued
3/16/14 value lnvesung Congress 41
Pow 1o llnd
lnformauon sources: CaplLal lC, 8loomberg,
lacLseL, and Coogle AlerLs
3/16/14 value lnvesung Congress 42
compooles osoolly lssoe o ptess teleose ofet tbe 8ootJ opptoves o sbote
tepotcbose ptoqtom, so o oews seotcb wlll olso toto op mooy televoot tesolts
Source: lacLseL
Case SLudy: lranklln Covey
ln !une 2012, Lralnlng and
consulung servlces provlder
lranklln Covey (lC) lnluaLed
a $10 M buyback
lnexpenslve sLock prlce
(abouL 8.3x cash ow for a
growlng, hlgh quallLy
buslness)
MarkeL Cap (M):
$140.3
Lv/lCl:
12.8
Shares
CuLsLandlng (M):
13.6
3/16/14 value lnvesung Congress 43
8esulL
8esulL: Lhe comblnauon of sLrong execuuon
(leadlng Lo lncreased lnvesLor demand) and
fewer shares ouLsLandlng (reduced supply)
have had a very favorable eecL on Lhe
sLock prlce - a roughly 133 galn
Source: Coogle llnance
3/16/14
value lnvesung Congress 44
?< IOPQKN
3/16/14 value lnvesung Congress 43
n1 10-C/k
llled when a company cannoL submlL lLs
requlred quarLerly or annual reporL by Lhe
SLC's deadllne ln a umely manner
1hls dlsrupuon can lnduce a shorL-Lerm
markeL panlc LhaL can provlde bargaln
opporLunlues for value lnvesLors
lmporLanL LhaL Lhe resLaLemenL does noL
maLerlally lmpacL Lhe lnLrlnslc value of Lhe
buslness
3/16/14 value lnvesung Congress 46
Pow 1o llnd
Source: SLC.gov
3/16/14 value lnvesung Congress 47
lnformauon
sources: sec.gov
8SS feed, CaplLal
lC, 8loomberg,
lacLseL, and
Coogle AlerLs
Case SLudy: ulllgenL 8oard Member Servlces
ulllgenL 8oard Member Servlces (ulL nZ)
8oard communlcauon Lool provlder
Lradlng ln new Zealand (Lhough also
reglsLered wlLh SLC because managemenL
ls based ln Lhe uS)
Mlsclassled Lhe umlng of revenue
recognluon leadlng Lo a resLaung of
nanclals
1hls was rsL announced ln AugusL 2013
Was lnlually supposed Lo be compleLed ln
mld-uecember 2013, buL laLer announced
LhaL Lhls would be delayed due Lo Lhe
complexlues of Lhe process
Announced free cash ow would noL change
MarkeL Cap
(M uSu):
$483.1
Lv/lCl:
14.3
Shares
CuLsLandlng
(M):
122.3
3/16/14 value lnvesung Congress 48
8esulLs of lnablllLy Lo llle on 1lme
As a resulL, ulL dropped nearly 30
Source: 8loomberg
3/16/14 value lnvesung Congress 49
Sello ls Cverdone - A 8ally lollows
As oen occurs, Lhe sello proved overdone
and ulL rallled sLrongly soon aer
Source: 8loomberg
3/16/14 value lnvesung Congress 30
D=<9R <8?D8@
3/16/14 value lnvesung Congress 31
uuLch 1ender
Speclallzed Lype of buyback
Company specles Lhe prlce range aL whlch Lhey
are wllllng Lo repurchase shares
Shareholders are Lhen lnvlLed Lo Lender Lhelr
sLock, lf deslred, aL any prlce wlLhln Lhe range
Wlll Lhen buy sLock aL lowesL prlce LhaL allows rm Lo
Lhelr deslred share quanuLy
3/16/14 value lnvesung Congress 32
Pow 1o llnd
lnformauon sources: CaplLal lC, 8loomberg,
lacLseL, and Coogle AlerLs
Source: Coogle
3/16/14 value lnvesung Congress 33
Case SLudy: 1ucows
1ucows (1Cx)
Canadlan lnLerneL servlces company
wlLh a rapldly growlng and valuable
hldden asseL called 1lng
Whlle Lhe company dld noL look
lncredlbly cheap on an Lv/lCl basls, lL
was very cheap because of Lhe value of
1lng
Pave successfully execuLed several
uuLch 1ender oers ln recenL years
ln november 2012, 1Cx announced a
Lender Lo repurchase up Lo 6.3 M shares
ln Lhe end, Lhe company boughL back over
9 of Lhelr shares ouLsLandlng
1he move was parucularly accreuve because
1Cx purchased Lhem aL a 7 dlscounL Lo Lhelr
currenL markeL value
MarkeL Cap (M):
$61.3
Lv/lCl:
12.9
Shares
CuLsLandlng (M):
11.1
3/16/14 value lnvesung Congress 34
8esulL
8esulL: smarL caplLal allocauon and Lhe markeL's
reallzauon of Lhe value ln 1lng has helped 1Cx
more Lhan double from Lhe daLe Lhe Lender oer
was announced
Source: Coogle llnance
3/16/14 value lnvesung Congress 33
D8;%6<%?A6
3/16/14 value lnvesung Congress 36
uellsungs
Cccurs when company ls removed from Lhe exchange
on whlch Lhey were prevlously Lradlng
noL ln compllance wlLh lndex llsung requlremenLs
Cen causes Lhe markeL Lo fear a serlous problem aL
Lhe company, as well as forced selllng by lndex funds
and sLrlcL-mandaLe muLual funds
lnformauon sources: sec.gov 8SS feed, CaplLal lC,
8loomberg, lacLseL, and Coogle AlerLs
5ell-o[s fot tecbolcol teosoos (oot bosloess
teloteJ) ofeo cteote excelleot boyloq
oppottoolues
3/17/14 value lnvesung Congress 37
A CurrenL CpporLunlLy: Avld 1echnology
Avld 1echnology (Avlu)
rovlder of dlglLal medla
conLenL creauon soluuons
lncorrecLly accounLed for
cerLaln soware revenue
componenLs, prompung an
accounung resLaLemenL
Pave noL reporLed nanclal resulLs
slnce Lhe 3
rd
quarLer of 2012
lorced Lo dellsL from Lhe nASuAC
MarkeL Cap (M):
$263
Lv/lCl:
8.8
Shares
CuLsLandlng (M):
38.9
3/16/14 value lnvesung Congress 38
1he CpporLunlLy resenLs lLself
Company's ln Lhe dark" sLaLus, coupled wlLh an audlLor change
and compleuon delay announcemenL, led Lo a 40 sell-o early
Lhls year
1he day before Lhe dellsung, Lhe sLock wenL from $6.80 Lo $4.93 for
non-fundamenLal reasons
Many funds cannoL own a plnk sheeL sLock, and so are forced Lo sell
regardless of prlce
Source: Coogle llnance
3/16/14 value lnvesung Congress 39
1he 8oad Less 1raveled
Whlle mosL lnvesLors avold companles LhaL do
noL le Lhelr nanclal sLaLemenLs (whlch ls why
we follow Lhem), a close look uncovered a
poLenually auracuve slLuauon
8uslness wlLh hlgh barrlers Lo enLry
lree cash ow posluve
Secular Lallwlnds
Auracuve valuauon

3/16/14 value lnvesung Congress 60
we tblok tbls ls oo ooJetvoloeJ speclol sltoouoo oppottoolty
Avld 1echnology - 1he 8uslness
8uslness wlLh hlgh barrlers Lo enLry
Avlu's hlgh-quallLy vldeo edlung soware ls hlghly
regarded and wldely used by edlung professlonals
Was used ln Lhe edlung of a number of famous lms
(such as Lhe lotJ of tbe kloqs), as well as by mosL
academy award nomlnees
1he complexlLy of Lhe soware and large
quanuues of people lnvolved ln Lhe edlung
process make swlLchlng cosLs hlgh
3/16/14 value lnvesung Congress 61
lo sbott, Avlu ls tbe Jomlooot ployet lo o vety outocuve olcbe
umng Lhe leces 1ogeLher
lnvesLors have enough lnformauon from Lhe 8-k llngs Lo
bulld a model desplLe noL havlng currenL nanclals
lree cash ow posluve
Cash ow generauon masked by cosLs assoclaLed wlLh
ongolng accounung resLaLemenL
LsumaLes based on managemenL's commenLs lmply a cosL
of around $8-12 M per quarLer
Company has also esumaLed LhaL Lhey've burned $22-24 M
ln cash over Lhe pasL year
Applylng Lhls burn raLe Lo Lhe annual resLaLemenL cosL
ylelds posluve lCl
3/16/14 value lnvesung Congress 62
ltovlJes compellloq evlJeoce ooJetlyloq bosloess bos temoloeJ sttooq omlJ cotteot totmoll
8uy 8efore Lhe Cycle 8eglns
Secular Lallwlnds
Arrlval of 4k (ulLra Pu) Lelevlslon seLs should be
Lhe caLalysL for Lhe nexL cycle of Lelevlslon
upgrades
CeLs Lhe name '4k' from lLs resoluuon, compared Lo
Lhe currenL 1080 sLandard
new sLandard for Lelevlslon wlll ln Lurn creaLe new
sLandards for Lhe quallLy of complemenLary lndusLrles
such as Avlu's
3/16/14 value lnvesung Congress 63
1bls Jyoomlc sboolJ Jtlve tbe oext toooJ of looovouoo wltblo Avlus
ptoJoct lloe ooJ tepolte costomets to opqtoJe to keep op wltb ooe oootbet
4k - 1he nexL lndusLry Cycle
4k Adopuon
romlnenL 1v hardware provlders
are already sLarung Lo roll ouL 4k
producLs
AL Lhls year's Consumer LlecLronlcs
Show, nearly every ma[or
manufacLurer announced a 4k dlsplay
for lmmlnenL release
AlLernauve enLerLalnmenL opuons
are followlng sulL
neullx ls shooung Lhe nexL season of
lLs hlL show Pouse of Cards" ln 4k
3/16/14 value lnvesung Congress 64
Cheap valuauon MeLrlcs
Auracuve valuauon meLrlcs
0.37x Lv/Sales
1.31x malnLenance revenues
0.64x Lv/normallzed gross margln
10x Lv/normallzed free cash ow
3/16/14 value lnvesung Congress 63
ocb ls sobstoouolly below lts set of compotoble compooles
uownslde roLecuon
WhaL's lL worLh?
SubsLanual downslde
proLecuon
uslng a conservauve 3
operaung margln and
10x lCl muluple, we
Lhlnk Lhe sLock ls worLh
aL leasL $7 per share
(roughly Lhe currenL
prlce)
3/16/14 value lnvesung Congress 66
11M 8evenue 363
x CperaLlng Margln 3
L8l1 28.3
-lnLeresL expense 1.0
-Laxes 2.0
neL lncome 23.3
+u&A 30
-Capex 28
normallzed lCl 27.4
- Shares CuLsLandlng 39
lCl per Share 0.70
x MulLlple 10
value per Share 7.03
Ao loJostty leoJloq sofwote ptovlJet wltb 55-60X qtoss motqlos sboolJ
eoslly be oble to ouolo tbls opetouoq motqlo lo o ootmollzeJ eovltoomeot
oLenual upslde
Powever, peer companles
have double-dlglL operaung
marglns and we see no
sLrucLural reason why Avlu
shouldn'L have Lhe same
lf we assume lL can achleve
a 10 operaung margln,
shares would be worLh
nearly $14
WlLh revenue growLh, Avld
could earn over $2/share
We agaln conservauvely
assume an lCl muluple of
10x
3/16/14 value lnvesung Congress 67
11M 8evenue 363
x CperaLlng Margln 10
L8l1 36.3
-lnLeresL expense 1.3
-Laxes 3.0
neL lncome 32.0
+u&A 30
-Capex 28
normallzed lCl 34.6
- Shares CuLsLandlng 39
lCl per Share 1.40
x MulLlple 10
value per Share 14.00
1bls lmplleJ Avlu woolJ be oboot o Jooble ftom tbe
cotteot ptlce of otoooJ 56.80
8uyouL CandldaLe
Avlu's susLalnable compeuuve advanLages
should also make lL a poLenually lnLeresung
LargeL for an acqulrer
1he company lnsuLuLed a rlghLs oerlng ln !anuary
LhaL we Lhlnk may have been ln regards Lo a poLenual
Lakeover oer
8elden ls maklng acqulsluons ln Lhe lndusLry
3/16/14 value lnvesung Congress 68
1be klqbts wlll oot pteveot o tokeovet of tbe compooy. nowevet, tbe
klqbts moy coose sobstoouol Jllouoo to o petsoo ot qtoop tbot
ocpoltes 15X ot mote of tbe commoo 5tock ooless tbe klqbts ote ftst
teJeemeJ by tbe 8ootJ of ultectots of tbe compooy.
PlsLory Cen 8epeaLs lLself
A cycllcal buslness, buL buylng durlng cycle
upswlngs has hlsLorlcally been very proLable
3/16/14 value lnvesung Congress 69
1be lock of foooclols bos cooseJ o posluoo of moxlmom pesslmlsm, bot
we tblok oo lofecuoo polot ls opptoocbloq sooo
8eglnnlng
of Pu cycle
8eglnnlng
of 4k cycle?
1hank ?ou


Ooesuoos?

3/16/14 value lnvesung Congress 70