We were fortunate to attend the VALUEx Vail conference this week and had the opportunity to present a few investment ideas and meet a collection of great investors and wonderful people.
I didn't see anything in the presentation about Siri's debt. The last 10-Q said that they have 8.7 billion of long term debt, plus another 1.5 billion of other liabilities.
The 10-Q also said that net income is $265 million, which sounds like paying off the debt is going to be hard.
David - good comment and it's a valid concern. I mentioned the debt as one of the key risks/negative narratives in one of the slides. The company will come out of the transaction decently levered (3.9x), but nothing too crazy given the cash generation and stability of the business. I don't worry about the ability to repay and/or roll over the debt as it matures, and the company will likely delever to sub-3.5x by end of next year even with buybacks, but there's a good chance that any debt they roll over will be higher rate and the incremental interest expense will chip into free cash flow to some degree. This is why I've assumed a much smaller amount of repurchases as a % of free cash flow than previous years.
Really great, consise, compelling presentation. I do wonder with the discount closing what selling pressure there will be prior to and after the merger.
Great stuff as always guys.
Thanks Larson, glad you enjoyed it
I didn't see anything in the presentation about Siri's debt. The last 10-Q said that they have 8.7 billion of long term debt, plus another 1.5 billion of other liabilities.
The 10-Q also said that net income is $265 million, which sounds like paying off the debt is going to be hard.
David
David - good comment and it's a valid concern. I mentioned the debt as one of the key risks/negative narratives in one of the slides. The company will come out of the transaction decently levered (3.9x), but nothing too crazy given the cash generation and stability of the business. I don't worry about the ability to repay and/or roll over the debt as it matures, and the company will likely delever to sub-3.5x by end of next year even with buybacks, but there's a good chance that any debt they roll over will be higher rate and the incremental interest expense will chip into free cash flow to some degree. This is why I've assumed a much smaller amount of repurchases as a % of free cash flow than previous years.
nobody pays off debt in Western credit based financial systems - ever.
Really great, consise, compelling presentation. I do wonder with the discount closing what selling pressure there will be prior to and after the merger.
Thanks Tom, appreciate it. It'll be interesting to see the dynamics post-transaction. Wouldn't surprise me to see quite a bit of volatility!