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Msg  165017 of 178727  at  2/14/2020 3:59:52 PM  by


My first pass at the results

Q4 was in line with expectations. Guidance was ok but was hoping for slightly larger numbers. That said guidance went against analyst consensus expectations which expected lower numbers. Things are moving in the right direction, but it will take about two years to play out IMO. Q4 results and guidance indicate revenue declines are decelerating toward zero but this will take several years. 2019 saw revenue declines of 1042m. 2020 looks like somewhere around 500m, given the guidance. The large government contract wins probably will not move the revenue needle until 2021.

EBITDA is about flat. I see declines in TTM gross margin $ (even though GM% is increasing) offsetting cost reductions. I see GM$ reversing course as revenue declines decelerate. 2019 GM$ dropped 257m over 2018. I estimate 2020 GM$ drop in the 150m range, all dependent on the top line.

FCF gains, in addition to A above, should go up with interest savings but are offset by a bump up in capex, my guess is due to, in part, preparing to service the government contracts.

All this is a first pass although any changes must fit the guidance unless there is a mistake of course

The bear case here is some believe the deceleration in declining revenues is temporary therefore over time EBITDA and FCF will suffer which is probably why some analyst estimates are at $11 or less. They would probably argue that they are treading water so to speak in 2019.

The bull case being revenue will continue to decelerate, and on a TTM basis it has been since 2Q19, so it deserves a higher multiple which is also reflected by some analyst estimates and my own estimate. The recent DoD 1.6B award and a few other smaller awards (470m with SSA) should accelerate the positive revenue trend toward zero over time assuming their tech vision starts bearing more results in the private sector.

JS holds his cards very close, so close in fact it seems to push some analysts to see more of a bear possibility. Many only see the negative if it’s left up to them to fill in the blanks, it’s human nature so until JS decides to clear the fog, target prices will remain all over the place.

I am a little surprised at the integration costs going into 2020. I’ve seen these costs become recurring which is why I look at actual FCF and Ebitda. I’ve gone through a preliminary analysis and see real FCF at 3.06B vs 2019 3.05B and EBITDA at 8.8B vs 2019 8.77B.

A summary of metrics are at

The interactive model is updated for longer term inputs at

The Survey is open for anyone’s target prices now that the guidance is out. I’ve added a few of the analyst’s updates and the summary tab show results back to 1Q18. Survey is at

Other than that, I see no excitement going forward until minds are changed one way or the other. My bet is on the bull side, just need more clarity (How many times have I said that to people 😊)


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Msg # Subject Author Recs Date Posted
165023 Re: My first pass at the results jeffbas 0 2/14/2020 11:03:08 PM

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