Just a quick blog post to update our previously posted long thesis on CCUR (and, consequently, one of its main portfolio holdings, SEAC, which we are also long separately). Both CCUR and SEAC reported earnings in late August (see here and here). First, the headlines for CCUR:
CCUR turned in a profitable final quarter for its 2019 fiscal year (ending June 30th), with revenues growing a massive 72% sequentially and 3,300%(!) year over year. In addition, Q4 of FY 2019 represented the second consecutive profitable quarter for the company, with CCUR recording a total of $2.2 million, or $0.25/share, in profits over the past two quarters. Not too shabby for a stock that was trading at just $3.43 as of the date of the earnings release. The Merchant Cash Advance (or MCA) business, acquired just 7 months ago, certainly seems to be paying dividends for the company, as the company noted that "[CCUR] recorded an expense of $730,000 representing the change in fair value of contingent consideration due to the seller of the LuxeMark [MCA] assets...given better than expected performance since the LuxeMark acquisition earlier in calendar year 2019."
In our original writeup, we pegged CCUR's fair value at 1.25X book value, implying a target price of $7.47/share (or double the then market price). Since then, book value per share has declined ever so slightly from $5.98/share to $5.87/share due a decline in other comprehensive income (i.e., changes in unrealized gains and losses with respect to CCUR's investment portfolio during Q4 of FY 2019). Thus, our target price is now $7.33/share (versus $7.47/share in the writeup), or 101% above the current market price of $3.65/share. In short, we still major upside potential for CCUR shares.
Next, the headlines for SEAC:
As a reminder, as of June 2019, CCUR owned 1.285 million shares of SEAC, whose stock has appreciated 50% (from $2/share to $3/share) since the above earnings release. In the release, the company announced that revenues for Q2 of FY 2020 (ending July 31st) reached $18.8 million, up from just $8.5 million in the prior quarter, representing sequentially growth of over 120% (and year over year growth of 58%). More importantly, SEAC narrowed its quarterly loss to almost breakeven (negative $174K, to be precise) from a massive $9 million loss in the prior year quarter. The promotion of Yossi Aloni to the permanent President and Chief Executive Officer role seems to bode well for SEAC shares, as he has primarily orchestrated the current turnaround. Management is targeting "a business model that could result in sustainable double-digit revenue growth and non-GAAP operating income growth of 12-15% in 2 to 3 years". While it is too early in the turnaround process to render a verdict on SEAC yet, recent results appear promising.
Both CCUR and SEAC also have active stock repurchase programs: (x) CCUR repurchased a total of 188,510 shares during the fiscal third quarter for a total of $703,000; a total of 414,607 shares under the authorized program remain available for repurchase as of March 31, 2019; and (y) SEAC initiated a $5 million share repurchase program in June 2019, subsequently purchasing 100,000 shares for a total consideration of approximately $140,000 in the quarter.
Below is the tale of the tape (or tale of the charts, as it were) for both stocks in 2019:
DISCLOSURE: Long CCUR and SEAC.