Noble Capital Markets Research Report Friday, November 1, 2024
Companies contained in today’s report:
1·800·Flowers.com, Inc. (FLWS)/OUTPERFORM – A Slow Start, But On Track Toward Growth
ACCO Brands (ACCO)/OUTPERFORM – 3Q24 First Look
Eledon Pharmaceuticals (ELDN)/OUTPERFORM – Islet Cell Transplant Results Are A Breakthrough For Diabetes
Haynes International (HAYN)/MARKET PERFORM – Lowering Estimates to Reflect Anticipated Negative Revenue Impact of Boeing Strike
NN Inc (NNBR)/OUTPERFORM – Accelerating on its Transformation
1·800·Flowers.com, Inc. (FLWS/$8.32 | Price Target: $14)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Jacob Mutchler jmutchler@noblefcm.com |
A Slow Start, But On Track Toward Growth
Rating: OUTPERFORM
Q1 results. The company reported Q1 revenue of $242.1 million, 3% lower than our estimate of $249.7 million. Adj. EBITDA loss of $27.9 million was below our estimate of negative $23.5 million. The lackluster results were partially attributed to roughly $3 million in wholesale revenue being pushed into Q2. A bright spot in Q1 was the effective management of input costs, which contributed to a gross margin improvement of 20 basis points from the prior year period.
Positioned for revenue growth. In our view, the company is positioned to benefit from several favorable developments, including expanded product offerings, a growing same-day delivery footprint and effective cost management of input prices. We believe that revenue trends should improve in coming quarters as inflation trends moderate and the general economy improves.
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ACCO Brands (ACCO/$4.9 | Price Target: $12)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
3Q24 First Look
Rating: OUTPERFORM
3Q24. ACCO is beginning to see the fruits of its cost reduction and infrastructure initiatives with 3Q24 results in line with expectations and overall sales trends improving in the third quarter compared to the first half of the year. Gross margin expanded by 20 basis points-the seventh consecutive quarter of improvement-and SG&A costs were down 7% y-o-y.
Details. Revenue of $420.9 million was down 6% on a reported basis y-o-y, with comp sales off 5%, reflecting softer back-to-school demand as well as for certain office products, although technology accessories saw growth. We had projected revenue of $418 million. Reported operating income was $26.3 million. Adjusted operating income was $44.7 million, down from $46 million in 3Q23. GAAP net income was $9.3 million, or $0.09/sh, with adjusted net income of $22.5 million, or $0.23/sh. In 3Q23, ACCO reported net income of $14.9 million, or $0.15/sh, and adjusted net income of $23.1 million, or $0.24/sh. We were at $0.15/sh and $0.24/sh, respectively.
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Eledon Pharmaceuticals (ELDN/$4.65 | Price Target: $10)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Islet Cell Transplant Results Are A Breakthrough For Diabetes
Rating: OUTPERFORM
Islet Cell Transplant Patients Achieve Insulin Independence. A clinical study using tegoprubart as an immunosuppressant in islet cell transplantation was presented at a medical meeting on Tuesday, October 29, 2024. The first two subjects receiving islet cell transplants with tegoprubart as an immunosuppressant were able to regulate their blood glucose and achieve insulin independence. We see this as a significant advance that could enable islet cell transplantation to become a treatment for diabetes.
Tegoprubart Prevented The Toxicities That Have Led To Failure. Previous attempts to transplant healthy islet cells to restore insulin production have been unsuccessful. This is partly due to side effects of tacrolimus, the immunosuppression drug that is effective but toxic to the kidney and islet cells. This trial used tegoprubart instead of tacrolimus, resulting in islet cells surviving, engrafting, and producing insulin at effective levels.
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Haynes International (HAYN/$60.36)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Lowering Estimates to Reflect Anticipated Negative Revenue Impact of Boeing Strike
Rating: MARKET PERFORM
Boeing strike. In fiscal year 2023 and for the first nine months of fiscal 2024, aerospace represented 49% and 51% of Haynes’ net revenue. A significant portion of the company’s aerospace sales are dependent on the number of aircraft built by The Boeing Company and Airbus. On September 13, Boeing union members went on strike after rejecting a contract proposal from the company. Boeing has extended a pause on component shipments for several of its programs. While we are hopeful that the strike will be resolved soon, we expect it to have a negative impact on Haynes’ fourth quarter of fiscal year 2024 which ended September 30 and the first quarter of fiscal year 2025 which ends on December 31, 2024. Seasonally, the first quarter of the fiscal year is generally the company’s weakest.
Updating estimates. We have lowered our 2024 EBITDA and EPS estimates to $67.4 million and $2.46, respectively, from $68.5 million and $2.52. The revisions reflect weaker demand in the aerospace segment and lower sales expectations for the fourth quarter. Our expectations for weaker demand extend into fiscal year 2025, and we have lowered our EBITDA and EPS estimates to $82.5 million and $3.35, respectively, from $99.5 million and $4.15. Our revisions reflect lower shipment, revenue, and margin expectations, particularly during the first half of the year.
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NN Inc (NNBR/$3.15 | Price Target: $6)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Accelerating on its Transformation
Rating: OUTPERFORM
Adjusted Results. Adjusted net loss during the quarter was $2.5 million, or $0.05 per share compared to adjusted net income of $0.1 million or $0.01 last year. Adjusted EBITDA was $11.6 million, or a margin of 10.2%, compared to last year’s $14.5 million or 11.6%. Both items were impacted by the Company’s rationalization of plants undergoing turnarounds and the sale of the Lubbock plastic plant operations.
Accelerated Transformation. Management has been accelerating its transformation initiatives, as the Company continues to win business, nearing the lower end of guidance for the year, and is continuously undergoing cost reduction, including $2 million in annualized cost savings enacted in the third quarter. New business wins bring over higher margins for NN at over 20% compared to the legacy business at around 11%, providing higher gross margins overtime as legacy contracts become more offset.
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Noble Capital Markets Research Report Thursday, October 30, 2024
Companies contained in today’s report:
FAT Brands (FAT)/OUTPERFORM – Challenged Operational Results; But Moving Forward With Value Creation
NN Inc (NNBR)/OUTPERFORM – A First Look at the Third Quarter
Perfect Corp (PERF)/OUTPERFORM – Developing Additional Revenue Growth Catalysts
FAT Brands (FAT/$5.34 | Price Target: $15)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Challenged Operational Results; But Moving Forward With Value Creation
Rating: OUTPERFORM
Overview. FAT Brands 3Q24 results were below our expectations, mostly due to underperformance at the Smokey Bones brand. Development deals continued strongly, although new store openings are below plan as franchisees have taken a more conservative stance on new openings. Management continues to move forward with value creation efforts, specifically with Twin Peaks, and is hopeful of announcing additional developments in the coming weeks.
3Q24 Results. Revenue of $143.3 million was up 31.1% y-o-y but was down from $152 million reported in 2Q24. We had estimated $159.9 million. Adjusted EBITDA totaled $14.1 million, down from $21.9 million in 3Q23 and $15.7 million in 2Q24. FAT Brands reported a net loss of $44.8 million, or $2.74/sh, compared to a net loss of $24.7 million, or $1.59/sh, last year. We had forecasted a net loss of $32 million, or $1.88/sh.
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Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A First Look at the Third Quarter
Rating: OUTPERFORM
Focused on Business Wins and Costs. NN is continuing to achieve business wins with $15 million in new business wins in the quarter, totaling $49 million year-to-date, near the bottom of its $55-70 million range for the year. The Company’s transformation program is moving faster than anticipated, as evidenced by the new business growth, along with operational efficiency and structural cost reductions. An example of the latter being the previous sale of the plastics plant in July and closure of the Dowagiac plant to move operations to China, further lowering costs.
3Q Results. Third quarter results were slightly below expectations with net sales of $113.6 million, below last year’s $124.4 million and our estimate of $125 million, due to the sale of the Lubbock operations. Excluding the sale, rationalized volume at plants undergoing turnarounds, and a customer settlement, sales were down 0.5%. Adjusted EBITDA was $11.6 million, down from $14.5 million last year and our $13.9 million estimate. With decisions such as the plant closure and higher margins of new business, we expect improved performance in the short term.
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Perfect Corp (PERF/$1.86 | Price Target: $5)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Developing Additional Revenue Growth Catalysts
Rating: OUTPERFORM
Strong Q3 results. The company demonstrated attractive 11% revenue growth in Q3 with revenue of $16.1 million, slightly better than our estimate of $15.7 million. Adj. EBITDA and adj. net income for the quarter were both better than our expectations, due to lower-than-expected marketing, G&A, and R&D expenses.
Revenue drivers. The company’s B2C segment drove Q3 revenue growth, while the B2B segment revenue was more flat, as some of the company’s enterprise clients have faced economic challenges. Importantly, the company’s B2C web-based offering should bolster B2C revenue growth. As for B2B, interest rate cuts should have a positive impact on clients’ enterprise software budgets. Moreover, the company could increase contract values through new services, such as Perfect GPT.
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Noble Capital Markets Research Report Wednesday, October 30, 2024
Companies contained in today’s report:
GDEV Inc (GDEV)/OUTPERFORM – Q3 Preview: Upside Surprise Potential
Perfect Corp (PERF)/OUTPERFORM – B2C Drives Q3 Beat
GDEV Inc (GDEV/$37.69 | Price Target: $70)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Q3 Preview: Upside Surprise Potential
Rating: OUTPERFORM
Q3 preview. We estimate the company’s upcoming Q3 revenue and adj. EBITDA to be $103.0 million and $4.9 million, respectively. There is the prospect for an upside surprise, however, particularly for adj. EBITDA. We believe that the company’s ongoing strategy for improving operational efficiency could be reflected in this quarter. The company is expected to report Q3 results in the second week in November.
Enhancing efficiency. During the company’s Q2 earnings call, management highlighted its focus on efficiency in its user acquisition strategy. We believe the company’s efficient use of marketing spend, particularly in areas that provide sufficient returns, could indicate upside surprise potential for adj. EBITDA, not only from our estimate, but also the Street consensus which is $8.5 million.
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Perfect Corp (PERF/$1.88 | Price Target: $5)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
B2C Drives Q3 Beat
Rating: OUTPERFORM
Q3 beat. Perfect Corp. reported better-than-expected Q3 results. The company reported Q3 revenue of $16.1 million, slightly better than our estimate of $15.7 million. Adj. EBITDA of $1.2 million and adj. net income of $3.2 million were also better than our estimates of a loss of $0.3 million and a gain of $1.6 million, respectively. Figure #1 Q3 Results highlights how the performance compared with our forecast.
B2C leading the way. Management noted that the company’s B2C segment was the key revenue growth driver in the quarter. Moreover, the company is poised to capitalize on an expanding B2C opportunity set with a web-based service offering. Notably, web-based services offer higher margins than the company’s mobile app offerings, due to the lack of Android and iOS app store fees.
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Noble Capital Markets Research Report Tuesday, October 29, 2024
Companies contained in today’s report:
Alliance Resource Partners (ARLP)/OUTPERFORM – Third Quarter Results Negatively Impacted by Operational Challenges
Alliance Resource Partners (ARLP/$25.5 | Price Target: $28)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Third Quarter Results Negatively Impacted by Operational Challenges
Rating: OUTPERFORM
Third quarter financial results. Alliance reported third quarter EBITDA and earnings per unit (EPU) of $170.7 million and $0.66, respectively, compared to $227.6 million and $1.18 during the prior year period. We had forecast adjusted EBITDA of $220.5 million and $0.82, respectively. Revenue declined 3.6% to $613.6 million because of lower coal sales prices which declined 2.1% due in part to lower export pricing in Appalachia. Operating expenses increased 13.5% due to a longwall move and challenging mining conditions at all three Appalachia operations that reduced recoveries and increased costs. The partnership also experienced a $2.3 million loss related to its equity investment in Francis Energy.
Adjusting estimates. We have lowered our 2024 EBITDA and EPU estimates to $760.1 million and $3.25, respectively, from $813.6 million and $3.60. Our estimates reflect lower coal sales and higher segment adjusted EBITDA expense per ton. Additionally, we have modestly lowered our 2025 EBITDA and EPU estimates to $831.7 million and $3.40, respectively, from $835.2 million and $3.43.
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Noble Capital Markets Research Report Thursday, October 24, 2024
Companies contained in today’s report:
FreightCar America (RAIL)/OUTPERFORM – Raising Price Target Based on Higher Revenue and Margin Growth Expectations
The ODP Corporation (ODP)/OUTPERFORM – A Varis Sale
Travelzoo (TZOO)/OUTPERFORM – Acceleration In Growth Expected In 2025
FreightCar America (RAIL/$12.73 | Price Target: $14.75)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Raising Price Target Based on Higher Revenue and Margin Growth Expectations
Rating: OUTPERFORM
Pure play manufacturer. FreightCar America, Inc. is a diversified manufacturer of railroad cars and rail car components. The company designs and manufactures a broad variety of railroad car types for the transportation of bulk commodities and containerized freight products primarily in North America. The company reported strong second-quarter financial results and appears poised for greater scale and margin expansion as it increases its market share and expands its product suite.
On the path to greater profitability. While the company has broadened and diversified its product portfolio, we expect further growth into new areas such as producing tank cars which is expected to support margin expansion. Growth in the conversion and rebody business, along with increased parts sales, could enhance gross margins and reduce the company’s top-line sensitivity to the cyclicality associated with new railroad car orders. Additionally, we think FreightCar America will continue to improve its cost profile through productivity and efficiency gains.
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The ODP Corporation (ODP/$30.9 | Price Target: $35)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Jacob Mutchler jmutchler@noblefcm.com |
A Varis Sale
Rating: OUTPERFORM
A Sale. The ODP Corporation reported that on October 18, 2024, the Company sold its Varis Division to an affiliate of Arising Ventures. The Company did not release the terms of the agreement. We expect to see additional detail on the Company’s third quarter earnings call.
Details. ODP is retaining a minority interest of 19.9% after the sale. Under the terms of the agreement, the Company will fund up to $4 million of expenses that Varis may incur following the transaction date until December 31, 2025, and has no further obligations to contribute capital to Varis. The terms of the sale did not result in a materially different impact on the Company’s financial statements than previously estimated.
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Travelzoo (TZOO/$14.6 | Price Target: $18)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Joshua Zoepfel jzoepfel@noblefcm.com |
Acceleration In Growth Expected In 2025
Rating: OUTPERFORM
Steady as she goes. Third quarter results were in line with our estimates, with revenue of $20.1 million (down 2.4% year over year), versus our estimate of $20.9 million. Adj. EBITDA was $4.6 million (up 19.3% year over year), better than our estimate of $3.8 million by almost 21% due to lower than expected sales & marketing expenses.
Swing toward revenue growth. Advertising revenue was down slightly to $19.7 million from $20.0 million in Q2, with membership revenue up from $1.2 million in Q2 to $1.4 million in Q3. The membership revenue increase reflected improved subscriptions with Jack’s Flight Club, which was expanded into Canada.
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Noble Capital Markets Research Report Wednesday, October 23, 2024
Companies contained in today’s report:
Comstock Inc. (LODE)/OUTPERFORM – Making Significant Progress on Multiple Fronts
EuroDry (EDRY)/OUTPERFORM – Expecting Weak Third Quarter Financial Results but a Strong Finish to the Year
Euroseas (ESEA)/OUTPERFORM – Raising Estimates on New Vessel Deliveries and Charters
Comstock Inc. (LODE/$0.488 | Price Target: $2.5)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Making Significant Progress on Multiple Fronts
Rating: OUTPERFORM
Pending transaction with SBC Commerce. Comstock recently executed an indicative term sheet for $325 million, or $315 million net of transaction fees, in funding through SBC Commerce LLC (SBCC), a U.S. based private equity group. The transaction is contingent on final due diligence and applicable regulatory approvals and is expected to close in tranches over the next several months. When the transaction was announced, it contemplated SBCC taking equity ownership positions in each business unit commensurate with the amount of its investment. Increasingly, it appears that a portion of the transactions could include debt which could have implications for our valuation which is currently based on the terms summarized in the original release.
Third quarter 2024 achievements. Comstock achieved significant milestones during the third quarter, including executing an exclusive license and cooperative research and development agreement with the Department of Energy’s National Renewable Energy Laboratory, executing an international license agreement for three industry scale fuel hubs, recording first revenues from the sale of recycled aluminum and announcing new contracts with new customers for the decommissioning and disposal of solar panels.
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EuroDry (EDRY/$19.48 | Price Target: $29)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Hans Baldau hbaldau@noblefcm.com |
Expecting Weak Third Quarter Financial Results but a Strong Finish to the Year
Rating: OUTPERFORM
Updating estimates. We lowered our 2024 net loss and loss per share estimates to $(2.3) million and $(0.85), respectively, from $(1.8) million and $(0.65). Our revisions were driven by an increase in dry-docking expenses during the third quarter and modestly lower average shipping rates. While we are forecasting a third quarter loss, we expect a relatively strong fourth quarter. We forecast 2025 EBITDA and EPS of $37.3 million and $5.65, respectively.
Market fundamentals. The outlook for the remainder of 2024 remains positive, particularly in the Capesize market which is expected to benefit from Atlantic iron ore and bauxite exports. Rates for Panamax and smaller vessels are expected to remain stable at current rates. Disruptions in the Red Sea have caused re-routing of vessels around Africa which have increased ton-miles. In 2025, bulker earnings may be impacted by outcomes of the Red Sea situation and global economic growth and infrastructure spending, particularly with respect to China.
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Euroseas (ESEA/$43.74 | Price Target: $67)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Hans Baldau hbaldau@noblefcm.com |
Raising Estimates on New Vessel Deliveries and Charters
Rating: OUTPERFORM
New Time Charter Contracts: Euroseas executed new time charter contracts for three feeder vessels, M/V Tender Soul, M/V Dear Panel, and M/V Symeon P. All three contracts are for a minimum period of 34 months and a maximum period of 36 months at a rate of $32,000/day. The charter for M/V Tender Soul is considerably higher than its previous $17,000 and is expected to take effect in early to mid-December. M/V Dear Panel and M/V Symeon P. are the last two of the company’s nine-vessel newbuilding program and are expected to be delivered at the beginning of January 2025. These charters are expected to contribute about $79 million of EBITDA for the minimum contract period, increasing the company’s 2025 coverage to roughly 63%.
Picking its sweet spot. The company has made it a point to build out its fleet with a focus on smaller feeder vessels, insulating itself from historical growth in the industry orderbook. Furthermore, Euroseas has invested in eco-friendly vessels as the market continues to push for more environmental regulations. We believe these new profitable charters highlight the success of this two-pronged strategy.
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Noble Capital Markets Research Report Tuesday, October 22, 2024
Companies contained in today’s report:
Direct Digital Holdings (DRCT)/MARKET PERFORM – A Pretty Big Reset
Direct Digital Holdings (DRCT/$2.61)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
A Pretty Big Reset
Rating: MARKET PERFORM
Getting back on track. The company made a substantial step forward by becoming current on its filings. On Tuesday, October 15th, it reported full year 2023, first quarter 2024, and second quarter 2024 results. The delay in its filings was due to the resignation of the company’s previous auditor, Marcum.
Issues unrelated to the audit. During the first half of the year, the company’s Sell-side revenue was disrupted when its largest client paused service, which coincided with a lawsuit with an activist shareholder. The client subsequently reconnected to the company’s SSP, but volumes have not yet fully recovered. This severely disrupted Q2 results and appears will have a lingering effect for the balance of the year.
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Noble Capital Markets Research Report Monday, October 21, 2024
Companies contained in today’s report:
Perfect Corp (PERF)/OUTPERFORM – An AI Company Positioned to Accelerate Revenue Growth
Perfect Corp (PERF/$1.94 | Price Target: $5)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
An AI Company Positioned to Accelerate Revenue Growth
Rating: OUTPERFORM
Initiating coverage with Outperform rating. We are initiating coverage on Perfect Corp., an AI technology company, with an Outperform rating and $5 price target. The prospect of additional interest rate cuts should lead to an improving environment for the company to grow its enterprise client base, leading to enhanced revenue growth and improving margins.
Seizing B2B and B2C opportunities. The company’s AI and AR technology powers its market leading virtual try-on service, used by beauty brands and retailers alike for skincare products and makeup. The company also leverages its technology to offer a suite of products direct to consumers through its apps. These include capabilities like AI-enhanced photo editing and generative AI.
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Noble Capital Markets Research Report Friday, October 18, 2024
Companies contained in today’s report:
Bit Digital (BTBT)/OUTPERFORM – Refining Third Quarter Estimates
Comtech Telecommunications (CMTL)/MARKET PERFORM – Announces Transformation into Pure Play Satellite and Space Communications Company
SelectQuote (SLQT)/OUTPERFORM – Debt Reduction Strategy Becomes Tangible
Bit Digital (BTBT/$3.88 | Price Target: $5.5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Refining Third Quarter Estimates
Rating: OUTPERFORM
Management Comments. We had an opportunity to speak with management to further refine our go forward projections following the Enovum acquisition announcement. Management noted the mining business continues to be impacted post halving with reduced BTC production. Bit Digital mined 165.5 BTC in 3Q24, down from 244.2 BTC in 2Q24 and 410.7 BTC in 1Q24. For its GPU Cloud Services, management provided no new update on the Boosteroids contract or on its key customer and has seen roughly steady income throughout the third quarter. We had anticipated additional deployments under the key customer contract in 2024.
New Estimates. With the comments made from management, we refined our estimates to reflect the operating environment on both the segments. The lower BTC production results in a drop in 3Q24 mining revenue to $10.3 million from a prior $13.5 million, while our GPU segment revenue falls to $12.5 from a prior $18 million. For the third quarter, we now estimate total revenue of $23.2 million from our prior model of $31.9 million. Net loss is now $2.5 million or a loss of $0.02/sh from a prior estimate of net income of $1.5 million or $0.01/sh. Adj. EBITDA is now $6.7 million down from $10.6 million. For the year, we estimate total revenue of $120.5 million, down from our prior $133.2 million, net income of $37.5 million or EPS of $0.30, down from $42.1 million or $0.33, and adj. EBITDA of $78.7 million, down from $82.8 million.
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Comtech Telecommunications (CMTL/$3.54)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Announces Transformation into Pure Play Satellite and Space Communications Company
Rating: MARKET PERFORM
Transformation. Last night, Comtech issued a press release announcing its Board of Directors and management team are executing a strategy to transform Comtech into a pure-play satellite and space communications company and provided a capital structure update.
Strategic Alternatives. A key element of the plan is the potential sale of the Company’s Terrestrial & Wireless Networks business. According to the Board, “given the strength and value we see in our T&W segment, we initiated a process to explore strategic alternatives for this business to unlock value for Comtech shareholders.” If T&W can fetch peer group type multiples, this business segment alone would be worth well in excess of Comtech’s current enterprise value, in our view.
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SelectQuote (SLQT/$2.1 | Price Target: $5)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Debt Reduction Strategy Becomes Tangible
Rating: OUTPERFORM
De-levering effort takes a step forward. On October 15, the company completed its previously announced securitization of a portion of its commission receivables, resulting in $100 million of newly issued securitized notes. With the proceeds, the company is paying down $100 million of its existing term loans. Importantly, the company also extended the maturities of the balance of its term loans to late 2027 (previously maturing in early 2025).
Attractive financing option. The average effective interest rate on the newly issued securitized loans is roughly 8.5%, significantly better than the company’s term loan effective rate (nearly 15%). Moreover, the newly created asset backed securities are investment grade and the company could offer the product to third-party asset managers in the future. Given that it has roughly $1 billion in commission receivables, we believe securitization is a powerful debt reduction tool for the company
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Noble Capital Markets Research Report Thursday, October 17, 2024
Companies contained in today’s report:
Alliance Resource Partners (ARLP)/OUTPERFORM – ARLP To Report Third Quarter Financial Results on October 28
Bitcoin Depot (BTM)/OUTPERFORM – 3Q24 Preview: Fine Tuning Estimates
Comtech Telecommunications (CMTL)/MARKET PERFORM – NT 10-K, Fourth Quarter Challenged
Tonix Pharmaceuticals (TNXP)/OUTPERFORM – NDA Filing Submission For Tonmya Beats Expected Timeframe
Alliance Resource Partners (ARLP/$24.94 | Price Target: $28)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
ARLP To Report Third Quarter Financial Results on October 28
Rating: OUTPERFORM
Crude oil and natural gas prices. Because ARLP has hedge-free exposure to commodity prices within its oil and gas royalty business, we revised our model to reflect updated commodity prices. We have revised our 2024 average crude oil and natural gas price estimates to $75.97 per barrel and $2.37 per Mcf, respectively, from $77.66 and $2.32. Our average 2025 crude oil and natural gas price estimates were lowered to $68.41 per barrel and $3.17 per Mcf from $71.39 and $3.22.
Updating estimates. We have trimmed our 2024 EBITDA and EPS estimates to $813.6 million and $3.60, respectively, from $816.1 million and $3.61. Our 2025 EBITDA and EPS estimates were lowered to $835.2 million and $3.43, respectively, from $841.0 million and $3.47. Beyond hedge-free exposure to crude oil and natural gas, ARLP’s ownership of bitcoin may also influence results. As of June 30, Alliance owned 452 bitcoins. On June 30, the price of a bitcoin closed at $62,678.29 compared to $63,329.50 on September 30. The bitcoin price closed at $67,640.84 on October 16. While there is a futures market, we generally do not try to predict the price of bitcoin or how many coins the partnership may sell during any given quarter.
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Bitcoin Depot (BTM/$1.53 | Price Target: $7)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
3Q24 Preview: Fine Tuning Estimates
Rating: OUTPERFORM
Tweaking Q3 forecast. In anticipation of the company’s upcoming Q3 release, we are fine tuning our forecast, by tweaking down our Q3 revenue forecast from $134.0 million to $130.6 million, but maintaining our adj. EBITDA estimate of $7.8 million, as illustrated in Figure #1 Q3 Forecast Revisions.
A conservative approach. Our revision reflects the very near term adverse revenue impact from new kiosks. The company should add 900 kiosks in the second half of 2024. Installed kiosks typically ramp up volume and revenues over a 6 to 9 month period. We are taking a conservative approach to the revenue generation of newly installed kiosks.
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Comtech Telecommunications (CMTL/$4.39)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
NT 10-K, Fourth Quarter Challenged
Rating: MARKET PERFORM
NT 10-K. Yesterday, after the market close, Comtech filed with the Securities & Exchange Commission a Form 12b-25 disclosing the Company will not be filing its 10-K annual statement in a timely manner. In addition, management noted it anticipates a significant change in its fiscal 2024 GAAP results, primarily due to lower-than-expected performance during its fiscal fourth quarter.
4Q24 Performance. According to the filing, the Company anticipates a significant change in its fiscal 2024 GAAP results of operations, as compared to fiscal 2023, primarily due to lower-than-expected performance during its fourth quarter of fiscal 2024 in its Satellite and Space Communications segment, including non-cash impairment charges related to goodwill associated with the segment and long-lived assets pertaining to its steerable antenna operations located in the United Kingdom. The aggregate non-cash impairment charge is estimated to range between $60.0 million and $70.0 million.
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Tonix Pharmaceuticals (TNXP/$0.16 | Price Target: $4)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
NDA Filing Submission For Tonmya Beats Expected Timeframe
Rating: OUTPERFORM
NDA Submission Starts The FDA Review Clock. Tonix announced that it has submitted the New Drug Application (NDA) for Tonmya, its proprietary formulation of cyclobenzaprine hydrochloride for treating fibromyalgia. As discussed in our Research Note on October 11, this is slightly ahead of our expected timeframe of late October.
NDA Acceptance May Be Received Before YE2024. The FDA usually conducts a preliminary evaluation to determine if an application is complete and meets requirements for its full review. An “acceptance for filing” notification is usually made within 60 days of the submission, with the FDA’s statutory date for completing the review under the Prescription Drug User Fee Act (known as the PDUFA.
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Noble Capital Markets Research Report Wednesday, October 16, 2024
Companies contained in today’s report:
Bit Digital (BTBT)/OUTPERFORM – Expanding on HPC Through Enovum
V2X (VVX)/OUTPERFORM – Raising Price Target
Bit Digital (BTBT/$3.56 | Price Target: $5.5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Expanding on HPC Through Enovum
Rating: OUTPERFORM
New Service. Bit Digital’s acquisition of Enovum provides a new vertical within the HPC business in AI/HPC colocation services. As noted in our previous report, the new business will vertically integrate Bit Digital’s HPC business and complement the current GPU Cloud service segment.
Colocation Expansion and Synergies. The new service offers longer contract terms (4-12 years versus 2-5) and higher gross margin (70-80% versus 65-75%) than the current GPU Cloud service. With a potential 8MW expansion, annualized EBITDA can climb to $13 million, and the additional 20MW expansion can further climb it to $45 million. The data centers also can be extended to its GPU Cloud service through storing procured GPUs, offering capacity to customers on a just-in-time basis, or to boost margins instead of hosting third party GPUs. We believe the scalability and potential synergies present an exciting vertical now and in the future.
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V2X (VVX/$62.95 | Price Target: $72)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Raising Price Target
Rating: OUTPERFORM
Raising Price Target. We are maintaining our Outperform rating on VVX shares but raising our price target to $72 from a prior $62. We believe V2X is well positioned for continued operating success. Recent results and contract awards highlight the power of V2X, in our view. At our new price target. VVX shares would trade at 0.8x our projected 2024 revenue and 10.6x our projected adjusted EBITDA for the year. These multiples are still below the peer group averages.
Rationale. On Monday, VVX shares closed at $65.14, above our $62 price target. Year-to-date, VVX shares have appreciated 40.3%, compared to a 10.5% rise over the same period for the Russell 2000 index. Given the business momentum exhibited in the first half of 2024 and our projections for the remainder of the year, we believe the momentum will continue for V2X.
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Noble Capital Markets Research Report Tuesday, October 15, 2024
Companies contained in today’s report:
Bit Digital (BTBT)/OUTPERFORM – Vertically Integrating with Acquisition of Enovum
Seanergy Maritime (SHIP)/OUTPERFORM – Outlook for Capesize Vessel Market Remains Favorable, Increasing Our 2024 and 2025 Estimates
Bit Digital (BTBT/$3.29 | Price Target: $5.5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Vertically Integrating with Acquisition of Enovum
Rating: OUTPERFORM
HPC Business Integrated. Bit Digital announced the acquisition of Enovum Data Centers for approximately CAD $62.8 million (USD $46 million), consisting of CAD$56 million in cash and 1.62 million shares being issued to Enovum’s management. The transaction will vertically integrate the Company’s HPC business with a Tier 3 datacenter and a pipeline of expansion site opportunities. In addition to vertically integrating and potential expansion, the acquisition provides Bit Digital with potential synergies for margin expansion and operational flexibility.
Who is Enovum? Enovum is an owner, operator, and developer of HPC datacenters based in Montreal, Canada. The company has a 4MW Tier 3 datacenter in Montreal powered by renewable hydroelectricity, a benefit to Bit Digital’s carbon-free strategy. The site is leased through 2036 with two five-year extension options, and is fully leased to more than a dozen customers with it expected to generate CAD$10 million of revenue in 2025.
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Seanergy Maritime (SHIP/$10.41 | Price Target: $14)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Hans Baldau hbaldau@noblefcm.com |
Outlook for Capesize Vessel Market Remains Favorable, Increasing Our 2024 and 2025 Estimates
Rating: OUTPERFORM
Updating Estimates. We are increasing our 2024 EBITDA and EPS estimates to $102.1 million and $2.56, respectively, from $101.1 million and $2.35. Additionally, we have increased our 2025 EPS estimates to $102.0 million and $2.39 from $101.3 million and $2.00. Our revised estimates reflect greater operating days and modestly higher time charter rates, along with lower interest expense.
Capesize Vessel Market Fundamentals. We think the outlook for the Capesize shipping market will remain favorable through 2025. Many of the same 2024 tailwinds that have benefited the Capesize market are expected to continue, including strong demand growth for dry bulk commodities, continued disruptions in the Red Sea, and a historically low orderbook for Capesize vessels. Additionally, lower interest rates could boost global economic trade and benefit industry participants.
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Noble Capital Markets Research Report Friday, October 11, 2024
Companies contained in today’s report:
AZZ Inc (AZZ)/OUTPERFORM – Tempering Our Expectations; Rating Remains an Outperform
Steelcase (SCS)/OUTPERFORM – A New 10b5-1 Plan
Tonix Pharmaceuticals (TNXP)/OUTPERFORM – A New Era For Tonix Begins With The Tonmya NDA Filing
AZZ Inc (AZZ/$77.3 | Price Target: $98)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Tempering Our Expectations; Rating Remains an Outperform
Rating: OUTPERFORM
Second quarter financial results. For the fiscal year (FY) 2025, AZZ reported second quarter adjusted net income of $41.3 million or $1.37 per share compared to $37.2 million or $1.27 per share during the prior year period and our estimate of $40.8 million or $1.35 per share. AZZ maintained its FY 2025 sales guidance range of $1.525 billion to $1.625 billion, lifted the lower end of adjusted EBITDA to a range of $320 million (from $310 million) to $360 million, and increased adjusted diluted EPS expectations to a range of $4.70 to $5.10 from $4.50 to $5.00.
Updating estimates. We have lowered our 2025 EBITDA and EPS estimates to $343.0 million and $4.95, respectively, from $350.3 million and $5.00. Our estimates reflect seasonality in the second half of the year. Our 2026 EBITDA and EPS estimates have been reduced to $361.2 million and $5.45, respectively, from $366.8 million and $5.70. Our 2026 estimates reflect a slower ramp in revenue from the new facility under construction in Washington, Missouri.
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Steelcase (SCS/$12.6 | Price Target: $16)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A New 10b5-1 Plan
Rating: OUTPERFORM
A New Plan. Yesterday, after the market closed, Steelcase filed an 8-k with the Securities & Exchange Commission reporting the Company has entered into a stock repurchase agreement with an independent third party broker. The agreement was established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. We believe share repurchases are a good use of excess cash on the balance sheet at current prices.
Details. The broker is authorized to repurchase up to 1.5 million shares of the Company’s common stock on behalf of the Company during the period from October 11, 2024 through December 20, 2024, subject to certain price, market and volume constraints specified in the agreement. At yesterday’s closing price, acquiring the shares would cost approximately $19 million and the 1.5 million shares represent approximately 1.6% of the outstanding Class A shares. The Company has $79.9 million remaining under its $100 million share repurchase plan authorization.
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Tonix Pharmaceuticals (TNXP/$0.14 | Price Target: $1.5)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
A New Era For Tonix Begins With The Tonmya NDA Filing
Rating: OUTPERFORM
We Expect The NDA Filing For Tonmya Approval To Be Submitted Shortly. We anticipate the NDA submission for Tonmya to be announced around the end of October 2024. This would start the FDA review process, which we expect to lead to marketing approval in mid-2025. In July, Tonmya received Fast Track Review, a designation that gives advantages in the regulatory pathway. With a pending NDA submission for a drug that could be used by millions of patients, we believe the company’s progress has not been reflected in the stock price.
Fast Track Review Is A Significant Distinction. The Fast Track Review designation from the FDA is awarded to drugs that can make significant impact on serious medical conditions. The designation provides important benefits including increased communications with the FDA, as well as eligibility for Accelerated Approval and Priority Review. We expect the application for Accelerated Approval to be filed shortly after the NDA is completed. This could shorten the FDA’s review period by up to 4 months.
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Noble Capital Markets Research Report Thursday, October 10, 2024
Companies contained in today’s report:
AZZ Inc (AZZ)/OUTPERFORM – Second Quarter Financial Results Exceed Expectations
SKYX Platforms (SKYX)/OUTPERFORM – Raises Capital at Favorable Price
Unicycive Therapeutics (UNCY)/OUTPERFORM – Results From Phase 1 Trial Testing UNI-494 In Acute Kidney Injury Announced
AZZ Inc (AZZ/$81.57 | Price Target: $100)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Second Quarter Financial Results Exceed Expectations
Rating: OUTPERFORM
Second quarter financial results. For the fiscal year (FY) 2025, AZZ reported second quarter adjusted net income of $41.3 million or $1.37 per share compared to $37.2 million or $1.27 per share during the prior year period and our estimate of $40.8 million or $1.35 per share. Adjusted EBITDA increased 4.4% to $91.9 million, roughly in line with our estimate, representing 22.5% of sales versus 22.1% of sales during the second quarter of FY 2024. While sales of $409.0 million were modestly below our $410.5 million estimate, AZZ generated a 25.3% gross margin as a percentage of sales compared to 24.4% during the prior year period and our estimate of 24.4%. AZZ maintained its FY 2025 sales guidance range of $1.525 billion to $1.625 billion, lifted the lower end of adjusted EBITDA to a range of $320 million (from $310 million) to $360 million, and increased adjusted diluted EPS expectations to a range of $4.70 to $5.10 from $4.50 to $5.00.
Debt reduction. During the first half of FY25, AZZ generated operating cash flow of $119.4 million and reduced debt by $45 million. Management expects to reduce debt by at least $100 million during the fiscal year compared to prior expectations of $60 million to $90 million. At quarter end, the company’s net leverage was 2.7x trailing twelve months EBITDA and cash and cash equivalents amounted to $2.2 million.
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SKYX Platforms (SKYX/$1.25 | Price Target: $5)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Raises Capital at Favorable Price
Rating: OUTPERFORM
Scores additional funding. This week, the company announced that it secured $11 million in additional funding through the issuance of convertible preferred shares. At $2 per share, the company raised the funds at a premium to the current share price, which has fluctuated around $1 per share in recent months. The shares will pay an 8% annualized dividend (quarterly installments) and are convertible to common shares at $2 per share.
Strategic relationship. Lance Shaner is the leading investor in the preferred share offering, which includes several other company insiders. Notably, Mr. Shaner, who chairs SKYX’s Hotel Advisory Board, is the CEO of Shaner Hotel Group, a leading developer of Marriot hotels. In our view, the vote of confidence given by Mr. Shaner could signal potential hotel partnerships for the company in the future and serves as continued validation of the company’s technology by industry insiders.
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Unicycive Therapeutics (UNCY/$0.36 | Price Target: $7)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Results From Phase 1 Trial Testing UNI-494 In Acute Kidney Injury Announced
Rating: OUTPERFORM
Phase 1 Trial Tested Safety, Tolerability, and Pharmacokinetics At Multiple Doses. Unicycive announced completion of the Phase 1 trial testing UNI-494, its product in development for protecting against acute kidney injury. The study was designed to determine tolerability, safety, and pharmacokinetic data for the design of Phase 2. Unicycive plans to present the study at an upcoming scientific meeting.
UNI-494 Is In Development For Preventing Acute Kidney Injury. UNI-494 is a proprietary formulation of nicorandil to protect against the mitochondrial dysfunction and prevent pathways that lead to cell death in acute kidney injury. The proprietary formulation increases the half-life and makes it practical for administration, while maintaining its properties as a nicotinamide ester derivative and selective activator of the ATP-sensitive mitochondrial potassium channel.
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Noble Capital Markets Research Report Wednesday, October 9, 2024
Companies contained in today’s report:
Comtech Telecommunications (CMTL)/MARKET PERFORM – Ex CEO Endorses Dissident Slate
Steelcase (SCS)/OUTPERFORM – A Global Leader with Room to Grow
Traws Pharma (TRAW)/OUTPERFORM – Phase 1 Study In Influenza Shows Positive Data With Plans To Move To Phase 2
Comtech Telecommunications (CMTL/$4.46)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Ex CEO Endorses Dissident Slate
Rating: MARKET PERFORM
Peterman Endorsement. Former CEO Ken Peterman, who was terminated for “conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements” this past March, has publicly declared his personal endorsement for the full slate of director nominees proposed by Michael Porcelain for the Company’s upcoming 2024 Annual Meeting of Stockholders, adding another layer of intrigue to the dissident efforts.
Reasons. Mr. Peterman notes serious concerns about many decisions made by the current Board, including the June 2024 refinancing, and what he terms the Board’s lack of critical domain expertise in Comtech’s core satellite and NG 911 markets.
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Steelcase (SCS/$12.78 | Price Target: $16)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Global Leader with Room to Grow
Rating: OUTPERFORM
Initiating Research Coverage. We are initiating research coverage of Steelcase Inc. with an Outperform rating and a $16 price target. Already the global leader in the office furniture marketplace, we believe there is a substantial opportunity to capture additional wallet share. The Company’s research driven approach is a competitive differentiator, in our view.
Largest, But Room to Grow. Despite being the market leader, we believe Steelcase can benefit from a rising market share in a growing market. Steelcase’s overall market share is relatively modest, providing opportunity for Steelcase to capture additional market share, while secular trends are driving overall growth in the market, with the worldwide Office Furniture space projected to grow at a 7.1% CAGR through 2032.
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Traws Pharma (TRAW/$4.8 | Price Target: $7)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Phase 1 Study In Influenza Shows Positive Data With Plans To Move To Phase 2
Rating: OUTPERFORM
Positive Results Announced From Tivoxavir Marboxil Study. Positive data was announced from the Phase 1 clinical trial testing safety and pharmacokinetics of Tivoxavir Marboxil, Traw’s drug in development for seasonal and pandemic influenza. The study showed tolerability and bloodstream levels within the expected range, supporting use as a one-time treatment for flu. The dose for Phase 2 has been selected with the trial planned to begin in 1H2025.
Tivoxavir Inhibitor A Protease Needed For Viral Replication. Tivoxavir acts through inhibition of CAP-dependent endonucleases (CEN), a highly conserved influenza protein needed for the synthesis of its viral mRNA. Tivoxavir was designed for use across a broad range of flu viruses including the H5N1 bird flu virus. Preclinical studies have shown potent inhibition of drug-resistant influenza viruses.
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Noble Capital Markets Research Report Tuesday, October 8, 2024
Companies contained in today’s report:
Comstock Inc. (LODE)/OUTPERFORM – GenMat Acquisition Positions Comstock to Leverage the Power of AI
Euroseas (ESEA)/OUTPERFORM – Updating Estimates Due to New Time Charter Contract for the M/V Jonathan P
Townsquare Media (TSQ)/OUTPERFORM – Ignite’s Its Growth
Comstock Inc. (LODE/$0.51 | Price Target: $2.6)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
GenMat Acquisition Positions Comstock to Leverage the Power of AI
Rating: OUTPERFORM
Acquisition of Quantum Generative Materials (GenMat). Comstock executed an agreement to acquire Quantum Generative Materials, including GenMat’s artificial intelligence materials discovery platform, along with retaining most of the associated technical team. A holding company controlled by Mr. Deep Prasad, GenMat’s founder, will assume control of GenMat’s space-oriented business. GenMat will become a 100%-owned subsidiary of Comstock Inc. and will continue development and commercialization of its physics-based artificial intelligence products and services.
Transaction terms. GenMat will pay $1 million to Mr. Prasad in exchange for the assignment of the rights and related intellectual property. Comstock will make the following payments: 1) $250,000 on the closing date, 2) $250,000 on November 15, 2024, and 3) $500,000 on March 31, 2025. Under terms of the agreement, Mr. Prasad is entitled to a contingent earn-out payment equal to 3% of either the consideration paid in connection with a liquidation of GenMat in excess of $100 million or funds raised by GenMat upon completion of an initial public offering valuing GenMat in excess of $100 million.
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Euroseas (ESEA/$44.25 | Price Target: $64)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Hans Baldau hbaldau@noblefcm.com |
Updating Estimates Due to New Time Charter Contract for the M/V Jonathan P
Rating: OUTPERFORM
New Time Charter Contract: Euroseas Ltd. executed a time charter contract for M/V Jonathan P at a gross daily rate of $20,000 for a minimum period of 11 to a maximum period of 13 months at the option of the charterer. The M/V Jonathan is a 1,740 TEU feeder container ship. Recall that TEU is a unit of cargo capacity that is based on the volume of a 20-foot-long intermodal container that can be transferred between different carriers. The new charter is expected to commence in mid-to-late October 2024.
Profitable Rate and Improved Charter Coverage: The new time charter is expected to contribute EBITDA of ~$4.0 million during the minimum contracted period and improves 2024 and 2025 charter coverage to 96% and 52%, respectively. While the rate is lower than the previous time charter, it is above our prior 2025 rate estimate of $15,000 per day. Moreover, the contract enhances revenue visibility by locking in a profitable rate through 2025.
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Townsquare Media (TSQ/$10.44 | Price Target: $21)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Ignite’s Its Growth
Rating: OUTPERFORM
Forms a strategic partnership. The company announced that it formed a strategic partnership with SummitMedia to offer Townsquare Ignite’s digital advertising solutions to nine of its radio markets that do not overlap with Townsquare’s. We believe that the agreement highlights Townsquare’s preeminence in the digital media space. The agreement will largely kick off in first quarter 2025.
Utilizes SummitMedia’s sales force. Townsquare plans to train SummitMedia’s staff on digital sales practices, at SummitMedia’s expense. Townsquare will add relationship managers to service SummitMedia, execute campaigns, (including creative), and to provide back office support.
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Noble Capital Markets Research Report Monday, October 7, 2024
Companies contained in today’s report:
Bit Digital (BTBT)/OUTPERFORM – September Production In-line with Last Month
InPlay Oil (IPOOF)/OUTPERFORM – Tempering 2024 and 2025 Expectations; Rating Remains an Outperform
PDS Biotechnology (PDSB)/OUTPERFORM – Clinical Trial in Cervical Cancer Shows Improved Survival and Supports Use In Other Tumors
Bit Digital (BTBT/$3.37 | Price Target: $5.5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
September Production In-line with Last Month
Rating: OUTPERFORM
AI Services. Bit Digital had 256 servers actively generating revenue from its initial Bit Digital AI contract, as of September 30, 2024, and earned approximately $4.2 million of unaudited revenue from this contract during the month.
Mining Side. The Company produced 51.5 BTC in September, a 3.6% decrease from last month’s 53.4 BTC. The active hash rate was 2.43 EH/s, flat with the previous month. Management will continue to be opportunistic with miner purchases dependent upon the returns, in our view.
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InPlay Oil (IPOOF/$1.55 | Price Target: $5.5)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Tempering 2024 and 2025 Expectations; Rating Remains an Outperform
Rating: OUTPERFORM
Lower third quarter commodity prices. During the third quarter, West Texas Intermediate (WTI) crude oil prices declined 18.2% to $68.17 per barrel and averaged $75.35 per barrel. InPlay sells oil at monthly average Edmonton Par prices which are based on the price of WTI crude oil minus quality differentials, transportation, and marketing fees. Crude oil prices have risen since the end of the quarter due to heightened geopolitical risk with WTI crude oil priced at $74.45 per barrel on October 4. WTI and Henry Hub futures prices average $71.16 per barrel and $3.40 per mcf in 2025. We note that natural gas prices in Canada were weak relative to Henry Hub prices during the third quarter.
Outlook for 2025. For 2024, the company forecast average production of 8,700 to 9,000 barrels of oil equivalent per day (boe/d). We are forecasting 2024 production of 8,682 barrels of oil equivalents per day compared to our previous estimate of 8,952 boe/d due to lower third and fourth quarter expectations. We think the company may start off with a conservative 2025 plan that targets production at the upper end of 2024 guidance and have lowered our production expectations to 8,971 from 9,638 barrels of oil equivalents per day.
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PDS Biotechnology (PDSB/$3.71 | Price Target: $17)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Clinical Trial in Cervical Cancer Shows Improved Survival and Supports Use In Other Tumors
Rating: OUTPERFORM
Interim Data From Phase 2 Cervical Cancer Trial Presented. An interim analysis from the Phase 2 ImmunoCerv Trial in locally advanced cervical cancer was presented at the American Society For Radiation Oncology (ASTRO) annual meeting on October 1, 2024. Overall survival (OS) and progression free survival (PFS) showed clinically meaningful improvements over published studies. We believe this supports the efficacy of Versamune HPV in cervical cancer as well as other HPV16+ tumors in other tissues.
Study Design. The ImmunoCerv study was an investigator-initiated trial (ITT) conducted at MD Anderson Cancer Center in Houston, Texas. The study enrolled 17 patients with newly diagnosed high-risk HPV-related cervical tumors at least 5 cm in size. Patients received up to 5 doses of Versamune HPV along with standard of care chemotherapy and radiation.
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Noble Capital Markets Research Report Friday, October 4, 2024
Companies contained in today’s report:
Aurania Resources (AUIAF)/OUTPERFORM – Memoranda of Understanding Executed to Advance Nickel-Rich Placer Project in France
Information Services Group (III)/OUTPERFORM – Sharper Focus with Automation Sale
Aurania Resources (AUIAF/$0.463 | Price Target: $0.6)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Memoranda of Understanding Executed to Advance Nickel-Rich Placer Project in France
Rating: OUTPERFORM
Memoranda of Understanding. Through a wholly owned subsidiary, Aurania entered into a non-binding Memoranda of Understanding (MOU) with the Communes of Ogliastro and Nonza in Cap Corse, Northern Corsica, France for the exploitation of heavy mineral beach placers that are enriched with nickel and other metals. An accumulation of black sand comprised of awaruite and magnetite on the beaches of Albo and Nonza originated from asbestos mine waste that had previously been dumped in the Mediterranean Sea. The waste traveled up along the coast and accumulated silt at the historic ports of Albo and Nonza. Awaruite is a natural nickel-iron mineral alloy.
Placers are rich in nickel. While no resource or reserve has been established, Activation Laboratories Ltd. conducted an analysis of a heavy mineral concentrate produced by simple panning of the beach sand by hand which yielded an assay of 50.4% nickel, 0.701% cobalt, and 0.476% copper. Moreover, a Mozley gravity table concentrate of magnetic beach sand performed by SGS Laboratories yielded 40.1% nickel. At some point, we think Aurania will likely take a bulk sample for analysis.
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Information Services Group (III/$3.24 | Price Target: $5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Sharper Focus with Automation Sale
Rating: OUTPERFORM
Sale of a Unit. Wednesday, ISG announced the sale of its non-core automation unit to UST, a digital transformation solutions company, for $27 million. At closing, ISG received $20 million in cash with $4 million to be released over the next 90 days and $3 million to be released at the end of 1Q25. Proceeds will be used for reducing debt, re-investing in the business, and returning capital to shareholders. Automation contributed roughly $30 million of annual revenue, including $18 million of recurring revenue.
AI Business. With large enterprises’ increasing focus on AI, ISG is placing more emphasis in this area and we believe is poised to capitalize on future spending through its AI Advisory and Research segments. Early indications of growing demand are showing with ISG Tango’s total contract value rising at the end of the second quarter.
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Noble Capital Markets Research Report Thursday, October 3, 2024
Companies contained in today’s report:
Comstock Inc. (LODE)/OUTPERFORM – Collaborative Agreements with the Department of Energy’s National Renewable Energy Laboratory
GoHealth, Inc. (GOCO)/OUTPERFORM – Closes Acquisition After Busy September
Resources Connection (RGP)/OUTPERFORM – Post Call Commentary and Updated Model
Comstock Inc. (LODE/$0.43 | Price Target: $2.6)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Collaborative Agreements with the Department of Energy’s National Renewable Energy Laboratory
Rating: OUTPERFORM
Laying the groundwork for a successful moonshot. Comstock IP Holdings, a wholly owned subsidiary, executed an Exclusive License Agreement (ELA) and Cooperative Research and Development Agreement (CRADA) with the Alliance for Sustainable Energy, the managing and operating contractor of the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL). The agreements provide access to technologies developed by NREL and the Massachusetts Institute of Technology (MIT) to convert lignocellulosic biomass into aromatic sustainable aviation fuel (SAF). The goal is to produce the world’s first 100% renewable SAF at costs approaching parity with fossil fuels by integrating Comstock and NREL technologies.
Cooperative Research and Development Agreement. Terms include a three-year scope of work to jointly develop an integrated process based on Comstock and NREL processes and technologies to refine woody biomass into aromatic SAF and other renewable fuels. Comstock will fund the research and contribute staff, equipment, and use of its pilot facility in Wisconsin. The CRADA is expected to result in the construction of a pre-commercial pilot system to affirm requirements needed to scale-up and incorporate the resulting process into Comstock’s planned 50,000 metric ton per year commercial demonstration facility.
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GoHealth, Inc. (GOCO/$8.98 | Price Target: $22)
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Closes Acquisition After Busy September
Rating: OUTPERFORM
Acquired e-TeleQuote. On October 1, GoHealth announced that it closed on its acquisition of e-TeleQuote, one of its peers in the Medicare insurance marketplace landscape. The deal was originally announced in early September. In our view, the terms of the transaction were highly favorable to the company as the deal appears to be immediately accretive to the company’s balance sheet.
Favorable Terms. The company acquired e-TeleQuote through a creative agreement, in which it invested $5 million for a roughly 19% stake in the business through newly issued shares. At that time, the previous owner relinquished its 81% stake, leaving GoHealth as the sole shareholder. This left the company with all the assets on the e-TeleQuote balance sheet, with over $18 million in cash (including the $5 million paid by GoHealth) and over $100 million in contract assets. The company also gains almost 400 experienced agents.
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Resources Connection (RGP/$8.35 | Price Target: $15)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Post Call Commentary and Updated Model
Rating: OUTPERFORM
New Model. We believe it is informative to take a deeper dive into the operational changes being made by RGP over the past quarter. The Company has taken the challenging operating environment to create a strong platform, broaden its addressable market, deepen client relationships, and improve efficiency, all of which position the Company to capitalize on the environment once it improves, in our view.
Impact. The On Demand Talent segment is increasingly relevant in the professional staffing space. The new Consulting segment positions RGP higher up the professional services value chain, enabling RGP to play a key role in transformation strategy and execution initiatives. And the Outsourced Services segment is expanding its client base, especially among venture-backed AI startups, while also exploring cross-selling opportunities within the existing client base.
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Noble Capital Markets Research Report Wednesday, October 2, 2024
Companies contained in today’s report:
Resources Connection (RGP)/OUTPERFORM – First Look 1Q25 – Environment Remains Challenging but Green Shoots Evident
Resources Connection (RGP/$9.47 | Price Target: $15)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
First Look 1Q25 – Environment Remains Challenging but Green Shoots Evident
Rating: OUTPERFORM
Overview. While the operating environment remained challenged in 1Q25 as clients continued to delay projects, RGP made strides in evolving its business model and rebuilding its brand architecture and positioning. A full recovery should follow improving client sentiment about the economy, but the Company is seeing pockets of improvement.
1Q25 Results. Revenue came in at $136.9 million, a decline of 19.5% y-o-y, but in-line with guidance. Gross margin was 36.5%, down from 39.4% a year ago and below management’s 37.5%-38.5% guide due to lower consultant utilization and unfavorable leverage on indirect costs. RGP recorded a $3.4 million gain on a sale as well as a $3.9 million impairment charge. Net loss for the quarter was $5.7 million, or a loss of $0.17/sh, compared to net income of $3.1 million, or EPS of $0.09/sh last year. Adjusted EPS was breakeven versus EPS of $0.20/sh in 1Q24.
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Noble Capital Markets Research Report Tuesday, October 1, 2024
Companies contained in today’s report:
Aurania Resources (AUIAF)/OUTPERFORM – What to Expect for the Remainder of 2024
Traws Pharma (TRAW)/OUTPERFORM – Phase 1 Ratutrelvir Results Announced With Plans To Move To Phase 2a
Aurania Resources (AUIAF/$0.38 | Price Target: $0.6)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
What to Expect for the Remainder of 2024
Rating: OUTPERFORM
Exploration at Kuri-Yawi. Aurania is preparing for an induced polarization (IP) geophysical survey of the Kuri-Yawi gold target in Ecuador. The vendor has been selected and the survey is expected to begin in the second half of October. The survey is expected to take approximately one month to complete after which management will review the data to identify targets for a drilling program that we think could commence in the first quarter of 2025. We also believe fieldwork has continued at Crunchy Hill during the quarter.
Anaconda mapping program. Anaconda mapping of the southern and northern parts of Aurania’s Awacha porphyry copper target in Ecuador has been completed. Aurania’s team of geologists is now interpreting the data to define targets for future drilling programs. During the field program, new intrusive outcrops with typical porphyry alteration were discovered.
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Traws Pharma (TRAW/$5.88 | Price Target: $7)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Phase 1 Ratutrelvir Results Announced With Plans To Move To Phase 2a
Rating: OUTPERFORM
Phase 1 Topline Data Shows Safety and Tolerability. Traws Pharma announced results from its Phase 1 trial testing ratutrelvir, its oral protease inhibitor for COVID-19. The trial was designed to determine pharmacokinetics and safety, with results showing consistent plasma levels within the expected range with no adverse events. A Phase 2a trial is being planned to begin in 1H2025.
Ratutrelvir Could Become A Category-Leading Drug. Ratutrelvir is an inhibitor of the SARS-CoV-2 Main protease (Mpro or 3CL protease). It has demonstrated in vitro activity against the original viral strain and numerous variants, including delta and omicron. Ratutrelvir does not require co-administration of ritonavir as a metabolic inhibitor and avoids the drug-drug interactions and potential side effects. In comparison, Pfizer’s Paxlovid is a combination of its Mpro inhibitor, nirmatrelvir, with ritonavir as a metabolic (cytochrome P450) inhibitor.
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Noble Capital Markets Research Report Monday, September 30, 2024
Companies contained in today’s report:
Eledon Pharmaceuticals (ELDN)/OUTPERFORM – Virtual Roadshow Discussions Focus On Kidney Transplantation
Eledon Pharmaceuticals (ELDN/$2.49 | Price Target: $10)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Virtual Roadshow Discussions Focus On Kidney Transplantation
Rating: OUTPERFORM
Client Meetings Answered Questions About Tegoprubart. We held a Virtual Non-Deal Road Show with Eledon’s CEO, Dr. DA Gros. The discussions with clients covered tegoprubart history of development, mechanism of action, clinical trials, and its upcoming milestones. Some of the points raised and common questions are highlighted below.
The Phase 2 BESTOW Trial Completed Enrollment In August. Eledon announced the completion of enrollment for its Phase 2 BESTOW trial that tests tegoprubart against tacrolimus for prevention of kidney transplant rejection. The enrollment was completed ahead of the expected YE2024 timeframe due to higher than expected interest from the transplant surgeons.
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Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Second Quarter Financial Results Exceed Expectations; Increasing Estimates
Rating: OUTPERFORM
CoreCivic, Inc. (CXW/$12.26)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Peek into the Second Quarter
Rating: MARKET PERFORM
Second Quarter Results. Total revenue was at $490.1 million, above our forecast of $482 million and above last year’s $463.7 million. Occupancy rates helped the increase in revenue, as occupancy increased to 74.3% from 70.3% in the prior year. Management’s cost initiatives are also taking root, as net income was $19.0 million, or $0.17 per diluted share, compared to $14.8 million or $0.13 last year. We estimated net income of $14.4 million or $0.13 per diluted share.
New Contract. CoreCivic was awarded a new management contract in July from the state of Montana to house additional residents at the Company’s facilities. The Company expects that 120 additional residents will be housed in the Saguaro Correctional Facility in Eloy, Arizona. We believe the new contract with the state shows the Company’s flexibility to accommodate additional residents and demand for CoreCivic’s services.
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Euroseas (ESEA/$40.15 | Price Target: $60)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Strong Second Quarter Financial Results; Increasing Estimates
Rating: OUTPERFORM
Second quarter financial results. Euroseas Ltd. generated second quarter adjusted net income of $34.3 million or $4.92 per share compared to $29.0 million or $4.17 per share during the prior year period. Net revenues increased 23.1% to $58.7 million, while adjusted EBITDA increased 38.1% to $42.3 million. During the second quarter, the company owned and operated an average of 21.26 vessels earning an average time charter equivalent rate of $31,639 per day compared to 18 vessels earning an average time charter equivalent rate of $30,151 per day during the prior year period.
Updating estimates. We have increased our 2024 EBITDA and EPS estimates to $13.24 and $132.0 million, respectively, from $100.0 million and $9.70. We raised our 2025 EBITDA and EPS estimates to $99.4 million and $7.80, respectively, from $90.4 million and $6.80. Our revisions are based on the company’s strong second quarter financial results and higher average time charter equivalent rates in 2024 and 2025.
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Graham Corp (GHM/$27.84 | Price Target: $35)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
First Look at the First Quarter
Rating: OUTPERFORM
Strong Results. Net sales for the quarter were $50.0 million, above the prior year’s $47.6 million and in-line with our estimate of $50.0 million. Higher margin defense sales helped increase revenue as well as gross margin, as gross margin increased to 24.8% from 23.1% last year and above our forecast of 22.0%. Net income totaled $3.0 million, or $0.27/sh, compared to $2.6 million or $0.25/sh last year. We estimated net income of $1.6 million or $0.15/sh.
New Facility. In an effort to support the U.S. Navy’s shipbuilding schedule, the Company received a $13.5 million investment during fiscal 2024 to expand its Batavia, N.Y. production capabilities. The Company is expecting to break ground on the facility in August 2024. We believe the expansion of the facility can facilitate the needs of the U.S. Navy and also potential non-U.S. Navy customers, should the Company have excess capacity.
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Great Lakes Dredge & Dock (GLDD/$8.58 | Price Target: $11)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Solid 2Q24 Sets Up Rest of the Year
Rating: OUTPERFORM
2Q24. Revenue totaled $170.1 million, up from $132.7 million a year ago. We had forecast $166 million. Higher capital and coastal protection project revenues drove the increase. Gross margin improved to 17.5% from 13.5%. Adjusted EBITDA for the quarter increased $9.2 million to $25.8 million. Great Lakes recorded net income of $7.67 million, or EPS of $0.11, compared to $1.73 million, or $0.03/sh in 2Q23.
Backlog. Quarter-end dredging backlog totaled $807.9 million, with an additional $273.1 million in low bids and options pending award and another $44.6 million of offshore wind backlog. Post quarter-end, Great Lakes was the low bidder on approximately $181.6 million of additional work.
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Kratos Defense & Security (KTOS/$20.07 | Price Target: $22)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Look at the Second Quarter
Rating: OUTPERFORM
Continued Strong Results. Revenue was reported at $300.1 million, beating out our estimate of $270 million by a wide margin and last year’s revenue of $256.9 million. Organic growth was 16.7%. Net income totaled $7.9 million from a prior net loss of $2.7 million last year. We estimated net income of $0.4 million. Adjusted EBITDA was $29.9 million.
KUS. For the quarter, Unmanned Systems was the star performer, generating revenues of $85.8 million, as compared to $52.1 million in the second quarter of 2023, with organic revenue growth of 61.8% driven primarily by increased domestic target drone production and a certain international target drone delivery which contributed $17.4 million.
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Seanergy Maritime (SHIP/$9.95 | Price Target: $13)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Second Quarter Earnings Exceed Expectations
Rating: OUTPERFORM
Second quarter financial results. Seanergy reported second-quarter adjusted net income of $15.3 million or $0.77 per share compared to $3.3 million or $0.18 per share during the prior year period. Unadjusted for stock compensation and loss on extinguishment of debt, EPS amounted to $0.68. We had forecast net income of $12.5 million or $0.61 per share. The variance to our estimate was largely revenue driven with greater fleet utilization of 99.7% versus our 99.4% assumption and a modestly higher average time charter equivalent rate (TCE). Expenses were also below our estimates in several categories, including voyage expenses.
Updating estimates. Despite strong second quarter results, we lowered our 2024 EBITDA and EPS estimates to $101.1 million and $2.35, respectively, from $108.7 million and $2.77. Our revised estimates reflect a reduction in operating days in the second half due to drydocking and lower average time charter equivalent rates. While the overall supply/demand outlook remains strong, some uncertainty exists beyond 2024, particularly with respect to demand in China.
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The GEO Group (GEO/$12.12 | Price Target: $17)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
2Q24 – Delivering Steady Operational and Financial Performance
Rating: OUTPERFORM
2Q24 Results. Revenue of $607.2 million compared to $593.9 million last year, with all business segments except BI showing y-o-y growth. Adjusted EBITDA came in at $124.1 million versus $119.3 million. Reported net loss was $0.25/sh, versus EPS of $0.20/sh las year. Excluding one-time refi costs, adjusted EPS of $0.23 versus $0.24 last year. We were at a loss of $0.22 and EPS of $0.26, respectively.
Stable, At Higher Levels. GEO ICE populations were stable at approximately 13,000 in the quarter, but up 30% from the year ago. U.S. Marshals populations remained in the 9,000 neighborhood, up some 8% over last year. With current ICE bed utilization some 4,500 beds below the 41,500 authorized level, there is room for additional growth if funding materializes.
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The ODP Corporation (ODP/$24.56 | Price Target: $35)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Jacob Mutchler jmutchler@noblefcm.com |
An Overreaction To A Difficult Quarter
Rating: OUTPERFORM
2Q24 Results. The Company reported lackluster operating results that were largely driven by a challenging macroeconomic environment. Revenue of $1.72 billion, adj. EBITDA of $57 million, and net income of negative $4 million, or negative $0.12 per share, all experienced y-o-y decreases. Notably, ODP shares were down roughly 35% at market close, which, in our opinion was an overreaction, spurred on by recessionary concerns.
Veyer gains traction. During the earnings call management highlighted that Veyer received a verbal agreement from a large e-commerce company that has the potential to nearly double the segment’s top line. Notably, the agreement pertains to warehousing and the company’s well established supply chain. Importantly, we view the contract as a significant development that has the ability to favorably alter the Company’s trajectory.
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Townsquare Media (TSQ/$11.09 | Price Target: $21)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Jacob Mutchler jmutchler@noblefcm.com |
Digital On A Favorable Revenue Trajectory
Rating: OUTPERFORM
In line quarter. The company delivered on expectations for its second quarter. Total company revenues of $118.2 million, down a modest 2.5% from the year earlier quarter, was in line with our $117.7 million estimate. Adj. EBITDA in the quarter was $26.2 million, in line with our $26.8 million estimate and within the company’s guidance range of $26.0 million to $27.0 million.
Digital on a recovery trajectory. Its Interactive business is sequentially gaining subscribers and its programmatic business, Ignite, had solid 9% revenue growth in Q2. With easier National Digital comps and with improving revenue trends in its Interactive business, we expect its Digital segment to return toward revenue growth in the second half.
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Noble Capital Markets Research Report Wednesday, August 7, 2024
Companies contained in today’s report:
Bit Digital (BTBT)/OUTPERFORM – July Production Released
Century Lithium Corp. (CYDVF)/OUTPERFORM – Bringing the Final Step In-House
Commercial Vehicle Group (CVGI)/OUTPERFORM – Q2 Results: A Closer Look
GeoVax Labs (GOVX)/OUTPERFORM – GeoVax Highlights Trial Progress In 2Q24 Report
Information Services Group (III)/OUTPERFORM – In a More Stable Environment
V2X (VVX)/OUTPERFORM – Set Up For 2H24 Growth
Bit Digital (BTBT/$2.91 | Price Target: $5.5)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
July Production Released
Rating: OUTPERFORM
AI and Staking. Bit Digital had 256 servers generating revenue during the quarter and earned an estimated $4.3 million of revenue during the month. The staking side had approximately 17,184 ETH actively staked, flat with last month, and earned a blended APY of approximately 3.3% on its staked ETH in the month of July, slightly down from last month’s 3.5%.
Mining Side. The Company produced 60.5 BTC in the month, a slight 1.9% decrease from the previous month. The active hash rate was roughly 2.46 EH/s, a decline from 2.57 EH/s in June. With the active goal of 6.0 EH/s at the end of 2024, we anticipate a ramp up in the hash rate during the last few months of the year.
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Century Lithium Corp. (CYDVF/$0.1847 | Price Target: $2.35)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Bringing the Final Step In-House
Rating: OUTPERFORM
Lithium carbonate production at the pilot plant. Century Lithium successfully added a lithium carbonate stage at the company’s lithium extraction facility which is part of the company’s Angel Island Mine project. Recall that Century recently changed the name of its Clayton Valley Lithium project to Angel Island Mine to distinguish it from other projects. Previously, concentrated lithium solutions from the pilot plant were treated by Saltworks Inc. at their facility in Richmond, British Columbia to produce samples of battery grade lithium carbonate.
Following through on the feasibility study. Adding the lithium carbonate stage at the pilot plant satisfies one of the recommendations contained in the recently published feasibility study. Being able to produce battery grade lithium on site further demonstrates the commercial viability of the project and will also help the company to better optimize the process from the direct lithium extraction (DLE) phase through to production of the final product. Century successfully treated 200 liters of concentrated lithium solution and produced 20 kilograms of high-grade lithium carbonate on site.
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Commercial Vehicle Group (CVGI/$3.98 | Price Target: $8)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Jacob Mutchler jmutchler@noblefcm.com |
Q2 Results: A Closer Look
Rating: OUTPERFORM
Electrical Systems. To our surprise, the segment had a difficult quarter, revenue decreased $13.5 million, or 21.2%. The decrease was largely attributed to a slow down in the construction and agriculture industries, and new contract wins taking longer to ramp up and at lower than expected volumes. In our view, the company is well positioned to capitalize on the industry rebound, anticipated to take place in 2025 & 2026.
Vehicle Solutions. The segment experienced a decrease of $11.8 million, or 7.7%, from the prior year period, which was primarily driven by softer demand and reorganization. Notably, the company anticipated a more drastic decline in the business and closed a plant, shifting manufacturing to three other existing facilities, which should improve cost structure over the long-term.
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GeoVax Labs (GOVX/$1.8 | Price Target: $6)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
GeoVax Highlights Trial Progress In 2Q24 Report
Rating: OUTPERFORM
GeoVax Made Significant Advances In 2Q24. GeoVax reported a 2Q24 loss of $5.1 million or $(1.99) per share. The company reviewed the progress made during the quarter, including the DARPA grant for the Phase 2 CM04S1 trial, two CM04S1 trials in immunocompromised cancer patients, and announcement of the Phase 2 Gedeptin trial design.
Financial Results Reflect First Grant Revenues. During 2Q, GeoVax recognized $0.3 million in revenues from work related to the Phase 2 CM04S1 trial. Revenue is recognized as the work is completed on a cost-reimbursement basis, with billings recorded as receivables. The company had $1.6 million in cash on June 30 and plans to raise capital in the near future.
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Information Services Group (III/$3.17 | Price Target: $8)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
In a More Stable Environment
Rating: OUTPERFORM
Improved Metrics. Although performance decreased from the prior year, the Company improved sequentially. Stable revenue and lower costs led to higher a gross margin of 39.5% compared to 36.1% in the first quarter. The increased margin led to profitability in the quarter compared to a net loss last quarter. These improvements show ISG’s efficiency in the continued down environment while the Company prepares for clients to resuming spending, in our view.
Geographies. Although the regions are down from the prior year, most of ISG’s geographies are showing stability. Both the Americas and Europe are experiencing stability in their pipelines even as the uncertain macro environment continues. We would note management believes spending will resume more quickly in the Americas segment, primarily the U.S., with a return to spending as soon as the fourth quarter.
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V2X (VVX/$45.75 | Price Target: $62)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Set Up For 2H24 Growth
Rating: OUTPERFORM
2Q24 Results. Record revenue of $1.07 billion, up 9.7% from $977.9 million in 2Q23. We had estimated $1.02 billion. Adjusted EBITDA totaled $72.3 million, or a 6.7% margin, compared to $77.8 million and 8.0% last year, driven by contract mix. V2X reported a GAAP net loss of $6.5 million, or a loss of $0.21/sh, versus net income of $1.8 million, or $0.06/sh, in 2Q23. Adjusted EPS was $0.83 versus $1.10. We had estimated adjusted EPS at $0.87.
Revenue Drivers. Revenue growth in the quarter was achieved through continued expansion of existing business in the Pacific and Middle East regions, as well as new programs. Revenue growth in both areas grew by 29% year-over-year. Notably, in the quarter V2X had over $500 million of on contract growth.
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Noble Capital Markets Research Report Tuesday, August 6, 2024
Companies contained in today’s report:
Commercial Vehicle Group (CVGI)/OUTPERFORM – First Look at 2Q24
Information Services Group (III)/OUTPERFORM – A Look at the Second Quarter
Commercial Vehicle Group (CVGI/$4.73 | Price Target: $12)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
First Look at 2Q24
Rating: OUTPERFORM
Still Challenging. 2Q24 revenue declined 12.3% y-o-y to $229.9 million due to softening global customer demand. We had projected $237.5 million. Operating income was $0.8 million and adjusted operating income totaled $5.7 million, down 65.9% y-o-y. CVGI reported a net loss of $1.6 million, or $0.05/sh, and adjusted net income of $2.1 million, or EPS of $0.06. We had forecast adjusted EPS of $0.21. Adjusted EBITDA of $10 million was down 51.9% y-o-y and short of our $16 million estimate.
Drivers. Second quarter results were challenged due to multiple factors. In particular, continued softening in the construction and agricultural end markets and reduced volumes in new business win launches, impacting the key growth segment in Electrical Systems. CVG also experienced operational inefficiencies in the Vehicle Solutions segment resulting from a new product launch with a major customer across multiple sites, as well as activities to prepare the Cab Structures business for sale.
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Information Services Group (III/$3.16 | Price Target: $8)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Look at the Second Quarter
Rating: OUTPERFORM
2Q Results. Reported revenues totaled $64.3 million, slightly below our estimate of $65 million. Clients are continuing to delay projects, as these are being pushed further. Net income was better than expected at $2.0 million, or $0.04 per diluted share, compared to $2.3 million or $0.05 last year. We estimated a net loss of $0.2 million or breakeven EPS.
Silver Lining. The continued headwind of client decision making has offered a light at the end of the tunnel for management. An increase in contract value through ISG Tango, now exceeding $4 billion from $2.6 billion in the previous quarter, offers a sign that clients are allocating more towards projects in our view. The increase in overall contract value showcases management’s belief in increasing business spending as the year progresses.
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Noble Capital Markets Research Report Monday, August 5, 2024
Companies contained in today’s report:
ACCO Brands (ACCO)/OUTPERFORM – 2Q 2024: A Closer Look
Cumulus Media (CMLS)/MARKET PERFORM – Green Shoots Wither Amidst Economic Uncertainty
Haynes International (HAYN)/MARKET PERFORM – Tempering Expectations for the Remainder of FY 2024 and FY 2025
ACCO Brands (ACCO/$4.65 | Price Target: $12)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Jacob Mutchler jmutchler@noblefcm.com |
2Q 2024: A Closer Look
Rating: OUTPERFORM
Segment results. Americas revenue totaled $292.3 million in Q2, a decrease of 13.1% from the prior year period. Comparable sales were down 12.7%. International revenue was $146.0 million in Q2, a decrease of 7.1% from the prior period. Comparable sales decreased 5.1%. While revenue was modestly below our estimates, largely due to soft demand for business and consumer office products and a shift from lower margin products, we believe the Company’s outlook is favorable.
Cost reduction efforts. The company made significant progress towards its cost reduction target of $60 million in annualized savings, with $10 million in cost reductions realized so far this year, and $20 million of savings expected for full year 2024. Notably, the Company reduced inventory levels by 17% from the prior year with its technology enabled SKU rationalization
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Cumulus Media (CMLS/$1.62)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Jacob Mutchler jmutchler@noblefcm.com |
Green Shoots Wither Amidst Economic Uncertainty
Rating: MARKET PERFORM
Mixed Q2 results. The company reported revenue of $204.8 million, slightly lighter than our expectations of $206.2M. Due to cost cuts, adj. EBITDA was $25.2 million, finishing ahead of our estimates by $2.1M. Digital revenues advanced 5%, but was slower than the 7% in the first quarter.
Lackluster pacing outlook. Management indicated that third quarter revenue pacing is disappointingly down low single digits, in spite of the anticipated influx of Political advertising. We believe that spot advertising is down mid single digits, with Network likely to be down double digits, similar to the second quarter.
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Haynes International (HAYN/$59.6)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Tempering Expectations for the Remainder of FY 2024 and FY 2025
Rating: MARKET PERFORM
Third quarter financial results. Haynes reported third-quarter fiscal 2024 net income of $8.1 million or $0.63 per share compared to $8.8 million or $0.68 per share during the prior year period. Adjusted EBITDA was $17.1 million compared to $18.7 million during the prior year period and declined as a percentage of net revenues. Third-quarter results were negatively impacted by raw material headwinds and lower mill production volumes due to fewer orders and company initiatives to reduce inventory.
Updating estimates. We have lowered our 2024 EBITDA and EPS estimates to $68.5 million and $2.52, respectively, from $77.3 million and $3.00. The revisions reflect third quarter financial results and management expectations that fourth quarter revenue and earnings will be like the third quarter due to the unfavorable impact of lower production volumes. Our 2025 EBITDA and EPS estimates were lowered to $90.5 million and $3.82, respectively, from $99.5 million and $4.15 to reflect lower revenue and margin expectations in 2025, particularly during the first half of the year.
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Noble Capital Markets Research Report Friday, August 2, 2024
Companies contained in today’s report:
ACCO Brands (ACCO)/OUTPERFORM – Reports 2Q24 Results
Commercial Vehicle Group (CVGI)/OUTPERFORM – A Strategic Sale
DLH Holdings (DLHC)/OUTPERFORM – A Transitionary Quarter
FreightCar America (RAIL)/OUTPERFORM – Multi-Year Tank Car Conversion Contract Provides a Solid Path Toward Tank Car Production
Haynes International (HAYN)/MARKET PERFORM – Third Quarter Negatively Impacted by Lower Production and Raw Material Headwinds
ACCO Brands (ACCO/$4.98 | Price Target: $12)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Reports 2Q24 Results
Rating: OUTPERFORM
2Q24 Results. Reported results continue to be impacted by soft demand for ACCO products. In addition, the previously disclosed exit of certain lower margin business, primarily in the back-to-school categories, and a one-time impairment charge related to goodwill and intangible assets negatively impacted reported results.
Details. Revenue of $438.3 million was down 11.2% on a reported basis y-o-y, with comp sales off 10.2%, reflecting softer global business and consumer demand, although computer accessories saw growth. We had projected revenue of $455 million, in-line with consensus. Reported operating loss was $111.2 million reflecting $165.2 million of non-cash impairment charges. Adjusted operating income was $64.6 million, down from $66.2 million in 2Q23. GAAP net loss was $125.2 million, or $1.29/sh, with adjusted net income of $36.6 million, or $0.37/sh. In 2Q23, ACCO reported net income of $26.4 million, or $0.27/sh, and adjusted net income of $36.5 million, or $0.38/sh.
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Commercial Vehicle Group (CVGI/$5.1 | Price Target: $12)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Strategic Sale
Rating: OUTPERFORM
Cab Structures. Yesterday, after the market close, Commercial Vehicle Group (CVG) announced the sale of its Kings Mountain, NC Cab Structures business. This is another step in the Company’s strategic plan to lessen the impact of the highly cyclical Class 8 truck business.
Details. Net proceeds of the transaction are expected to be $40 million, with closure in the second half of 2024. We expect the majority of the net proceeds to be used for debt paydown and other general corporate purposes. CVG did not release unit financial performance, but we do expect management to update its full-year 2024 outlook to reflect the impact of the business unit divesture during its 2Q24 earnings conference call on August 6th.
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DLH Holdings (DLHC/$10.39 | Price Target: $15)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Transitionary Quarter
Rating: OUTPERFORM
Environment. The government continues to delay its decision making process on various contract awards, as management notes that although decisions do take time, they have been abnormally long in 2024. Coinciding with this is the VA’s decision on its CMOP locations, which provides a good and bad aspect for DLH. The good is a likely extension of DLH’s ID/IQ contract with the VA, but the bad is that the VA is reducing responsibilities within the awards, not allowing the Company to differentiate from its competitors.
Expanding Markets. As the government delays its decisions, management is focused on its three markets in digital transformation & cyber security, science research & development, and systems & engineering & integration. These markets have had growth to their budget in recent years and we believe they provide DLH with future opportunities to expand its pipeline and add to its total proposals outstanding, a focus of management.
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FreightCar America (RAIL/$3.49 | Price Target: $4.5)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Multi-Year Tank Car Conversion Contract Provides a Solid Path Toward Tank Car Production
Rating: OUTPERFORM
Expansion into tank car conversions. FreightCar America has entered into a multi-year contract to convert over 1,000 existing DOT-111 tank cars to DOT-117R (retrofit) tank cars over a two-year period. In addition to further diversifying its product offerings, the expansion into tank car conversions provides a solid path toward M-1002 tank car facility certification by the Association of American Railroads and the production of DOT-117 tank cars.
Ensuring the safe transportation of flammable liquids. The completed tank cars will receive new exterior tank jackets, thermal protection, full height head shields, top fittings protection and upgraded bottom outlet valves. As part of a federally mandated program, all tank cars transporting Class 3 flammable liquids, such as refined products, crude oil and ethanol, are required to meet DOT-117 or equivalent specifications by May 1, 2029.
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Haynes International (HAYN/$59.66)
Mark Reichman mreichman@noblefcm.com | (561) 999-2272
Third Quarter Negatively Impacted by Lower Production and Raw Material Headwinds
Rating: MARKET PERFORM
Third quarter financial results. Haynes reported third-quarter fiscal 2024 net income of $8.1 million or $0.63 per share compared to $8.8 million or $0.68 per share during the prior year period. Adjusted EBITDA was $17.1 million compared to $18.7 million during the prior year period and declined as a percentage of net revenues. Third-quarter results were negatively impacted by raw material headwinds and lower mill production volumes due to fewer orders and company initiatives to reduce inventory. Strong operating cash flow of $52.5 million supported reducing the balance of the company’s credit facility by $24.2 million during the first nine months of fiscal 2024.
Merger Update. With respect to Haynes’ proposed merger with North American Stainless, Inc., a wholly owned subsidiary of Acerinox S.A., required approvals in the United States have been obtained. Following favorable decisions by European countries reviewing the transaction from a foreign direct investment (FDI) perspective, the company expects to obtain remaining required clearances
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Noble Capital Markets Research Report Thursday, August 1, 2024
Companies contained in today’s report:
Codere Online (CDRO)/OUTPERFORM – Casino Games A Key Driver
DLH Holdings (DLHC)/OUTPERFORM – A Look into the Third Quarter
FAT Brands (FAT)/OUTPERFORM – Overview of 2Q24 Operating Results
GeoVax Labs (GOVX)/OUTPERFORM – Gedeptin Phase 2 Head and Neck Trial Design Announced
MustGrow Biologics Corp. (MGROF)/MARKET PERFORM – Tack On Another Approval
Codere Online (CDRO/$8.2 | Price Target: $14)
Michael Kupinski mkupinski@noblefcm.com | (561) 994-5734
Patrick McCann, CFA pmccann@noblefcm.com | (314) 724-6266
Casino Games A Key Driver
Rating: OUTPERFORM
Adj. EBITDA positive. Q2 overachieved expectations with revenue growth a strong 39% to €54.4 million (vs our €47.6 million estimate) and with positive adj. EBITDA of €1.3 million (vs. our flat estimate). The results benefited from a favorable sports calendar, as well as strong customer growth for its casino games. Casino revenue accounted for 59% of total company revenue, up from 56% in Q1.
Spain and Mexico deliver strong revenue performance. The company exhibited favorable operating momentum in its latest Q2 quarter. Net gaming revenue increased a solid 39% to €54.4 million, nicely above our estimate of €47.6 million. The quarterly revenue represented a sequential quarterly revenue improvement from the first quarter at €53.0 million and an acceleration in revenue growth from 34% in Q1.
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DLH Holdings (DLHC/$11.57 | Price Target: $21)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
A Look into the Third Quarter
Rating: OUTPERFORM
3Q Results. Revenue was reported at $100.7 million, below our estimate of $103 million and down from the prior year of $102.2 million. Net income was $1.1 million, or $0.08 per diluted share, compared to $1.7 million, or $0.12 last year. EBITDA was roughly $10.0 million versus $11.4 million in the prior year, or a margin of 10.0% and 11.1%, respectfully, in range of management’s expectations.
Delays. The GRSi acquisition continues to experience anticipated runoff of DLH’s small business set-aside awards, as these contracts transitioned towards small businesses impacting overall revenue. The government evaluation process also has resulted in delays for new business revenue for the Company in fiscal 2024. However, with the budgets passed earlier in the year for various government departments, including the VA and HHS, we expect DLH to be awarded new contracts sooner rather than later.
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FAT Brands (FAT/$5.25 | Price Target: $25)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Overview of 2Q24 Operating Results
Rating: OUTPERFORM
Note: FAT Brands has entered into an Equity Distribution Agreement with Noble Capital Markets relating to the potential sale of up to $10.335 million of Class A common stock and/or 8.25% Series B Cumulative Preferred stock. As a result, this report will just focus on a review of FAT Brands’ second quarter operating results.
2Q24 Results. FAT’s 2Q24 results were very similar to 1Q24 results. While we had hoped for some sequential improvement, given the overall industry challenges seen so far this reporting season, relatively flat results are not too bad. Revenue totaled $152 million, flat sequentially and up 42.4% y-o-y. Adjusted EBITDA totaled $15.7 million versus $23.1 million last year, with the decline reflecting lower employee retention credits this quarter. FAT reported a net loss of $41.3 million, or $2.43 per share, compared to a loss of $8.7 million, or a loss of $0.53/sh in 2Q23.
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GeoVax Labs (GOVX/$2.08 | Price Target: $6)
Robert LeBoyer rleboyer@noblefcm.com | (212) 896-4625
Gedeptin Phase 2 Head and Neck Trial Design Announced
Rating: OUTPERFORM
Gedeptin Will Be Tested As A Neoadjuvent. GeoVax announced the design of the Phase 2 trial testing Gedeptin in head and neck cancer. As planned, a Clinical Advisory Panel completed its data review from the clinical trials and made its design recommendation. The trial will test Gedeptin in combination with an immune checkpoint inhibitor (ICI) before surgery in head and neck squamous cell carcinoma (HNSCC) patients after first recurrence. The trial is expected to start in 1H25.
Trial Will Use A Single Cycle Of Gedeptin Before Surgery. The trial will enroll patients with HNSCC after first relapse. Patients will be treated with a single cycle of Gedeptin/fludarabine and a checkpoint inhibitor, followed by surgery. This adds Gedeptin’s intracellular activation of a chemotherapy agent to kill cancer cells with the immune response of the checkpoint inhibitor. The planned enrollment is 36 patients with a primary endpoint of pathological response rate.
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MustGrow Biologics Corp. (MGROF/$0.54)
Joe Gomes, CFA jgomes@noblefcm.com | 561-999-2262
Joshua Zoepfel jzoepfel@noblefcm.com |
Tack On Another Approval
Rating: MARKET PERFORM
Another State. MustGrow announced the Company has received the Idaho State Department of Agriculture approval for TerraSante, allowing the product to commence sales in the state. The state follows the existing Organic OMRI Listed certifications in Oregon and Washington. Idaho now joins the list of states to authorize product sales, including the aforementioned Oregon and Washington and California.
Market Size. Idaho provided approximately $1.3 billion in crop production from potatoes in 2023, an increase from $1.2 billion in 2022, as potatoes are the state’s top crop. Other commodities the state provides includes barley, alfalfa hay, peppermint oil, and food trout. Overall, the state’s crop production was $3.3 billion in 2021.