Look at two areas: market position, financial position.
First, market position. Huge hosting capacity with recent openings in Toronto, Amsterdam, Seoul. Recently selected by GE and HP, of all companies. Named Top ISP this year. Avg. corporate account up from $9,800 per year to $15,000; new hosting account up to $354,000 from $232,000 (levels that exceed Exodus, if I'm not mistaken). I challenge the board to name one company with this profile in the past who has gone belly-up. The market and its competitors won't let it happen. Done, and done.
Next, financial performance; again, overblown fear of debt coverage problems. Look at the facts. Revenue up 151% YTY; hosting up 300% YTY. EBITDA, which also represents cash flow from operations for PSIX, for quarter was -$13.8M, which would have been POSITIVE $15.2M, if you pull out the $29M loss of Xpedior, which they discontinued. Debt interest is a net -$60M per quarter (-$75M to debt holders + $15M in interest from cash held). Thus, next quarter (assuming no growth) would produce $15M in EBITDA cash flow to support $60M in net interest due = -$45M cash flow burn per quarter (in current state). The $1B in cash supports that for 20 months, excluding the $500M-$750M PSIX'll will receive from selling Inter.net, Xpedior, and pieces of MMWW. Also, they'll get cash flow benefit by delaying certain hosting centers, but they have plenty of capacity within new centers for at least a year. So what about the current bad quarter and cash burn. Let's do one last piece of math. $1.4B net loss, add back one-time accounting charges for discontinuing Xpedior ($685M), for "impairment charges" ($504M), for non-cash expenses like depreciation ($101M)... and you still only get to -$110M cash flow, in what will be the worst quarter of their existence.
It's a screaming buy here if you can tune out the noise. |
