I agree regarding sales, and the promotion of Acrodyne's technology. This can be a critical turning point for Acroyne's market presence. I definitely like the ownership of 65 stations. That would be apprx $30mm in replacement analog, and another $40mm in digital HP. This is also a great platform to demonstrate Acro's technology and financial staying power. Companies that liked the product but not the balance sheet before, will like both the product and the balance sheet, as well as the implied corporate strength represented by Sinclair. I imagine that we will be able to sell to other broadcast chains now. I can see at least current $16mm revs + $10mm revs per year from Sinclair stations + $15 revs based on companies legitimate position in the transmitter business. That means revs will increase to $40 mm fairly soon, with greater revs pending. With new sales effort and increased awareness in the industry that ACRO is the best deal at the cheapest price, Harris and Comark will now have some serious competition. This will also be very beneficial to the balance sheet, out of proportion to the increase in sales. I imagine that with any reasonable controls on expenses and manufacturing costs, the economies of scale will quickly translate into significantly higher margins. I would hope for 45-50% gross margins.
On $40mm revs, $18mm profit. Take out $10 SG&A and $3 taxes and we are left with $5mm profit. Divide that by an average of 9mm shares outstanding (this is hard to estimate in early years since the purchase of stock will be performance based) and we are already at $.55 per share profit. At $100 mm revs and proportionately less % of SG&A, and greater economies of scale and I could see $20 mm profit divided by 12mm shares or $1.65 per share.
I do have some concerns about the amount of dilution, and the aggregation of power in the hands of parties with what looks like aprx 65% of the outstanding shares. I hope that the stand still and arms length transactions agreements provides for prohibitions on the majority repurchase of shares at any value they choose. I saw this happen with another company. The majority shareholders, in combo with an investment banking firm, took the company private and then, three years later reissued shares to the detriment of the originally "bought out" shareholders. With this kind of ownership, that kind of protection for current shareholders needs to be in the partnership documents. |
