Reminiscences of a Stockblogger

Research: HubSpot

I primarily started looking at HubSpot to compare them to SharpSpring.  I spent a bunch of time going over youtube demos of their product.  Its fine, it looks clean and easy to use.  It doesn’t blow me away to be honest.  Its like a lot of these SaaS products.  I read the WallStreet research and you’d think these companies are changing the world. Then I step through the demos and its like ehh, ok.  I mean I worked in software 10 years, this stuff isn’t rocket science.  But whatevs.

The bigger, more interesting thing I found is at the end of the post.  I bolded it.  I’ll do another post later because after noticing this with HubSpot I dug into a bunch of other SaaS names and drew the same conclusion.  But just as a teaser to that, since HubSpot is where I really clued into what seems to be going on, check out the chart at the end of the post showing how HubSpot stock has moved and just how much analyst estimates have changed since the beginning of the year.  Its crazy.  We’re told how these software businesses are booming.  Are they?   Or are the stocks booming and the software businesses are doing fine, but nothing really any better than they were when the stocks were 50% lower.  There are exceptions like Zoom or Shopify but most are not.

Just as a short conclusion: I’d say the HubSpot product looks better than the SharpSpring one.  You watch the SharpSpring demos against the HubSpot demos and its not quite as clean, things are labeled a little clunky here and there, not as much functionality, and you can see how the workflow isn’t as slick.  But on the other hand, SharpSpring is like 1/5th the price.  From what I can tell its not 1/5 of the package.  I can see why SharpSpring has a easier time getting the agency business.  These are customers that I imagine already know what they are doing. They know marketing.  They do this for a living.  So they know what they want and SharpSpring delivers that functionality at a fraction of the price.  Maybe if you don’t know what you are doing and you need some hand holding or want specific customization to your business then HubSpot is going to be better – I mean it really seems like a more intuitive, better package.  But again, its not that much better.  At least from what I can tell.

General

• $12.5b market cap – stock is at $284 right now
• $1.13b of cash
• $467mm of debt

• trades at 14x P/S
• grew 25% yoy in Q220
• ranked #1 company to work for on Glassdoor
• their annual event that SharpSpring mentions is called Inbound – 26k registrants in 2019

Customers

• leader in smaller businesses
• focus has been small business (organizations less than 2,000 people)
• could cause elevated churn though
• have 25k customers that are 2-20 employees – this segment grew 150% yoy
• enterprise with 200-2000+ employees has 8k customers
• 25k customers that have multi-products
• total of about 68k customers
• because they are targeting small busines, their TAM is 100s of millions of businesses)

Competition

• they have avoided competition by focusing on smaller end of midmarket
• they don’t even mention SHSP as competition:

Product

• began as an app, becoming a platform
• Marketing Hub is oldest product
• Marketing Hub puts all of the marketing activities/campaigns in one spot, accessible to sales and marketing depts
• CRM – contacts tab
  • contacts page, list contacts, filter contacts
• conversations
  • support emails
  •    chat logs
  •  creating email/conversation templates
• marketing
• this is a good video explaining the product https://www.youtube.com/watch?v=sxOibuTUGjQ
  • ads – can connect google/facebook ads, track engagement
  • email – create marketing emails, set up, automate and schedule marketing emails, analyze success of email campaigns based on open rates, click rates
  • social – link all social media accounts in one spot, schedule SM posts, monitor activity
  • website – create static websites in your domain (home page, contact), landing pages for inbound marketing – to download content, fill forms, blog pages – has things like templates for landing pages, web pages, its actually a little web page creation tool, geared to creating CTA pages
• sales – this is in large part their CRM platform
  • deals – set up a deal flow, appts, proposals stored, who decision makers are
  • tasks – lists of sales tasks assigned to you
  • documents – hub for finding documents, also shows stats around document usage/views
  • meetings – set up your sales meetings, connect to Google or Office 365 calendar
• here is what the deals page looks like:

• service:
  • tickets are listed
  • service hub dropdowns
• automated:
  • workflows – automated workflows for your organization, example I watched of an email nurturing sequence, sending sequence of emails of a contact that has shown interest via some form they filled out – fill out triggers of the automation, the emails you want sent out, timing of those emails, etc
  • sequences – stuff like send an email, call two days later, sequence of followup events
  • this was a good video describing: https://www.youtube.com/watch?v=sIEnM0YyM5M&t=444s
• reports:
  • see traffic analytics
  • performance of ad campaigns
• CRM
  • I’m not sure if HubSpot integrates with other CRMs or if you have to use their CRM
  • tracks contact management
  • deal and task management
  • interactions with social and email to track leads
  • good video demo: https://www.youtube.com/watch?v=zv2QXavTvH0
• pricing:

• the CRM software is free
• was originally a tool for SMB – a simple platform to track marketing campaigns
• originally built around inbound marketing – also called content marketing

• offer a free CRM product, cheap starter for marketing, sales, service hub:

• between the three hubs:
  • Marketing hub – $530mm of ARR, growing low-mid 20%s yoy
  • Sales Hub – $100mm ARR, growing 100% yoy
  • Service Hub – $14mm ARR, up 5x from ~$2m a year ago

Growth

• a few years ago they changed go-to-market by embracing free CRM
• their growth has been primary a function of customer count
• ARPC has been declining
• ARPC metric is a bit deceptive – enterprise spend per customer is increasing, starter products are bringing down overall spend per customer
  • Marketing Hub growing at 5% yoy if you exclude the starter product
  • Sales Hub growing at 31% yoy
• international revenue has expanded faster – 60% CAGR over last 5 years
• fcf margins are ~10% and growing:

• more evidence that their growth is based on sub adds. Their retention rates are not that high, hovering around 100%

• revenue in the US is slowing a little – was 26% in Q319
• core marketing ARR is in low-mid 20s
• these were the Wells Fargo numbers heading into Q419:

• whats interesting is that the FY20 average estimates are essentially the same as that, actually a little less on EPS:

Q2 Results

• had set a low bar
• revenue was up 25% to $204mm – this compares to 31% yoy growth in Q120 and 33% yoy growth in Q219
• positive surprise on customer acquisitions
• they had lowered the price of their Starter Suite by 2/3 in Q120 which drove growth in customers
• total customers grew 34% – 7,896 new adds vs 4-5k new adds last quarters
• the promotion could lower revenue growth over next 12 months – it is extended to Q320
• billings was up 20% yoy
• there was 400% increase in suites install base – due to free user upgrades and new businesses moving online
• avg sub revenue per customer was down 5% yoy though
• guidance of 23% revenue increase – up from 19% before – $210.5mm at midpoint
• here’s the funny thing about Hubspot, while the stock has shot up to new highs, its not really based on any increase in estimates, estimates went down and then came back up again and are basically still below where they were:

• So really take a look at this chart.  This chart is not just showing 2020.  Its showing 2021 and 2022 estimates as well.  So we are looking at changes to analyst revenue forecasts for next year and the year after.  And, um, they have hardly changed.  This is the big “pull forward” in software adoption?  Really?  Because it looks pretty damn flat to me.  The stock is up a ton.  But the forecasts – not so much.
• their poor cash flow in Q220 is kind of weird – everything yoy on the income statement looks comparable to Q219 but for some reason they burned through $23mm of cash before working capital.
• the only thing I see on the cash flow statement is this repayment of convertible:

• I wonder if that shouldn’t really be subtracted as an operating activity?
• Its really strange to me that Q220 cash flow was as bad as it was given results are basically similar yoy (and they are growing of course)

• what strikes me as well is that in the last 5 years their top line has grown 6x but really their EBITDA loss has only shrunk like by like $25mm.  And if you want to argue that its because of the sub-growth – that MS argument that growth is masking true profitability, then why don’t we see EBITDA improvement accelerating as their growth rate goes from 57% down to 32%

Research: SharpSpring

Marketing Automation

• marketing automation is really about driving leads and sales and revenue for our customers
• enables them to drive more leads and sales at a time when converting every lead possible into a sale
• help along the entire sales funnel
• With regard to the value of marketing automation, marketing automation is really about driving leads and sales and revenue for our customers.
• Even in a pandemic situation, SharpSpring enables them to drive more leads and sales at a time when converting every lead possible into a sale matters more than ever.
• enables them to optimize their entire marketing and sales process, enabling them to understand what’s working and what isn’t and eliminate the things that aren’t working and double down on the things that do.
• the TAM, the total addressable market, is massive when it comes to marketing automation
• estimated to grow by folks like Gartner and the rest to $14 billion by the end of 2014 — or excuse me, ’24

Legacy Alternative

• just beginning to see the adoption as people get frustrated with managing all of these point solutions that were never designed to work together, that don’t include the automation or any of the tracking
• at the beginning of the industry’s — or the world’s adoption of marketing automation
• A CRM system, a landing page builder, a forum builder, a social media management platform, an analytics package, an e-mail package, all of these things don’t work together well and create a very brittle marketing technology stack.
• Marketing automation solves that by incorporating all those technologies into an integrated solution that is wrapped around a core technology

Product

• we had a very weak product
• We launched in 2014
• we launched with a hugely disruptive price point
• offer our services for as little as 1/10 the cost of a comparable solution
• core technology is an integrated database
• and a core tracking technology that today will track literally billions of clicks from our agency — or excuse me, from our customers, every one of our customers’ websites, every visitor to every one of our customers’ websites and every click on an e-mail or landing page or website runs through our rules engine
• rules engine is the core technology of a marketing automation platform
• Form builders, landing page builders, e-mail marketing, social media management, chat bots and the list goes on – wrapped around this core tracking technology
• the rules engine that makes all of marketing automation possible is really the stuff of computer science textbooks
• pulling off a marketing automation solution is incredibly hard. It’s really 20 products at this point rolled into 1
• any click could tick off an automated event such as increasing a person’s lead score, a lead score, sending an e-mail or Drift campaign to that lead, notifying a salesperson that a lead has changed status and is now worth working on
• top-rated platform by every major software review site that’s out there, G2 Crowd, Software Advice, Capterra
• Nearly all of our revenues are SaaS business.
• 7:1 LTV to CAC ratio
• lifetime value, we believe, is — for an agency partner is north of $50,000
• During the COVID time period, we’ve been acquiring customers for south of 10,000 rather than 7,400 as represented here
• are acquiring customers that we think are actually now worth just north of $50,000

Customers

• SharpSpring competes is in the SMB and mid market
• 85% of our revenues flow through digital marketing agencies
• have about 2,000 agencies that we think of as our customer, but they act a lot like resellers
• agencies serve essentially as augmenting an internal marketing department or is a completely outsourced digital marketing department for the SMBs that hire them
• these agencies typically have between 5 and 50 employees and have many clients – between 10 and 100 clients
• No single client represents more than 1% of revenues and the vast majority of clients represent less than 0.1% of revenues.
• have thousands of clients
• their low price point – have not found ourselves on the menu when companies look to cut back in an effort to save costs.

Revenue

• revenue model, there’s really 4 parts to it
• First and foremost, we want to land new customers – means landing new agencies
• that leads to our expansion potential within each agency
• core mission is to expand within the agency, to get the agency to move from 1 client to 2, 3, 4 on up to 5, 10, 15. Our largest agency has over 100 clients
• fourth is pricing power
• are, far and away, the low-cost leader in the space
• ability to increase our prices significantly over time without fear that agencies would — or excuse me, clients would move in a different direction
• are literally 1/10 the cost of most of these solutions, but for a product that is every bit the equivalent of what they offer
• in order for competition to come down to compete with us, they would cannibalize themselves
• first 3 categories are what it’s all about for us, expanding the number of clients within each agency and giving them more products and providing value that way
• Beyond that, we can cross-sell and we can up-sell
• one of the things that people don’t understand about our business, we have high logo attrition
• see the heaviest attrition taking place in year 1 and are focusing on executing within that year time frame to become a more sticky platform
• can sign up on a monthly agreement and pay a very small onboarding fee to get started with SharpSpring
• no clear way for us to tell which agency is going to take off and add 15 or 20 of their clients to the platform and which agency is going to fizzle out after 6 months in a trip
• reported a 99% year-over-year net revenue retention number prior to COVID
• this last quarter, we reported roughly 92% revenue retention
• backdrop of 3% logo attrition on a monthly basis, so very high comparatively logo attrition
• only ever lose low-value agencies
• those characteristics, including the higher logo attrition, is built into our lifetime value calculation, which is north of $50,000

Recent Financials

• latest guidance, which is around $30 million of revenue
• We are continuing to grow healthily despite the pandemic conditions and have really never been more stable as a business than we are today.
• I need to — this slide does not gel with our latest guidance, which is around $30 million of revenue.
• We’ve also increased our cash position and are at around $15 million of cash on the balance sheet as of this point and made significant strides this last quarter towards both cash and EBITDA breakeven.

Competition

• competition is same as its been for years
• we compete with exactly the same companies that were on my business plan from 2011 before I started our company: HubSpot, Marketo, Salesforce, Act-On and Pardot
• Adobe just purchased Marketo last year, I believe, for $4.5 billion
• compete and win every day versus HubSpot, Act-On, Pardot, which is now part of Salesforce
• compete with Marketo on occasion
• we aren’t up at the enterprise space, which is mainly where Marketo exists
• smaller companies better served by companies like Mailchimp and Constant Contact
• they are leader in agencies – HubSpot has long since stopped reporting on their agency count – last number we’ve ever heard from them at 3,000 agencies
• other companies were the first movers in the space. They certainly have much, much higher price points and that serves them well
• competition has built up cost structures around those price points, have field representatives
• HubSpot does an inbound conference every year that, I believe, costs them something like $20 million
• if you go to any one of these software review sites, which are effectively the analyst for SMBS, right? SMBs don’t really go to Gartner. But they do go to Capterra, which is a Gartner site and look for reviews. And our ratings there and the number of ratings and the brand awareness is really started to pick up a little bit and we’re included in more bake offs, and we’re attracting a little bit larger agency, which is sort of exciting for us

Perfect Audience

• acquired in Q4 of 2020
• acquired substantially all the assets and assumed certain liabilities of the Perfect Audience business unit from Marin Software Incorporated, a Delaware corporation for cash consideration of $4.6 million
• Perfect Audience platform employs a usage-based revenue model
• Perfect Audience platform acquired in November of 2019 generated an additional $0.62 million of new revenue for the three months ended March 31, 2020
• retargeting and digital ad platform and we can bring those types of products to customers – basically an advertising platform
• allows a business to put all of their ads in one platform and yet advertise across dozens of digital ad networks including Google’s digital ad network, Facebook; Instagram; Smaato; OpenX; Rubicon, which is now, I believe, Xander — no, excuse me, the Rubicon Project, different company; Yahoo; AppNexus
• Perfect Audience experiences a much quicker cash turn than our core SharpSpring business. Processing higher volume, lower fee transactions
• estimate that the lifetime value of a Perfect Audience customer could be around $1,500
• believe we’re acquiring customers for about $475
• payback period on those dollars is just a couple of months, which allows us to recycle those invested dollars at very high velocity
• been steadily building this product into SharpSpring and believe it will offer us some real cross-selling and upselling potential
• Sharpspring integration focus has really been about making significant changes in the customer acquisition process and working to increase lifetime value by helping customers better spend our budget through look-alike audiences
• use it to drive quality leads into the top of the funnel
• June was the single highest revenue month since the acquisition

Q2 20 CC

• 276 new customer wins we secured during the period represent approximately $2.2 million in annual recurring revenue
• approximately 2,000 agency customers and over 500 direct customers and over 8,500 total businesses
• CAC up due to COVID: cost to acquire customer was approximately $10,900, which was a sequential increase from $9,800 recorded during the first quarter of 2020
• this quarter’s CAC calculation artificially reflected pre-COVID-19 sales and marketing spend as a numerator and COVID-19 adjusted new deal closing as a denominator
• our marketing spend is down considerably in Q2, but we’re still expecting to see similar sales levels going forward, which should lead to significantly lower CAC next quarter and beyond
• Q2 2020 net revenue retention was 91.6%. On a monthly basis, second quarter 2020 average net revenue retention was 97.6%
• firmly believe that we will see a point in our relatively near future where we hit a 100% revenue retention
• reduced expenses due to COVID: deliberately reduced our expense budget based by nearly 20%, which is expected to create significant cost savings for the remainder of 2020, and should also allow us to meet our target cash usage for the year of approximately $4.8 million
• put some austerity measures for lack of a better term in place as the pandemic hit
• Most of the changes that we put in place, we believe, to be permanent changes
• did do a salary reduction
• asked people to take a 10% reduction in salary
• During the first half of the year, we spent approximately $3.5 million of our $4.8 million 2020 full year projection
• expects total revenues between $29.5 million and $30.5 million, which would represent an increase of approximately 32% compared to the prior year – some of this growth is from Perfect Audience though
• range of total revenue is driven in large part by our Perfect Audience revenue through the second half of the year
• recorded a 38% increase in the number of paid advertisers compared to the first quarter of 2020
• actually sold, I want to say the number is 2 or 3 more agency partners than we did last year
• 80% of the businesses that we sold in Q2 were agencies and then that, of course, is where the 10 packs came from.
• seen agency client expansion slow down
• not seeing agency clients leave agencies very much at all
• many other players in the space are experiencing major drops in the advertising revenue
• as the economic conditions improve, we’ll see greater acceleration of the business
• as the low-cost provider in the space, we are also insulated from companies seeking to lower cost by switching to more cost-effective solutions.
• introduced a new pricing option for larger agencies that allows new customers to buy more licenses upfront at a nominal discount in exchange for an annual commitment
• saw strong interest in this new option from larger agencies and sold a total of 10 bundled, $1,500, 10 pack licenses, one of which was actually a 40 pack.
• in addition to signing up at a much higher initial MRR point from, typically what is a $600 sign up starting out at $1,500, in addition to that, they are on an annual contract. So these are customers that are not only paying us more MRR, but are more stable customers and more committed to putting a lot of clients on the platform
• these larger clients that takes a 10 pack and you’re getting the $1,500 kind of as it is
• would then be charging for expansion licenses I believe it’s $275 million for an additional license after the 10 pack
• these are larger customers that believe that their 10 pack is just the start
• new agency customers were actually up year-over-year for the second quarter.
• larger deals resulted in a 10% increase in ARR from $2 million in Q2 of 2019, to $2.2 million in Q2 of 2020
• Chip House would be joining SharpSpring as our new Chief Marketing Officer
• credentials at high-growth SaaS operations
• was the first marketing executive at Exact target and early SaaS pioneer
• also led marketing efforts for e-commerce provider, Digital River

Springboard

• our new engagement platform, which we’re calling SpringBoard
• products have become so powerful that most customers only use 20% or 25% of the entire tool set
• proactively building an in-app engagement tool called SpringBoard that is designed to provide a customized plan to a user, enabling an agency or their client to know precisely what to do? Why to do it? And when to do it?
• SpringBoard’s unique value proposition is that it doesn’t just teach a user how to use the platform, but acts as a business’ own strategy consultant advising you on how to extract the most value from the platform.
• customized stats to show a promise land
• concrete tailored guidance on how to get there
• gamified the process to track progress and unlock certification and merchandise rewards

Longer-term Financials:

Recent Financials

Research: Alcanna

• ~$180mm market cap
• have a fair bit of net debt – $9.1mm of cash and, debt of $75mm
• largest retailer of alcohol in Canada
• top 3 in NA
• operates 226 stores in AB, BC

• these are their brands:

• brands are: Wine & Beyond, Liquor Depot, Brown Jug
• they are mostly on the discount side
• operate in big box stores and from what I see next to groceries a lot of the time
• operate Nova Cannabis business (retail cannabis)
• here are cannabis stores:

• was 25% owned by Aurora Cannabis – I think they may have sold their stake though
• on June 24, Aurora sold 9.2mm shares at $3
• that was all of Aurora’s shares according to the MD&A

Sale of Alaska business

• sold for $27.2mm
• using proceeds to reduce debt

Q220 results

• SSS were up 13.4% yoy
• gross margins were up to 22.7% from 22.1% yoy
• frequency of visits was down but avg basket size up substantially
• cannabis retail sales inline with expectations
• total cannabis sales up 64% – from $8.8mm to $14.4mm
• GMs in cannabis were $4.9mm – that is 34%
• plan to open 2-4 new Nova stores in AB
• opening 6-7 stores in Ont

Q2 CC

• our results since May and right through till sitting here today have not changed
• Anecdotally, we’ve heard that even people who do go to restaurants are not staying. They’re eating fast, staying — in and out, stay for an hour, and — which the restaurants are encouraging to try to get some business in their limited-capacity footprints now. Not ordering the second bottle of wine. Not having the predinner drinks or the cocktails or the after dinner, and — all of which, I think, is playing into our belief — our strong belief that this is not just a onetime blip, it’s a trend and societal and consumer behavior trend that will be in place for the foreseeable future.
• Our company has shifted, quite dramatically, its focus, and we’re essentially, for the most part, a discount liquor company now
• our Ace banner has 102 stores, whatever it is, and Liquor Depot is 79 now. So — and Wine and Beyond, which is our large-format store, which does have luxury products but it’s not a luxury store, its margins are more or less the same as Ace
• on cannabis margins: That’s pretty much standard for the industry, as I understand, reading some other people. And we just — we obviously go comparison shop our other retailers. Most people are — started getting around 34%, 35% margin right now.
• more on cannabis: Our stores have been extremely stable on a sales-per-week basis because we’re in good locations. But ones who are in terrible locations, which is the vast majority of them, are just having more and more stores sharing tinier and tinier pieces of their part of the pie. And the only competitive response people in that situation can do over time, if you look at any retail 101, is drop prices
• we don’t anticipate margins staying in the competitive environment at this level for too much longer in Alberta – sounds like AB cannabis retail market is saturated but so is wholesale so prices just overall will come down
• But it’s 35%. 35% is just not sustainable for a long time in any retail. It’s just there’s too much — you do very well at 35% in a retail environment
• on liquor side they can’t keep inventory: The other place that we’ve increased inventories is just we have some stores that are just doing gangbuster numbers, and we needed to put more inventory in there to support those increased sales. And then the third place, as you pointed out, is there’s been some great deals on some LTOs from the vendors, and so we’ve stocked up to keep our margins healthy and remain competitive in the marketplace.
• step up in inventory buying in Q220 was deliberate: We made a deliberate — we sat down with our operating team, and they asked, and they had a well-thought-out plan for — wanted as much as — at the high point, as much as $10 million to $12 million extra dollars to invest in inventory because of the LTOs they saw coming and the conversations they’ve been having with vendors as to what might be possible. So it was a very deliberate thing we did. And you’ll see the benefits of that on the income statement over the next quarters because it’s purchased now, but the pricing is — it will have the impact on — positive impact on margins going forward. So yes, it was strategic. It was carefully done
• more on store sales: some of the stores, especially the Wine and Beyonds, we just literally couldn’t keep — the shelves are running out every single weekend. Those stores are doing Christmas-like numbers week after week after week, and we just couldn’t literally keep it on the shelf.
• in strong position for lease renewals: like 10%, give or take, whatever, of leases every year come due. So yes, no, absolutely. I think we can say with almost certainty there’s not going to be any rent increases, for sure. And it’s situational, case by case. If you’ve got some of our great Liquor Depots in — which have restrictive covenants in a grocery-anchored mall, which do very well, and we wouldn’t have the same leverage you might think we’d have with the landlord because we — if you say no, they get somebody else.
• more on leases: other situations, we do have tremendous leverage. Obviously, one of the very few retailers right now who is not only able to pay the rents but very comfortably able to pay the rents. So we’re a very desired tenant. Always have been, but even more so now
• if we’re patient, to get some extremely attractive real estate for very extremely attractive rents to build Wine and Beyonds, especially, in places where so far we’ve had trouble, namely Calgary and British Columbia

Insiders

• been buying a lot of shares
• bought around 100k shares in Aug/Sept at around current price
• Before that, in June-July had bought about 175k shares at a little over $3

Financials

• Long term:

• Short term:

• business really accelerated last quarter – no surprise
• FCF last quarter was negative b/c they built inventory – before WC FCF was $13mm
• I kinda like this one – seems to me that cases in BC and AB are going up not down, BC just shut down their bars and clubs, AB maybe not but who is going out right now – tailwinds for a few more quarters at least and this stock isn’t pricing in that like other pandemic stocks

Research: Mako Mining

• market cap is $327mm @ 50c – 583.7mm shares outstanding before offering, 654mm after offering
• have cash of ~$28mm and debt of $10mm
• $5.1mm of debt
• they just did an offering at:
  • 30,000,000 units of the Company (the “Units”) at an issue price per Unit of $0.40 (the “Offering Price”) for total gross proceeds of $12.0 million and a concurrent non-brokered private placement of an aggregate of 41,000,000 Units issued to Wexford Spectrum Trading Limited and Wexford Catalyst Trading Limited, funds managed by Wexford Capital LP (collectively, “Wexford”) on the same terms as the Bought
  • Deal Offering for total gross proceeds of $16.4 million
• each unit has a share and a half warrant at 60c
• they are 51% owned by some group called Wexford Capital:

• Wexford is led by Charles Davidson, Joseph Jacobs – have about $2.5b in assets
• they seem like they are just a big hedge fund
• CEO Akiba Leisman also is consultant at Wexford – oversees their public and private gold portfolio
• the whole team feels a bit more like a financial team than a mining team
• it looks like they are trading at 6.7x CF based on expected production at San Albino
• they aren’t really producing much yet
• run by team that has built Santa Elena, El Gallo and La Trinidad

San Albino

• high grade open-pit deposit
• in Nicaragua
• indicated resource of 150koz at 7.13g/t
• inferred resource of 192koz at 6.78g/t
• have a permit for 500tpd mill – are 65% complete
• recently expanded permit to 1,000tpd – not sure if they are expanding actual capacity though?

• this is a very odd deposit for an open-pit – it’s a vein, its narrow (1-2m in a lot of places) and its as much as 50m away from surface as you go west:

• capex on the mine is very low – $21.1mm
• going to be low cost – AISC of $395/oz, cash costs of $359/oz
• LOM ounces of 675koz – 41koz per year
• about 800kt of the ore is oxide
• recent drilling in May was 30.27g/t over 4.2m
• most of the recent drilling is very high grade but narrow

Las Conchitas

• had some high grade results – 84.6g/t over 1.6m, 32.7g/t over 3.1m, 56.8g/t over 1.4m
• this is adjacent to San Albino

• they have announced some decent results at Las Conchitas recently:

• these results were from the end of August
• they were widest intercepts at Las Conchitas so far
• conceptual model for the mineralization encountered at Las Conchitas consists of multiple, parallel, gold-bearing quartz veins with a gentle dip to the northwest
• here is one of the cross-sections they give for Las Conchitas:

• it looks pretty similar to Albino, narrow, high grade veins – though the grade is definitely lower than Albino

Potrerillo

• this is a newly acquired property
• to the NE of Albino
• sounds like it is contiguous and along strike so they think there is a lot of potential

Permit

• received permit for 1,000 tonnes per day operation in August 24^th
• the PEA is for a 500 tpd operation

I’m not sure about this one.  Its reasonable.  But it is such a weird deposit for an open-pit.