Excerpt from the Stanphyl Capital letter to investors for the month of May 2018 discussing their long position in one micro-cap play. Stanphyl was profiled in the second edition of HVS and has had some of the best picks among all the funds we have profiled with 200%+ returns on some pitches. Teaser fror non subs followed by content for full members [caption id="attachment_2058408" align="aligncenter" width="300"] PublicDomainPictures / Pixabay[/caption] We continue to own XXXXXXCXX (ticker: XXXX), a designer and manufacturer of point-to-point microwave systems for telecom companies, which in June announced a restructuring program that the company says will enhance both growth and profitability. However, it will take some time to find out, as after paying an immediate one-time restructuring charge of $X million, the company expects to save the same amount annually but not until FY 2020 which begins in July 2019. In May he company reported a mixed Q3 for FY 2018, with revenue up both sequentially and year-over-year but with several one-time expenses causing a larger GAAP loss than the previous year. However, for FY 2019 (beginning July 2018) the company guided to at least $2XXM of revenue (approximately X% better than 2018) and non-GAAP EBITDA of at least $1X million. Because of its approximately $3XX million of U.S. NOLs, $1X million of U.S. tax credit carryforwards, $2XX million in foreign NOLs and $X million of foreign tax credit carryforwards, he company’s income will be essentially tax-free for many years; thus, GAAP EBITDA less capex is essentially equal to earnings. So if the non-GAAP number will be $1X3 million and we take out $X million in share comp and $X million in capex we get $X million in earnings multiplied by, say, 1X = $XXX million + $X0 million in net cash = $1XX million/X.X5 million shares...
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