Thursday, August 6, 2009

Why I'm long on CGX. It's about Printernet Publishing and User Network Business Models.

This morning the headline on the CGX Q2 earnings was titled
Consolidated graphics reports 21% revenue decline

I'm still long on CGX
because I think the next big thing is Clickable Print that is Printernet Published. The upcoming National Geographic personalized covers is being produced on the CGX fleet of Indigos. Also I really like when the CEO says " Our companies" instead of "our company". From whatever I can see from here, they have the right business model for a user network economy.

At any rate, you can read the press release pasted below via

Thursday, August 06, 2009

Unless otherwise noted, the below is a press release from the issuing company

HOUSTON, TX. -- Consolidated Graphics, Inc. today announced financial results for the quarter ended June 30, 2009.

Revenue for the June quarter was $225.9 million, down 21% compared to the same quarter last year. The revenue decline was primarily due to a year-over-year same-store revenue decline, and lower election-related business. Operating income declined to $.9 million in the June quarter compared to $20.0 million last year due to the lower revenues and a more difficult operating environment. Operating margins declined from 7.0% in the June 2008 quarter to .4% in the current quarter. Net loss for the June quarter was $.3 million or $.03 diluted loss per share. Net income for the June 2008 quarter was $9.6 million, or $.84 diluted earnings per share.

Despite the decline in results, the Company had strong free cash flow of $29.8 million for the June quarter compared to $29.5 million for the same quarter last year. Adjusted EBITDA for the June quarter was $20.1 million compared to $37.6 million a year ago. Additionally, total debt declined $29.1 million during the quarter to $285.1 million at the end of June.

Joe R. Davis, Chairman and Chief Executive Officer of Consolidated Graphics, commented, "The weak economy continued to reduce demand for print and pressure our profit margins during the June quarter. Our companies are working hard to maintain revenues and effectively manage costs during these tough times."

Mr. Davis continued, "On a positive note, these difficult times have created opportunities for Consolidated Graphics. Our cost structure and financial strength are a competitive advantage and will allow us to attract new customers and sales personnel and continue to acquire good printing companies."

On July 30, 2009, the Company entered into an amendment to its revolving bank credit agreement. The amendment increases the interest rate on borrowings and allows for additional financial covenant flexibility. Following the amendment, based on the Company's current leverage ratio, as defined, and current market interest rates, borrowings under the revolving credit agreement carry a variable interest rate of less than 3%. Both the commitment amount of $335 million and the maturity date of October 6, 2011 remain unchanged.

For the quarter ended September 30, 2009, the Company expects to generate revenues of between $225 - $240 million and at least break-even adjusted net income.

A reconciliation of the non-GAAP financial measures, Adjusted EBITDA, Free Cash Flow and Adjusted Net Income is included in the attached tables and in the Current Report on Form 8-K filed today, as well as the basis for management's use of the non-GAAP financial measures.

Full disclosure: Long on CGX.


  1. Thanks for the mention Mike!
    We at CGX are committed to our technology, local and national clients, and are proud of the financial strength of the company.
    You will continue to see CGX leading the industry in technology and services centered around digital print.
    If anyone is interested in selling for CGX: grow your sales, offer more capabilities, expand your technology offerings and more...I would like to hear from you.
    Sally Hiler
    Recruiting Manager
    CGX -

  2. Sally,
    No need for thanks. Just watching out for this shareholders value.

    A question:
    Are there any opportunities for independents to have some kind of affiliate relationship with CGX?

    Not the typical printing broker as in buy it, mark it up and sell it. More like a Google Reseller. I have a feeling lots and lots of independents, designers, retail printers and even independent MPS might find it very interesting.

  3. Mike,
    I will echo your opinion on CGX. They seem to get the new generation of print media and have established the proper infrastructure to capitalize on it. It's about getting professional quality printing as quickly and efficiently as possible, and CGX is the recognized leader in digital print technology.

    I will continue to follow your blog, and appreciate your insight into the industry.

  4. Carolyn,
    Thanks for the kind words. I was particularly impressed with the announcement by HP the the "fleet of Indigos" made them the go to choice for National Geographic.

    Doing personalized covers for a photo book for Nat Geo seems like such a great use case. I will be very interested to see what the results are Nat Geo. If they are anywhere near what I expect my bet is that other magazines will follow suit.

    I would think any kid oriented celebrity fan mag would be perfect.