Buyback Wednesdays – Build-A-Bear Workshop Announces a 22% Buyback

Buyback activity edged up a little with 9 companies announcing buybacks last week. Synopsys (SNPS) announced an additional buyback of $1.5 billion representing around 3% of its market cap at announcement. The company beat earnings expectations in each of the last four quarters and net margin of 20.86% and return on equity of 19% were higher than prior quarters. Synopsis has been consistently announcing buybacks but the net impact on shares outstanding has been minimal. The company recently entered into accelerated share repurchase agreements, which will hopefully put a bigger dent in their outstanding shares. The company expects to grow its annual revenue by ~20% and pass the $5B milestone by the end of the year.

PotlatchDeltic Corporation (PCH), a REIT that owns timberlands, also announced a $200 million share repurchase program representing around 6% of its market cap. The company’s stock is down 15% over the last year. A 20% drop in lumber prices impacted the company’s Q2 2022 results. The wood products segment generated adjusted EBITDA of $107 million in the second quarter, compared to $150 million in the first quarter. The real estate segment however, managed another strong quarter with adjusted EBITDA of $22 million. The company has been a successful bidder on three bolt-on timberland transactions this year apart from the ongoing CatchMark merger. The three bolt-on transactions add approximately 46,000 acres to the company’s ownership in Mississippi and Arkansas. High mortgage rates and low home builder confidence are likely to put downward pressure on timber prices and impact PCH’s prospects in the near future.

The stock buyback announcement that really grabbed our attention last week was the $50 million share buyback announced by Build-A-Bear Workshop (BBW), representing around 22% of its market cap at announcement. This is a bold move by a roughly $200 million company that has $79 million of net debt on its balance sheet.

Lockdowns early during the pandemic and the touchy/feely nature of BBW’s business hurt fiscal 2021 (ending January 2021) results with revenue dropping from $338.5 million in the prior year to $255.3 million. The company, which was barely profitable pre-pandemic, swung to a loss of $23 million in fiscal 2021. Business rebounded sharply in the last few quarters with total revenue for the first half of fiscal 2022 coming in at $218.3 million, representing a 17% increase over the prior year. Commercial and international franchise revenues grew 41.1% year over year. The company beat earnings estimates in three of the last four quarters with net income of $50.1 million during the last four quarters.

                                                                                                           Source: Investor Presentation – Build-A-Bear Workshop, Inc. (BBW)

BBW makes itself available in multiple formats serving a wide range of locations including tourist, traditional malls, shop-in-shops inside Walmart, seasonal venues and sport-related event locations. The company has a high level of lease optionality with over 75% of its locations having a lease event within the next three years. The company plans to add approximately 20 locations in fiscal 2022 in North America. The stock is cheap with an EV/EBITDA under 5 and could be the motivation for the company to buy back its own stock. Fears of a recession and the company’s lackluster performance pre-pandemic are some of the reasons the stock appears cheap.

Welcome to edition 23 of Buyback Wednesdays, a weekly series that tracks the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the largest buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap stocks with a market cap below $2 billion.

Top 5 Stock Buyback Announcements 

1. United Maritime Corporation (USEA): $1.49

On September 02, 2022, the Board of Directors of this shipping company approved a new share repurchase program authorizing the company to repurchase up to $3 million of its class A common stock equal to nearly 24.1% of its market cap at announcement.

Market Cap: $13.20M Avg. Daily Volume (30 days): 1,754,539 Revenue (TTM): N/A
Net Income Margin (TTM): N/A ROE (TTM): N/A  Net Debt: N/A
P/E: 0.99 Forward P/E: N/A EV/EBIDTA (TTM): 4.85

2. Yiren Digital Ltd. (YRD): $1.05

On September 06, 2022, the Board of Directors of this online consumer finance company approved a new share repurchase program authorizing the company to repurchase up to $20 million of its class A common stock equal to nearly 22.7% of its market cap at announcement.

Market Cap: $94.90M Avg. Daily Volume (30 days): 282,920 Revenue (TTM): $704.63M
Net Income Margin (TTM): 23.07% ROE (TTM): 24.03%  Net Debt: $173.20M
P/E: 3.66 Forward P/E: 2.4 EV/EBIDTA (TTM): -0.87

3. Trinseo PLC (TSE): $25.42

On September 06, 2022, the Board of Directors of this chemical and plastic manufacturer approved a new share repurchase program authorizing the company to repurchase up to $200 million of its class A common stock equal to nearly 22.2% of its market cap at announcement.

Market Cap: $893.20M Avg. Daily Volume (30 days): 519,753 Revenue (TTM): $5.38B
Net Income Margin (TTM): 5.04% ROE (TTM): 15.39%  Net Debt: $2.14B
P/E: 7.32 Forward P/E: 3.27 EV/EBIDTA (TTM): 6.16

4. Build-A-Bear Workshop, Inc. (BBW): $12.5

On September 01, 2022, the Board of Directors of this plush toy retailer approved a new share repurchase program authorizing the company to repurchase up to $50 million of its class A common stock, equal to nearly 21.7% of its market cap at announcement.

Market Cap: $207.46M Avg. Daily Volume (30 days): 305,639 Revenue (TTM): $443.45M
Net Income Margin (TTM): 11.29% ROE (TTM): 55.94%  Net Debt: $79.1M
P/E: 4.35 Forward P/E: 4.91 EV/EBITDA: 4.33

5.  PetIQ, Inc. (PETQ): $10

On September 06, 2022, the Board of Directors of this pet medication and wellness company approved a new share repurchase program authorizing the company to repurchase up to $30 million of its class A common stock, representing nearly 10.6% of its market cap at announcement.

Market Cap: $256.63M Avg. Daily Volume (30 days): 641,962 Revenue (TTM): $934.88M
Net Income Margin (TTM): -1.53% ROE (TTM): -5.57%  Net Debt: $477.38M
P/E: N/A Forward P/E: 6.63 EV/EBIDTA (TTM): 14.64

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