Templates promise a shortcut. Then you spend three hours bending your actual business into someone else's boxes and rows. Congrats, you've saved like zero time!

Abacum's new AI Spaces skips that bad trade. Prompt it, or pick a starting point - either way you get a full board-ready dashboard or planning workspace in minutes, built on your model. Your variables. Your versions. Your dimensions. Not a generic template you then have to rewire.

It's not just about doing things "faster." (Although it is nice to not let formatting eat your afternoon.) It’s so when the board asks for a new cut on the spot, you're spending your time on the variance story and the recommendation.

That's the job they're actually paying you for.

Just when you think you’ve seen it all!

Friend of the pod (Tim Dillon voice) Dave Kellogg sent me down a deep, dark M&A rabbit hole with this tweet.

From the actual press release:

TL;DR:

It’s reminiscent of a SPAC in many ways, but with a balance sheet that came from someone else, rather than your investors.

And instead of raising money and then looking for a business to buy like you would in a typical SPAC, you can move into a vacant West Palm Beach home with cash, a NASDAQ ticker, and relatively valuable tax assets looking for a profit to offset.

To Dave’s point, the cash is easy to value. In this case, a dollar is truly worth a dollar.

But NOLs are much more difficult to value.

An NOL works like a coupon for future taxes. You can only redeem it if you have profits to redeem it against. And remember, Domo just sold the business that was supposed to (eventually) make profits.

At time of sale they had $900M in historical losses (they have a history of incinerating money), and if you assume a marginal corporate tax rate of about 21% you get to $189M in future tax savings.

BUT it’s actually less than that.

In a stock sale, shareholders sell their shares directly. The corporation itself owes nothing, and the money goes straight to the sellers.

In an asset sale, the corporation sells its stuff. The corporation recognizes a taxable gain, pays corporate tax on it, and only what survives that tax bill is left inside the company for shareholders.

This is the path Domo is taking. So the entity that’s left (the empty publicly traded shell) owes tax on the gain from what’s being sold to Progress.

My estimate is that something like $350M of the $900M in losses gets burned sheltering the asset sale gain, which means the shell ends up with closer to $550M. Plus, the exact figure depends on Domo's basis, which isn't public yet.

(Also, if you are into NOLs I’ve got a whole whack of carbon credits I’d love to sell you.)

And what’s more, they have to find a business that generates profits, not revenue, to use these NOLs. So it’s not like you walk in on day one with something to gain. You need to work for it, and run a profitable business.

Domo's losses come in two vintages and both have a catch:

The market voted (and will keep voting, because it's a publicly traded discarded mollusk shell) that the NOLs are worth less than nothing. About 48 million shares at Friday's $3.68 close gets you $177M of market cap, against $246M of cash that lands when the deal closes…. (checks math)… actually, they’re not paying for the tax assets at all. They're marking them at negative $69M, effectively charging you rent to hold this thing while it trades below its own cash value. Nice.

Admittedly, some of that gap is the market discounting a deal that hasn't closed yet. And some of it is a shrug at $900M of losses nobody knows how to use.

How would I use it?

This part’s fun! A choose your own adventure of sorts!

My money is on the Rights offering to buy something bigger and do some kabooky AI service move with a slow moving, headcount heavy, profitable company. Call it Domo’s AI enabled Post Operating SPAC ACT II.

Fascinatingly enough, the corn husk is worth about seventy cents for every dollar Progress just paid for the operations and assets of the company

That's the world we're living in, where the remains of a SaaS company fetches most of what the actual business fetched. Probably because it loses money (negative ~10% GAAP EBITDA and negative ~15% GAAP operating margins). Private equity looked at 13 straight quarters of flat revenue + continuing losses and threw its hands up and said even I can’t fix this.

When it comes to historical precedent, I found fewer than 10 examples, and the stories can be characterized by long waits and bankruptcies (and an absence of tech). Washington Mutual is the closest comp. And it sat empty for a decade before turning into Mr. Cooper in 2018.

It’s clear that the AI boom is the mother of many deal inventions. We saw a wave of acquihires that were more lucrative than any sort of tech business purchases we’d been familiar with (that’s just how valuable AI engineers are). And now on the downswing we are seeing a new flavor of deals for the victims of the AI boom.

Net net: When business is great, there are new, creative deals. When business is bad, there are new, creative deals.

This company in particular was a zombie before AI showed up. It was never being run like a serious business with a mission to eventually profit. So AI didn’t cause its death as much as created a funding environment that slowly strangles poorly run companies, pushing them faster to an inevitable death (also, see Marqeta).

Thirteen flat quarters is a very serious business problem, which eventually becomes a very serious solvency problem when you have debt. Last quarter $137M of debt jumped from long term to current, and whiffs of going concern language started to show up in their filings. So this was a move against the clock as much as it was against a stagnant revenue line.

In all honesty, the ref should have stopped this fight two rounds ago.

This is not a death caused by AI, but hastened. There will be more, and they will be direct knockouts to game opponents, not side swipes to an already wobbling pugilist.

Wishing you trade at a high revenue and EBITDA multiple,

CJ