Cutera Inc (NAS:CUTR) — mrkt cap $17.6mm; Price $.88; EV/EBITDA NA
PASS. This is a heavily indebted company that has seen its stock price crater as a result of mismanagement, operational issues, and challenging macro conditions. The company sells aesthetic products, with its primary product, AviClear, being the first FDA-approved laser treatment for acne. There are more robust acne treatments available, such as Accutane, which, though effective, is an oral medication with potential side effects. In short, the company has promising technologies that could see recovery as rates lower—encouraging capital equipment sales– and the business stabilizes (big ifs). There are good reasons why bondholders might prefer the company to remain a going concern rather than liquidate—recovery rates in a liquidation scenario are dubious, and if the business gains momentum, bondholders may benefit more from holding some equity. A debt exchange with the ‘26 convertible bondholders makes sense–it is reasonably likely that the company will undergo a reorganization (which will likely be highly dilutive to the equity) to preserve its going concern status rather than face liquidation, which should benefit the ‘26 converts. This debt is currently trading at 30 cents on the dollar, and we will continue to evaluate.
Fiverr (NYSE:FVRR) — mrkt cap $917mm; Price $25.99; P/E 83
PASS. We have been researching online talent marketplaces heavily given recent sell-offs in the sector. Fiverr is down over 90% from its highs and is known as a platform for hiring freelancers for lower-value gigs (hence the name). In response to AI-driven disintermediation—why hire someone for a logo when AI can generate one for free—the company is trying to move upstream into higher-value jobs. While Fiverr has had some success with Fiverr Pro and Fiverr Enterprise, it’s difficult to determine whether they will emerge as an AI winner or loser. The company is committed to generating free cash flow; however, active user growth is negative yoy. We do not believe AI will disintermediate higher-value jobs, and if Fiverr succeeds in penetrating this market, talent will adapt and find ways to offer skills in an AI-driven world. We will keep it on the watchlist and pass for now.
BK Technologies (NYSE:BKTI) — mrkt cap $71mm; Price $20.03; EV/EBITDA 12
PASS. BKTI, a provider of specialized radios for wildfire departments nationwide, has been transitioning from in-house manufacturing to outsourcing production to suppliers in Mexico. This shift has significantly improved gross margins, which have nearly doubled to 35% over the past four years. With costs now under control, BKTI is expanding its reach to other sectors, including Emergency Response and Law Enforcement. Although Motorola has long dominated these markets, BKTI’s lower-priced radios could gain traction in smaller counties where budget pressures are more acute. The stock has risen 60% in the past week following strong earnings and guidance. Given the recent run-up and the potential political budget risks tied to the upcoming election, we are holding off for a better entry point.