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Hi Lemat,

Something about their long term debt bothers you, but for the life of me I can’t figure out what it could be. I’m just not sure what your concern is.

First of all, they are obviously not adding to their debt, as they are about the most profitable company you or I has ever seen. Their gross margins are 81% and they are obviously not a high capex company. Possibly the debt came from the early years of starting the business. Maybe they wanted to do it all themselves and not take money from venture capitalists. Or maybe the present company bought it from prior owners. I don’t know because it hasn't seemed of any importance to me.

Think of it this way, their long term debt at the end of 2019 was $1200 million, and at the end of 2020 was $750 million so they have reduced it by $450 million over the past year.

But what is much more important is that, over time, the long term debt will stay the same or gradually decrease, while the revenue, operating income, and free cash flow will keep growing by leaps and bounds until any remaining long term debt becomes insignificant and irrelevant, considering the size of the business.

So again, I don’t see your concern, but I will ask Bert Hochfeld if he knows where the debt came from, as I’m now curious about that, even though it will fade away as time goes on.

Best wishes,

Saul
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