1 / 25

Recommendation: Buy Ian Strgar and Daniel Greenfield March 5 th , 2013

Recommendation: Buy Ian Strgar and Daniel Greenfield March 5 th , 2013. Background. Founded in 1997 as reseller of telecom services SLC, formerly known as UNC inc , name change in ‘09 Launch SaaS deployment based call center software platform in 2005 - Revenue model transition.

maura
Download Presentation

Recommendation: Buy Ian Strgar and Daniel Greenfield March 5 th , 2013

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Recommendation: Buy Ian Strgar and Daniel Greenfield March 5th, 2013

  2. Background • Founded in 1997 as reseller of telecom services • SLC, formerly known as UNC inc, name change in ‘09 • Launch SaaS deployment based call center software platform in 2005 -Revenue model transition

  3. Segments • Telecommunications: Qwest, Verizon, Global Crossing • Typically 1-3 year contracts • Software: Delivery/Support of SaaS based call center software • Typically last 1-2 years, billed monthly • InContact sales team: 37 sales reps, up 37% from 11Q4

  4. Key Reseller Agreements • Siemens • NOT Exclusive, minimum purchase agreements: $4.5, $7, $5 million in 2012, 2013, and first 7 seven months of 2014 • Verizon Wireless • North America market share, not yet ½ way through Verizon’s customer base • 12Q4 – Booked largest contract to date through Verizon reseller agreement • Main Benefit: 3000+ sales team behind InContact platform

  5. Call Center Industry Background • Private Branch Exchange (PBX): A switchboard (originally), internal telephone system where larger lines are broken down in multiple extensions • Contrast against common carrier operated lines – much more costly

  6. Wave of the Future: Hosted PBXs • Increasing internet speeds allow for hosted PBX systems • Calls begin and end at hosting vendor’s data center • Decentralization, cost pressure

  7. Primary Software Offerings • Automatic Call Distributing (ACD) • Handles inbound/outbound calls as efficiently as possible • Dialer • Number manipulation: preview (information), power (agents available), predictive (agents not available), auto (pre-recorded) • Interactive Voice Response (IVR) • I.e. pre-recorded help lines for large volumes • Workforce Optimization (WFO) • Planning, scheduling, forecasting workforce needs

  8. Competition • On-Premise • Aspect, Avaya, Cisco: large legacy product vendors hold largest market shares • Cloud Competitors: • Five9, Interactive Intelligence: less mature products for SMB • Development of cloud offerings by large software vendors is perhaps InContact’s greatest risk

  9. InContact vs. On-Premise • Data from Frost & Sullivan

  10. Market Opportunity • Roughly $8 billion opportunity • Data from Frost & Sullivan, DMG Consulting, and Gartner

  11. Comparable Analysis

  12. Revenue Model • Software Revenue • New Customer Sales: 3 pieces of data - new customers books, average # of seats, cost per seat • New Customers in ’12: 60-65 • Average # of seats for new customer in ’12: 40 • Average cost per seat: $1.7k-$2.5k. We took a low end estimate to be conservative ($2k) • Current Customer Sales • Retained revenue (92%), 6% growth in same store sales of retained customers

  13. Revenue Model Transition

  14. Revenue Model Cont. • Telecom: healthy growth, but decline as % of revenue

  15. Cost of Revenue • With cloud transition, COGS declines

  16. Other Notable DCF Considerations • Selling & Marketing • Guidance: projected to rise to 28-29% • Research & Development • Guidance: projected to rise to 9-10% • Depreciation & Amortization • Straight-line, 2-3% growth • Tax Rate • Compared to CRM, VZ, ININ • Determined reasonable average: %11-18

  17. DCF Price Target

  18. Final Price Target

  19. Questions

  20. Beta sensitivity a potential issue…

  21. Exit Multiple

  22. Exit Multiple Cont…

  23. All Things Considered

  24. From Our Boy, Aswath • “When you have a growth company, the discount rate is the least important input into the valuation. It is your revenue growth, margins and cash flows that matter.” -Aswath Damodaran

  25. Recommendation • In conclusion, we recommend a buy for all portfolios

More Related