Upload
danielshvartsman
View
1.292
Download
0
Tags:
Embed Size (px)
DESCRIPTION
ACIIC Pitch
Citation preview
March 14, 2015
Buy Presentation
Blake Klasios
Siddhant Dilawari
Avneet Multani
Jeffery Lee
Adam Steinberg
Jerry Du
Table of Contents
I. Business Overview
II. Management Overview
III. Investment Thesis
IV. Valuation
V. Risks and Catalysts
VI. Conclusion
Business Overview
Business Description
• QAD provides on-premise and cloud-based Enterprise Resource Planning (ERP) software to the manufacturing sector
• QAD delivers solutions both in the cloud and on-premise, providing ongoing support to customers ensuring they have access to the latest features of the QAD software.
• Currently, the cloud-based service comprises 10% of QAD's business.
Business Overview
Revenue Breakdown by Geography
Key Financials
Ticker NASDAQ: QADA
Market Cap 385M
52 Week Range $17.05-23.07
Current Price $21.49
EPS 0.62
Dividend 1.12%
Market Performance
NA, 43%
EMEA, 34%
LA, 6%
AP, 17%
15
17
19
21
23
25
QAD’s Approach to ERP – The Effective Enterprise
• At the core of our solutions is our ERP suite called QAD Enterprise Applications and is also deployed in the cloud as QAD Cloud
ERP
Business Overview
Revenue Breakdown
Business Overview
CloudOn-Premise
13%
9%
29%
49%
Licenses
Subscription
Services
Maintenance
Licenses
• New customers/users
• New divisions
• New models
Services
• New implementations
• Upgrades
Maintenance
• High Retention
Subscriptions
• New customers/users
• New divisions
• New models
Industries Served
• Products and services support business
processes of global manufacturing companies
in our target industries.
• The ERP suite, QAD Enterprise Applications, are
available on-premise, in the cloud as QAD
Cloud ERP or under a blended deployment
model combining both of these deployment
offerings.
• QAD enables seamless integration between
QAD Enterprise Applications and common browser
applications and spreadsheets.
Business OverviewServices Provided
21%
16%
32%
31%
Consumer &Food/Beverage
Automotive
HighTech & Industrial
Life Sciences
QAD Solutions
• Implementation of QAD Solutions
• Migrations
• Upgrades
• Conversions
• Integration
• Systems Management
• Training and Education
• Application Management
• Business Process Improvement
• Pre-Defined Consulting Engagements
ERP (Enterprise Resource Planning)
• A process by which a company manages and integrates
the important parts of its business. An ERP system
integrates areas such as planning, purchasing, inventory,
sales, marketing, finance, human resources, etc.
• Think of ERP as the glue that binds the different computer
systems for a large organization.
• With ERP, each department still has their own system, but
they can communicate and share information easier with the
rest of the company.
Business Overview
Technology Adoption Cycle
The Cloud
• QAD delivers our core ERP offering and many other solutions
in the cloud, charging a subscription fee for access to these
software-as-a-service (“SaaS”) solutions. We refer to these
solutions collectively as components of the QAD Enterprise
Cloud. Within the QAD Enterprise Cloud we have QAD Cloud
Apps, QAD Cloud Services and the QAD Cloud Portal.
Cloud Benefits
• Full Strength & Global ERP
• Flexibility
• Accessible Anywhere
• Reduced Risk (Cost predictability)
Management & Shareholder Analysis
Most of the shares (11.6M out of 16.8M shares –
73%) are held by the CEO and President (Insiders)
• CEO recently sold 1M shares in January 2015 at a
price of $20 each, possibly to dilute his ownership
in the company and gain more external investor
interest
• Mixed buy/sell activity from the institution side
• High level of control held by the key officers
indicates a strong dedication towards the growth of
the company
77%
Class A
Class A80%
Class B20%
Class A and B Share Split
Institutions – 23%
83%
Class B
Institutions – 17%
Tikvah Management is the
largest institutional holder,
with 3.7% of Class A shares
• Invest in small to large
cap stocks, mainly
financials and technology.
Management & Shareholder Analysis
Management tenure has been very long
compared to the industry
• CEO and President both served for 34+
years
• All key officers have 10+ years of
service at QAD
• Indicates a high level of attachment to
the company and dedication to drive
good results in the future
QAD Vision: The Effective Enterprise
Consists of businesses (clients)
operating at peak efficiency through
QAD’s system software solutions
Management & Shareholder Analysis
I. Transition from on-premise software to cloud-based
II. Improving margins from conversion
III. Undervalued compared peers (Valuation)
Investment Thesis
Transition to Cloud-based Software
Cloud-based software will drive revenue growth
• In past three years, QAD has grown its cloud business at 40%+ due to strong investment and
focus
• Forecasted to continue growing subscription-based cloud business for the nest three years at
40-50%
• Companies in the automotive, consumer, food and beverage, technology, and life sciences
industries are interested in paying a subscription fee instead of maintaining IT infrastructure
Conversion to cloud Revenue Breakdown
On premise
customers
Convert to cloud
Realize 3-4x the annual
revenue
Grow cloud
revenues
10%
90%
Cloud
On Premise
Improving Margins from Conversion
Strong margins from cloud
• Currently operates at a 40% gross margin; however, this is projected to improve to 60-70% in
the next five years
• Can cut R&D expense and realize leverage across its hardware and storage, software, and IT
administrative personnel costs
• As revenue increases, gross margins will trend toward the 65% level
I. Discounted Cash Flow
II. Comparable Companies
Valuation
Valuation: Comparable Companies
Ticker Name Mkt Cap (USD $M) P/E EV/EBITDA T12M EV/Sales T12M
GSB US Equity GLOBALSCAPE INC 66.5 21.1x 8.9x 1.6x
RKN CN Equity REDKNEE SOLUTIONS INC 329.7 N/A 17.4x 1.1x
IL US Equity INTRALINKS HOLDINGS INC 585.4 N/A 18.8x 2.x
VDSI US Equity VASCO DATA SECURITY INTL 868.3 26.8x 22.2x 4.9x
PRGS US Equity PROGRESS SOFTWARE CORP 1,352.8 24.4x 10.5x 3.x
PEGA US Equity PEGASYSTEMS INC 1,513.5 46.6x 17.9x 2.3x
MSTR US Equity MICROSTRATEGY INC-CL A 1,845.3 123.8x 49.1x 2.6x
CVLT US Equity COMMVAULT SYSTEMS INC 2,033.4 56.6x 29.2x 3.2x
SWI US Equity SOLARWINDS INC 3,652.4 41.9x 25.4x 8.2x
MEDIAN 41.9x 18.8x 2.6x
AVG 48.7x 22.2x 3.2x
MIN 21.1x 8.9x 1.1x
25TH 25.6x 17.4x 2.0x
75TH 51.6x 25.4x 3.2x
MAX 123.8x 49.1x 8.2x
QADA US Equity QAD INC-A 385.5 37.4x 12.1x 0.8x
Valuation: DCF
$26.16
Implied Share Price:
Valuation: DCF
Risks & Catalysts
Risks
QAD has a unique dual share structure,
which makes it difficult for shareholders to
replace the management group
• This could depress future value if the
management team is inefficient and
performs poorly
QAD faces substantial currency risk, as 55%
of its revenues are generated overseas
• The business does not hedge against
currency fluctuations
The business’s cloud business has margins
of 40%, below its overall gross margins
• There must be a focus on improving
margins in the cloud business
Risks & Catalysts
Catalysts
In the past, QAD has had limited analyst
coverage
• Limited coverage has depressed share
value
QAD’s cloud business is poised to grow
substantially in the future
• Analysts are projecting annual growth rates
of over 40% in the industry of the new few
years
• This will provide additional subscription-
based revenue
QAD is transitioning its products to cloud-
based software
• This will grow the business’s top-line
revenue and bolster margins
There are a number of discernible catalysts that will positively affect QAD’s share value
in the near future
Thank You.