Google Finance
Filing
Nov. 14, 2017
Q3 2017 Data
Price: $2.30, Share outstanding 21m. Cap: $48.5m
1.Basic Information
(1) History .
This company was found by William Tatham at around 2003. NexJ is short for Next Janna. Janna Systems was his previous company, a CRM software company he founded at 1990 and was sold to competitor Siebel at 2000 for $1.76B. Siebel later was acquired by Oracle. Right after the 3 years non-competing agreement expires, Tatham founded NexJ which enters the same business again. The company spend several years in development and be able to sell to Wells Fargo at 2007 as its first big customer. It grew quickly to $30m in revenue at 2011 and went public at that year. However, since then, it kind of slow down and only be able to achieve $33m in revenue at 2016.
Previous to 2016, it also has a health care segment which try to improve health care systems efficiency. It incurred quite a lot dev expense and was split off at end of 2015 as a private company.
Although the company didn't grow much since IPO. Its financial had been improved consistently. It achieved close to cash positive at 2015 and over $3.5m in cash at 2016. However, for first 3Q of 2017, the company generated small losses and revenue were down compare to last year.
(2) Business-related:
Its CRM system is focused on financial and insurance sector. And is On-promise model compare to cloud based model. Also it doesn't use the SaaS model. It sell its CRM licenses to its customers and do follow-up customization as service revenue. Also it generates maintenance revenue after it delivered its software system.
Its sales is contract based which means when a big win happens. It usually see a big jump in license revenues and service revenue for the following one year. Maintenance revenue is quite stable once a customer is on-board.
Major Customers:
Wells Fargo: Since 2007, 35,000 licenses.
Investors Group: Since 2008, 6,800 licenses.
London Life: Since 2010, 1,680 licenses.
American Family Insurance: Since 2010, 17,000 licenses.
RBC: Since 2011, 9,210 licenses.
ANZ: Since 2014, 4,400 licenses.
HSBC: Since 2015, 1,800 licenses.
UBS: Since 2016, 11,000 licenses.
(3) Management.
(4) Debt and Credit Facility.
As Q3 2017, it has $16m in cash and no debt.
(5) Insider holding, options, Insider trading info, share buyback.
William Holland: a director, 2.3m shares (10%) through Eastwood Capital. He is the key person of CI financial.
(6) Employee numbers
161 employees at 2016. 68 in R&D. 72 in service.
(7) Industry comparison.
Pegasystems CRM: Focus on financial industry as well.
Salesforce: Higher price, invest more in vertical market.
Oracle CX cloud: SaaS model.
Oracle Siebel: An old system which NexJ aims to replace.
Microsoft Dynamics: SaaS model.
SAP CRM: Sale as part of SAP system.
Overall I think Salesforce and Pegasystems might be its direct competitor.
(8) Major events
2. Financial data.
*The 2012-2015 revenue contains Health care segment. The 2012-2013 separate revenue contains Health care segment.
3. Valuation
(1) The company was in loss for many years until 2015 it generated small profits and at 2016, it generated around $3m in real income. Previous to 2016, the health segment also incurred a lots of loss which is also added the losses. In 2017, its profit is down but still be able to maintain profitable.
(2) Currently its market cap is below $50m. If it trades at 2x of revenue, it might be $65m to $70m range. That suggest a $3 to $3.5 share price.
4. Risk
(1) The company seems face tough competition on those places. It is hard to tell what is their competition advantage. It hadn't won and major contract in 2012-2013 which had dragged down its performance from 2012 to 2014. On the positive side, although no major contract, existing customer seems keep adding service to its existing systems.
(2) It can maintain some of its license and services revenue from existing customers. But it is hard to know what is the number. Only the maintenance part seems predictable.
(3) Although currently it is profitable, it might loss money again.
5. Conclusion
I think the company is actually been managed well. However, its product depends on big contract which is very unpredictable. If it can grow or even maintain current revenue level and improve profitability, it can be a good investment.
6.Links
