| 2008 | 2009 | ||||||
| Price: | 10.06 | EPS | |||||
| Shares Out. (in M): | 0 | P/E | |||||
| Market Cap (in $M): | 169 | P/FCF | |||||
| Net Debt (in $M): | 0 | EBIT | 0 | 0 | |||
| TEV (in $M): | 0 | TEV/EBIT | |||||
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Investment Thesis
Fundtech (FNDT) is a classic case of a great company that is suffering from guilty by association. As a provider of payment and settlement technology solutions to financial services companies, investors have become skittish about FNDT’s prospects for 2008 and beyond given the current crisis with financial institutions. Having fallen more than 45% from its 52-week high on Oct. 2 of $17.83, the stock is trading at $10.06. With $50M in cash ($3.00 a share), Fundtech has an enterprise value of $119 million, or $7.07 a share. Factor in $83M in net operating losses (NOLs) conservatively valued at $1.50 a share and you can buy Fundtech for roughly $5.55.
Based on 2008 estimates, Fundtech is currently trading at 1.0x EV/Revenue, 7.0x EBITDA and 9.9x EV/FCF and 12.6x P/E. Comps trade between 2.5x – 3x EV/Revenue, 9x – 18x EV/EBITDA and have P/Es between 20x-24x. Given the value of its technology, client base, and expertise, I believe Fundtech is severely mis-priced and undervalued. There’s also been plenty of M&A in the financial technology sector, and Fundtech is a prime acquisition candidate. Most fintech deals have been between 3.5x – 4.0x EV/Revenue and 37x – 48x EBITDA. Any way you look at it, Fundtech is a great value at current levels. For those willing to do the work, I believe you’ll find a profitable company that’s growing whose intrinsic value is at least $20 a share.
2007E
2008E
EV /Revenue
1.1x
1.0x
EV/ EBITDA
7.7x
7.0x
EV / FCF
21.7x
9.9x
P/E
14.4x
12.6x
Company Overview
Fundtech is a leading provider of end-to-end financial transaction processing software solutions for financial institutions. These solutions are grouped into five broad categories: payment processing, foreign exchange settlement processing, financial messaging, cash management and securities settlement straight through processing products. The first three categories are transaction processing solutions, which enable banks to automate the payment and settlement processes and provide real-time transaction processing capabilities to financial institutions and their customers. The fourth category, cash management products, enables corporate clients to communicate with their financial institutions for the purpose of initiating payments, making inquiries and managing their activities with the financial institutions. The final category securities post-trade settlement is a multi-asset global trade management solution that consolidates and automates a broker/dealer’s middle office operations. It operates in Israel, the United States, Switzerland, India, and the United Kingdom. The company was founded in 1993, went public in 1998 and is traded on NASDAQ. Fundtech is based in Ramat-Gan, Israel with its US headquarters in Jersey City, NJ.
Capital Structure (Balance sheet data as of 9/30/07)
| Price as of 1/9/08 | $10.06 | Total Current Assets | $80.2 | |||||||
| Fully Diluted Shares Outstanding | 16.8 | Total Assets | $122.9 | |||||||
| Market Cap | $168.8 | |||||||||
| (+) Debt | $0.0 | Total Current Liabilities | $21.1 | |||||||
| (-) Cash | $50.1 | Total Liabilities | $24.2 | |||||||
| Enterprise Value | $118.6 | Total Shareholders' Equity | $98.7 | |||||||
| Net Cash per Share | $3.0 | Total NOLs | $83.0 | |||||||
| NOLs per Share | $1.5 | NPV of NOLs | $25.1 | |||||||
Financial Summary
| 2005 | 2006 | 2007E | 2008E | |
| Revenue | $74.5 | $85.5 | $104.6 | $115.1 |
| Y/Y Growth | 27.2% | 14.8% | 22.3% | 10.0% |
| EBITDA | $10.3 | $11.7 | $15.4 | $16.9 |
| EBITDA Margin | 13.8% | 13.6% | 14.7% | 14.7% |
| (-) D&A & Stock-Based Comp | $5.8 | $8.9 | $9.5 | $10.0 |
| EBIT | $4.4 | $2.7 | $5.9 | $6.9 |
| EBIT Margin | 5.9% | 3.2% | 5.7% | 6.0% |
| Interest, Net | $1.1 | $2.0 | $2.0 | $2.0 |
| EBT | $5.5 | $4.7 | $7.9 | $8.9 |
| (x) Tax Rate | 21.2% | 20.4% | 16.4% | 15.0% |
| (-) Taxes | $1.2 | $1.0 | $1.3 | $1.3 |
| GAAP Net Income | $4.3 | $3.8 | $6.6 | $7.6 |
| (+) Non-Cash items | $2.7 | $5.3 | $4.9 | $5.0 |
| Adjusted Non-GAAP Net Income | $7.1 | $9.1 | $11.5 | $12.6 |
| GAAP EPS | $0.27 | $0.24 | $0.40 | $0.45 |
| Adjusted Non-GAAP EPS | $0.45 | $0.57 | $0.70 | $0.80 |
| Earnings Yield | 4.4% | 5.7% | 6.9% | 8.0% |
| FD Shares Out | 15.8 | 15.9 | 16.6 | 16.8 |
| GAAP Net Income | $4.3 | $3.8 | $6.6 | $7.6 |
| (-) D&A & Stock-Based Comp | $5.8 | $8.9 | $9.5 | $10.0 |
| Changes in other assets & liabilities | $0.1 | ($7.4) | ($4.5) | $0.0 |
| Operating Cash Flow | $10.3 | $5.3 | $11.6 | $17.6 |
| (-) Capital expenditures | ($5.4) | ($5.2) | ($6.2) | ($5.6) |
| Free Cash Flow | $4.9 | $0.2 | $5.5 | $12.0 |
| FCF / Share | $0.31 | $0.01 | $0.33 | $0.71 |
| FCF Yield | 2.9% | 0.1% | 3.2% | 7.1% |
Note: Non-cash items include amortization of capitalized software development, amortization of intangible assets and stock-based compensation.
Why Fundtech?
For such a small company, Fundtech has made impressive accomplishments in a very competitive industry – technology solutions for financial services companies. From 2002 to 2007, FNDT’s revenue has grown at a 21+% CAGR, from approximately $40 million in 2002 to $104 million (estimated) in 2007. At the same time, the company has improved EBITDA margins to approximately 15% and Free Cash Flow to $5 million in 2007. The Company is now in a strong position to continue selling add-on modules to its existing client base while leveraging their industry credibility, marquee client list, market-leading solutions and highly-valued technical expertise to acquire new clients.
Despite their revenue growth, Fundtech still only has a tiny percentage of the market. Bank IT spending in 2005 was approximately $145 billion, of which Fundtech’s products address $10.4 billion. By providing core software solutions that help automate, simplify and streamline payment and settlement processing, Fundtech has lots of room to grow. As the market leader in this payments and settlements niche, Fundtech is benefitting from four main trends: 1) new regulatory requirements which drive upgrades; 2) the search for new fee-based revenue streams and the greater cost reduction through greater operational efficiency; 3) the shift from in-house-developed systems to external packaged applications; and 4) need to upgrade from older, legacy systems to modern applications that can handle increased volume and complexity.
Although the financial services sector (especially in the US) may face a slow down in the near-term, Fundtech’s offerings are considered “mission-critical” by their customers, of which FNDT counts nine of the world’s ten largest banks including Citibank, HSBC and Barclays. With over 700 bank customers worldwide, approximately 50% of its sales come from North America, 44% from Europe and 6% from Asia-Pacific. Over the next 12-24 months, Fundtech is well positioned to increase revenue and free cash flow as it meets its customers’ demand.
Risks to Consider
· Client concentration: top two clients (Citibank and HSBC) represent approximately 24% of revenue in 2005 and 2006.
· Financial institution IT spending: Significant credit-related losses at top customers may lead to slowdown in project deployments for Fundtech.
· Long sales cycles: Large license deals, complex bank technology and multi-country projects can lead to lengthy sales cycles for new license and professional services engagements.
· Large shareholder concentration: CLAL owns approximately 41% of the company, which could put significant pressure on the stock if they ever decide to liquidate their position.
· Israeli-based company: Unstable political, economic, legal and tax conditions may impact Fundtech going forward.
Margin of Safety
· Large cash balance: With $3 per share in cash ($50 million), FNDT has approximately 30% of its market cap in net cash.
· Huge Switching Costs: As the payments engine for large financial institutions, it is extremely difficult to “rip-out” Fundtech technology once implemented, given the large upfront investment and mission-critical nature of their products.
· Expertise: Large “moat” with Fundtech’s highly-skilled professional services team, which has the industry largest payments knowledge base.
· NOLs: As of December 31, 2006, Fundtech had net operating loss (“NOL”) carryforwards of approximately $44.0 million in the United States which begin to expire in 2010 through 2025. As Fundtech also has approximately $32.6 million of Israeli net operating loss carryforwards and approximately $6.4 million capital loss carryforwards. The Israeli loss carryforwards have no expiration date. In total, that’s $83 million in NOLs, which is about $4.94 a share. Using conservative ways to value the NOLs with a 12% discount rate, I get to approximately $1.50 a share.
Catalysts
· Providing confident guidance for 2008.
· Potential wins from existing clients.
· Potential unexpected wins from large banks for Global PAYplus systems.
· Leveraging Global PAYplus for further SEPA modules.
· Potential cross-selling opportunity into existing customer base.
· Increased demand for product in European and Asian markets.
· Potential stock buyback.
· Potential acquisition.
What’s Recently Happened to Fundtech?
In the past 30 days, Fundtech has dropped 38% from a high of $16.05 on Nov. 30, 2007 to a new 52-week low on Jan. 9th 2008 of $9.95. I believe this is a classic case of a company that is mis-understood and is caught in a downdraft that has nothing to do with the fundamentals of its business. The aggressive decline can be attributed to three main issues:
1) Financial Services Gloom: Given the negative sentiment for all things financial services-related, Fundtech is getting thrown out with the proverbial bath-water. The fear is based on the simplistic logic that financial institutions are hurting due to sub-prime, therefore they must cut spending, therefore Fundtech is going to be hurt. Granted 3 large banks (Citibank, HSBC and Barclays) represent 24% of 2006 revenue, but one must dig deeper to understand how much is Fundtech truly exposed. 50% of Fundtech’s business comes from the US, however most of the work being done for Citibank and HSBC in North America is largely completed. Most of the work for these firms is being done outside of the US. Combine this with the fact that most of the European banks need to perform upgrades to meet new regulatory requirements such as the single European payment area (SEPA) and UK Faster Payments, and we think these concerns are being overly pessimistic.
2) Competitive Gloom: On Dec. 18, 2007, Fundtech competitor ACI Worldwide (ACIW) signed a five-year partnership with IBM. The market quickly viewed this as a big negative for Fundtech, which helped contribute to the decline. Although I do take seriously a competitor partnering with an important firm such as IBM (only the paranoid survive, right?), one has to put this “partnership” in perspective. First off, things take time. Fundtech has the market-leading solutions in the marketplace today and that is why the Company has had so much success. I believe ACI was falling behind and not able to win in competitive back-offs and had to do something that would make them a serious contender. However, the partnership with IBM means that they will have to re-architect and customize their MTS wholesale payments software for the IBM System z platform. As a result, ACI will not have a competitive offering in the market for perhaps the next two years, giving Fundtech ample runway to gain further share at a time where banks need to upgrade systems due to regulatory requirements.
3) Shareholder Gloom: I’ve learned that one of Fundtech’s top five shareholders had to sell off a significant stake in Fundtech due to fund redemptions that it received. Given that average daily trading volume is approximately 50,000 shares, having a large seller in the market has put unusual pressure on the stock for reasons that have nothing to do with the fundamentals of the business.
Why Consider Fundtech Now?
Fundtech presents a low-risk, value opportunity given the noise around the sector. Fundtech currently trades at $10.06 with a market cap of $169 million. With no debt and $50 million in cash ($3 / share), Fundtech has an enterprise value of $119 million and trades at 1.0x EV/2008E Revenue, less than 7x EV/2008E EBITDA and less than 10x EV/2008E Free Cash Flow. Using a conservative 2008E EPS range of $0.75 - $0.80 a shares, FNDT’s 2008E P/E is trading between 12.5x – 13.5x, which is well below its historical average of approximately 20x P/E and below the industry average of 22-24x P/E. While estimates are now being trimmed over concerns related to financial institutions’ spending as well as the recent ACI/IBM deal, I believe Fundtech’s business is deeply mis-priced and mis-understood. The combination of its impressive client base, market-leading technology solutions and highly-skilled professional services team makes Fundtech an attractive investment as a stand-alone business. With the ACI/IBM partnership, Fundtech will need to become more closely allied with a larger strategic technology partner such as an Oracle or HP. Indeed, Fundtech is now a likely acquisition candidate for either a strategic technology partner or a financial processor/outsourcer such as a Fiserv or a Metavante.
As a result, I believe the intrinsic value is north of $20 per share using a variety of ways including comparable comps of EV/Revenue multiple of 2x – 3x, EV/EBITDA multiples of 14x – 18x and a P/E multiple of 22x – 28x. M&A comps of EV/Revenue of 3.5x – 4.0x and EV/EBITDA of 37x – 48x would make it all the more attractive at current levels.
Business Overview
Fundtech’s primary business is providing a suite of global cash management and payments solutions that enable financial institutions and their business customers to manage cash, process payments and transfer funds electronically. Fundtech integrates a real-time, web-enabled payments engine with full Internet cash management functionality, which offers financial institutions the infrastructure they need to provide internet commerce services to their business clients. Examples of bank tasks that use Fundtech’s solutions include all aspects of funds transfer (wires) as well as cash management such as foreign exchange settlement processing, local regulatory compliance, account reconciliation, balance reporting, customer messaging, risk management, rules engines, integration into multiple clearing systems, and remittances.
Fundtech’s business model is a traditional software license, maintenance and professional services model. Fundtech also has launched hosted versions of some of its products, specifically its cash management offerings. Hence, there is also a nascent software-as-a-service business that is growing and is not reflected in the company’s valuation.
As of Q3 2007, Fundtech employed 841 employees and consultants, with approximately 54% working in services, 24% in technology, 17% in SG&A and 5% in support. The company operates on 4 continents in 13 locations, with primary offices in New Jersey, London, Frankfurt and Tel Aviv.
In 2006, product revenue was divided as follows: payment engines and operations represent 46% of sales, cash management 24%, gateways & interfaces 16% and clearing analysis settlement systems 14%.
In 2006, revenue was divided as follows: professional services (both development and implementation) were 42%, maintenance was 26%, license revenue was 16% and managed services (hosting) was 16%.
Competitive Overview
Fundtech is the clear market leader in a market with very limited competition. For its most important product offering, its Global PAYplus solutions, the short list of competitors that are consistently mentioned are Logica and ACI.
· Payment Market Players: Fundtech is the leader in this market. Other competitors include ACI, Clear2pay, Dovetail, Logica and TietoEnator.
· Cash Management Market Players: Fundtech is the leader in this market. Other competitors include Banklink, Bottomline, Corillian, P&H (part of ACI), Financial Fusion, Digital Insight and S1.
More often than not, the competition that Fundtech faces is in-house development by the financial institutions. According to research firm Celent, in 1999 approximately 91% of financial institutions developed products in-house vs. 75% by 2004. The changes in the external payments infrastructure, the need to drive out further costs from the payments platforms as straight-through processing (STP) penetrates deeper, the search for new fee-base income sources and the overall benefits of outsourcing are leading more financial institution to pick vendors that have both the expertise and client list to handle these tasks.
Product Overview
Fundtech’s products fall into four broad categories:
Payment Engine & Operations Market (2005 Market Size - $5.3 billion): Fundtech payments solutions automate all aspects of the funds transfer and customer notification process, enabling straight-through-processing (STP) of payments. Its offerings include:
· Global PAYplus: This is Fundtech’s flagship software offering for large global banks. Global PAYPlus provides financial institutions with real-time global payment services developed to meet the demands of the current regulatory and competitive landscape. This multi-tiered system addresses local and global payment processes. It is sold as a platform with multiple modules that can be added on to expand the platform. Modules include High Value Payments, SEPA, UK Faster Payments, STP Accelerator and a variety of other modules.
· PAYplus USA is the leading funds transfer solution for financial institutions in the United States. Combining features such as an enhanced user interface, superior throughput performance, scalability and browser-based payment initiation, PAYplus USA helps financial institutions manage payments more efficiently and cost-effectively.
· Nostro Manager helps financial institutions boost profitability by effectively managing their cash assets. It facilitates the management of correspondent bank accounts worldwide by enabling financial institutions to meet target balances at the account and at the currency level while minimizing the costs of account ownership.
· Transact CashIn/Transact CashWeb™ is equipped with a complete suite of solutions that efficiently manages channel finance & services, collections management, payments management, receivables management, liquidity management and account reconciliation.
Payment Initiation Market (2005 Market Size - $3.2 billion): Fundtech's global cash management solutions allow financial institutions to deliver a complete set of cash management services through the Internet and other delivery channels. Fundtech's solutions address the needs of small, mid-tier and large financial institutions. In addition, Fundtech also offers remittance solutions which are low value yet relatively low risk products that offer banks new fee revenue streams.
· CASHplus® is Fundtech's global cash management solution, leveraging the most advanced technologies, the most efficient system architecture and the most progressive functionality to provide cash management services for an ever widening global marketplace. CASHplus is a multi-lingual, multi-currency product that offers a comprehensive set of Internet banking services through a full range of delivery channels.
· webBANKER™ is Fundtech's corporate cash management solution for the Microsoft Windows platform. webBANKER enables financial institutions of all sizes to offer the same types of cash management services to their business customers as the money-center banks provide, but at much lower costs.
· Transact Remit™ is a powerful, web-based, international remittance transaction processing system, which automates the entire process of money transfer for a bank or financial institution. It is a highly customizable solution that ensures speedy remittances from anywhere in the world to anywhere, without the usual transit losses.
Settlements & Clearing Systems Market (2005 Market Size - $1.0 billion): Fundtech offers solutions for foreign exchange settlement.
· PAYplus for CLS™ is an integrated solution to help your bank capitalize on the opportunities presented by the expanding CLS (Continuous Linked Settlement) system for foreign exchange (FX) settlement. PAYplus for CLS inter-operates with settlement members, user members, and third and fourth party members to provide them with a full set of integrated CLS services, including all CLS-supported FX settlement, NDFs, Options Premiums (to come), derivative settlement, internal netting and non-CLS currencies. Full support to monitor the CLS daily and projected pay-in and pay-out schedule, assess credit real time with flexible risk parameters, and automatically feed data to internal bank systems and third parties for final settlement of FX trades. Test
· TRADEplus™ is a multi-asset, global trade management solution that consolidates and automates the middle office operations. TRADEplus provides real-time Omgeo connectivity (including OASYS, OASYS Global and ALERT) as well as FIX connectivity, complete 15022/20022 compliance, and the ability to mediate all of these proprietary and standard formats. Automated matching of allocations with the street side and intelligent routing by business area removes manual processes and drives down cost and risk. TRADEplus can be implemented as a whole or as a modular extension to existing trade management applications. Critical to trade management, TRADEplus integrates with Standing Settlement Instruction data providing superior reference data management capabilities and automated linkages into industry standard data sources, including Omgeo ALERT.
Gateways & Interfaces Market (2005 Market Size - $0.9 billion): Fundtech offers both gateway and interface solutions for multi-asset global trade management. These solutions consolidate and automate a broker/dealer’s middle office operations, allow users to detect and resolve trade issues, such as mismatched trades, in real time, as well as offering a rules engine to ensure more efficient control and management of transactions across asset classes, offices, market infrastructure, and various vendor interfaces and clients
· The IGTplus™ Message Converter is a unique middleware application specifically designed for the financial services industry. It allows financial institutions to convert proprietary messages into SWIFT and other standard messages and vice versa, saving time and reducing costs of conversion.
· Through Fundtech’s SWIFT ServiceBureau, corporates now have access to a cost-effective connection to the SWIFT messaging network. The service is a complete interbank solution that is centrally operated, eliminating the need for significant investment in hardware or software. Installation is quick and easy.
· Fundtech’s SWIFT ServiceBureau offers financial institutions and corporates access to a fast and cost-effective SWIFTnet connection. Participants benefit directly from all SWIFT messaging network functions, and operate interdependently with their own BIC code. The shared system environment allows greater efficiency without reducing functionality.
· The SWIFT IGTplus for FIN Messages Module provides financial institutions with greater flexibility in processing SWIFT FIN messages.
Customer Overview
Fundtech has over 700 bank customers. Nine of the top ten global banks are Fundtech customers, including Citibank, HSBC, Barclays, Deutsche Bank, UBS, and Bank of America. Six of the top ten US banks are customers, and 300 of the top 500 banks are as well. Other well know names include Bank of New Yrk, BBVA, Goldman Sachs, and Merrill Lynch.
Management & Organizational Overview
Fundtech’s is managed by a core group of executives with a strong background in financial services technology. As a group, insiders and directors own approximately 6.7% of the company as of it’s latest 20-F filing released in June 2007.
· CEO - Reuven Ben Menachem: A co-founder, has extensive experience in the design and implementation of payment systems. Prior to founding the company, he was employed at Logica Data Architects, a funds transfer software provider, as technical director and product manager. Previous positions include director of banking systems at Manof Communications Systems, a middleware software provider, and senior programmer/analyst in the Israeli Air Force.
· President & COO – Michael Sgroe: joined Fundtech in 2000. Before joining Fundtech, Mr. Sgroe spent 16 years at Chase Manhattan and Chemical Bank, and was responsible for developing and deploying high-performance solutions for the funds transfer and cash management businesses of the bank. Mr. Sgroe also served as CIO and vice president of technology and operations for the e-procurement solutions provider Intelisys, an e-commerce startup with 50% ownership by Chase Manhattan Bank. He began his career in 1979 at Morgan Guaranty Trust, where he held technology assignments both in New York and in London.
· CFO – Yoram Bibring: joined Fundtech in 2001. Prior to his current position, Mr. Bibring was chief financial officer of ViryaNet, a provider of software solutions to the workforce management market. Prior to joining ViryaNet in April 1999, Mr. Bibring served as chief financial officer of Americash, Inc., a leading operator of e-cash platforms, which was sold to American Express, and prior to that he was at Geotek Communications, a wireless communications service provider where he served initially as chief financial officer and then as the president of its International Division. Mr. Bibring has more than 11 years of experience as a high ranking executive of several technology companies.
· EVP, Technology – Gil Gadot: joined Fundtech in 1993. Gil is managing the Global Settlements Solutions division of Fundtech. Previously, he was senior vice president of operations-technology; he also served as vice president of research and development. Before joining Fundtech, Mr. Gadot was a senior project manager for DSSI, a leading systems and software supplier with operations in Israel and the United States. He has more than 20 years of software development experience, particularly in advanced graphical user interface, operating and real-time systems.
· EVP, Corporate Development – Joseph Mazzetti: joined Fundtech in 1994 and has been actively involved in business development of the company's payments and Continuous Linked Settlement (CLS) offerings. Prior to joining Fundtech, Mr. Mazzetti was executive vice president at PRT Corporation and executive vice president of the Financial Products Group at Logica Data Architects. He has more than 30 years of experience in payment systems technology for banking institutions and public sector financial agencies. Mr. Mazzetti has participated in numerous financial industry conferences and research projects.
Shareholder Overview
Fundtech has a very concentrated institutional shareholder base, with the top ten institutional shareholders owning approximately 70% of the fully diluted shares. Its largest shareholder is a large Israeli conglomerate group called CLAL Industries and Investments, Ltd. which owns over 40% of the fully diluted shares (via its subsidiary IDB Development Corporation). Cannell Capital is its second largest shareholder, owning approximately 17% of the fully diluted shares.
| Shares | Options | Total Shares | % of | $10.06 | |||
| Shareholder | Owned | Owned | Owned | Shares | Current Value | ||
| 1 | IDB Development Corporate (CLAL) | 6,791,176 | 40.48% | $68,319,231 | |||
| 2 | Cannell Capital, LLC | 2,800,000 | 16.69% | $28,168,000 | |||
| 3 | Federated Investors | 492,442 | 2.94% | $4,953,967 | |||
| 4 | Royce and Associates | 399,800 | 2.38% | $4,021,988 | |||
| 5 | Renaissance Technology | 324,500 | 1.93% | $3,264,470 | |||
| 6 | Shannon River Capital | 314,062 | 1.87% | $3,159,464 | |||
| 7 | Systematic Financial | 216,000 | 1.29% | $2,172,960 | |||
| 8 | Aura Investments | 169,500 | 1.01% | $1,705,170 | |||
| 9 | Brazos Brazos Capital | 141,500 | 0.84% | $1,423,490 | |||
| 10 | American International | 141,500 | 0.84% | $1,423,490 | |||
| Top 10 Shareholders | 11,790,480 | 70.28% | $118,612,229 | ||||
Comparative Company Analysis / M&A Analysis
Financial Processing Comparative Company Analysis
| 1/9/2008 | Market | Enterprise | Net Cash | P/E | EV/Rev | EV/EBITDA | EV/FCF | ||||||
| Company | Ticker | Price | Cap | Value | % Market Cap | NTM | LTM | LTM | LTM | ||||
| Fidelity National Information Services Inc. | FIS | $38.32 | $7,448 | $11,504 | -54.3% | 15.7x | 2.5x | 9.9x | 45.8x | ||||
| Fiserv Inc. | FISV | $53.77 | $8,821 | $9,632 | -9.2% | 19.5x | 2.0x | 9.6x | 19.4x | ||||
| Jack Henry & Associates Inc. | JKHY | $23.65 | $2,084 | $2,029 | 2.6% | 18.0x | 2.9x | 9.4x | 13.9x | ||||
| Metavante Technologies, Inc. | MV | $20.65 | $2,465 | $3,148 | -27.2% | 17.3x | 2.0x | 6.7x | 10.7x | ||||
| Core Processors | $5,205 | $6,578 | -22.0% | 17.6x | 2.4x | 8.9x | 22.5x | ||||||
| CyberSource Corp. | CYBS | $16.09 | $1,099 | $1,039 | 5.5% | 41.4x | 11.2x | NM | 133.6x | ||||
| Electronic Clearing House Inc. | ECHO | $16.58 | $117 | $107 | 8.1% | NM | 1.4x | 23.7x | 19.6x | ||||
| Euronet Worldwide Inc. | EEFT | $27.91 | $1,368 | $1,651 | -20.0% | 22.2x | 2.0x | 15.7x | 20.7x | ||||
| Bottomline Technologies Inc. | EPAY | $13.00 | $335 | $270 | 19.4% | 22.8x | 2.2x | 84.7x | 40.2x | ||||
| First Advantage Corporation | FADV | $14.66 | $896 | $1,083 | -15.3% | 12.9x | 1.3x | 6.3x | 13.5x | ||||
| Fair Isaac Corp. | FIC | $28.41 | $1,386 | $1,726 | -24.6% | 14.2x | 2.1x | 8.4x | 11.0x | ||||
| Global Cash Access Holdings, Inc. | GCA | $5.77 | $482 | $684 | -42.0% | 14.4x | 1.1x | 7.1x | NM | ||||
| Global Payments Inc. | GPN | $38.71 | $3,018 | $2,671 | 12.0% | 19.6x | 2.3x | 9.8x | 14.6x | ||||
| Heartland Payment Systems Inc. | HPY | $24.29 | $918 | $878 | 4.4% | 24.3x | 0.7x | 8.0x | 24.6x | ||||
| Mastercard Incorporated | MA | $189.89 | $36,258 | $31,997 | 8.4% | 35.3x | 6.0x | 20.6x | 38.1x | ||||
| Online Resources Corp. | ORCC | $10.35 | $299 | $448 | -22.9% | 40.8x | 3.5x | 16.7x | 49.4x | ||||
| S1 Corp. | SONE | $6.02 | $367 | $317 | 16.3% | 21.6x | 1.6x | 14.7x | 22.0x | ||||
| TNS Inc. | TNS | $16.93 | $424 | $615 | -45.0% | 18.2x | 2.0x | 10.7x | 26.0x | ||||
| Total System Services, Inc. | TSS | $23.90 | $4,584 | $4,078 | 11.2% | 18.0x | 2.2x | 7.1x | 11.3x | ||||
| Bank Software & Payment Processors | $3,682 | $3,398 | -6.0% | 23.5x | 2.8x | 18.0x | 32.7x | ||||||
| ACI Worldwide, Inc. | ACIW | $14.49 | $520 | $502 | 3.4% | 34.2x | 1.4x | 12.6x | 15.8x | ||||
| Fundtech Ltd. | FNDT | $10.06 | $223 | $153 | 31.6% | 14.4x | 1.1x | 9.4x | 19.0x |
Recent M&A Multiples
| Closed | Acquiror / | Transaction | Enterprise | EV/ | EV/ | ||
| Date | Target | Investor | Size ($MM) | Value ($MM) | Revenue | EBITDA | Type |
| 12/17/2007 | ACI Worldwide | IBM | $86 | $943 | 2.5x | 41.4x | Investment |
| 12/3/2007 | Checkfree | Fiserv | $4,564 | $4,369 | 4.5x | 15.6x | Acquisition |
| 5/15/2007 | Corillian | Checkfree | $220 | $245 | 3.6x | 123.9x | Acquisition |
| 2/13/2007 | Prang | Fundtech | $10 | $10 | 3.2x | NA | Acquisition |
| 2/6/2007 | Digital Insight | Intuit | $1,351 | $1,261 | 5.3x | 20.7x | Acquisition |
| 9/17/2007 | Fortuna Technologies | TietoEnator | $29 | $29 | 2.7x | NA | Acquisition |
| 1/19/2007 | i-flex Solutions | Oracle | $1,092 | $3,754 | 8.6x | 37.0x | Investment |
| 9/29/2006 | P&H Solutions | ACI Worldwide | $157 | $157 | 3.7x | NA | Acquisition |
| 10/28/2004 | CashTech Solutions | Fundtech | $7 | $7 | 2.1x | NA | Acquisition |
| Mean | $835 | $1,197 | 4.0x | 47.7x | |||
| Median | $157 | $245 | 3.6x | 37.0x |
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