IL - Intralinks Holdings

[17thstcapital]

Intralinks offers cloud-based software-as-a-service solutions to organizations worldwide.  If you work(ed) at a bank or at a fund, I'm sure you've used it many times on transaction matters.  Basically a secure virtual deal room.  Target markets: enterprises, M&A and debt capital markets.  Global business with 40% of revenues outside of US.  Used to be PE owned (TA, Rho, etc).  IPO'd in 2010; stock traded north of $30 in early 2011 before collapsing on missed expectations.  Stock now trading below $5.

 

Quick recap of the #s:

$213mm revenues

$66mm ebitda (31% margin)

~$30mm free cash flow

$260mm market cap

$269mm EV

$68mm cash as of 12/11 and should grow by $10mm a quarter

11% FCF margin

15% FCF margin net of cash

~3.9x EV/EBITDA

 

Looks cheap to me.  Strong 'cloud' related secular trends in the company's favor.  There are competitive issues here but top line should still grow.  FCF conversion should remain high.  Business should also scale (in theory) nicely with the top line growing.  Management turnover is another issue also.  PE holders still own a lot of the stock; overhang is probably not helping.  I don't get why they just don't take this thing private again - unless something is fundamentally broken here that I haven't found.  Also seems like the kind of business that a strategic would have an interest in.  Cash heavy company not buying back stock at these levels is head scratching - interestingly, they just paid back $15mm in bank debt earlier in the month.  The lack of insider buying is a red flag.

 

Haven't found very many that follow this company but thoughts would be welcome. 

 

I'm recently long the stock + have sold puts.

 

 

[beerbaron]

The idea looks good. I'm reading the only annual report since IPO. Maybe you could bring me up to speed:

 

Who are the competitors?

It does not look like the customers are captive. It seems to be some kind of place people go when they have a transaction. Why can't the If you customers go elsewhere?

If you wanted to compete with them, would you be able to move them with 500M$?

 

 

BeerBaron

[17thstcapital]

Who are the competitors?

It does not look like the customers are captive. It seems to be some kind of place people go when they have a transaction. Why can't the If you customers go elsewhere?

If you wanted to compete with them, would you be able to move them with 500M$?

 

Primary competitors include SyndTrack, Merrill's Datasite service, RR Donnelly and Bowne. Enterprise software companies such as EMC and IBM are likely secondary competitors.  Longer-term its possible that Dropbox, Google, Microsoft could want a piece of this market. 

 

Customers can easily go elsewhere but in practice the business relationship appears somewhat sticky.  In my experience, if a bank is currently using Intralinks for bond offerings, rarely will I see them move to other services for future offerings.  On the flip side, if a bank is using Syndtrack for loan offerings, I will rarely see them use Intralinks for the same type of offering.  Given the kind of money they spend on sales and marketing, it would appear that the market for new business is super competitive.  It wouldn't be unreasonable to assume that Intralinks keeps and maybe grows its Wall Street related market (M&A, debt capital markets, etc) but the real future growth is in the Enterprise market and this is where they will have to prove themselves.

 

Not sure I understand the 3rd question and I'm probably not smart enough to figure out how much money it would take to create from scratch a secure cloud-based platform to provide information collaboration. 

[A_Hamilton]

The idea looks good. I'm reading the only annual report since IPO. Maybe you could bring me up to speed:

 

Who are the competitors?

It does not look like the customers are captive. It seems to be some kind of place people go when they have a transaction. Why can't the If you customers go elsewhere?

If you wanted to compete with them, would you be able to move them with 500M$?

 

 

BeerBaron

 

I use Intralinks to access financial filings for Wrigley's as my firm's clients are debtholders. The site is very user friendly and very secure, and I can't imagine the Wrigley team wanting to create new logins for everyone just to put the filings on a different system. This is just one application however and I don't know what others use the site for.

[ShahKhezri]

Use it for about 9 companies, I see it's use, I just don't know how they could raise prices, offer new services, etc.

[17thstcapital]

Not suggesting that this is a comp for Intralinks but the money being thrown around for these cloud based/software as a service type companies is shocking.  I don't know much about this company but doesn't seem like they have much in the way of profitability and if I had to guess, not a significant top line. 

 

Intuit to buy Demandforce for $423.5 million

Fri Apr 27, 2012 9:38am EDT

(Reuters) - Intuit Inc, the maker of tax preparation software TurboTax, said it agreed to buy Demandforce, a software-as-a-service application provider, for $423.5 million in cash.

 

"Demandforce sits at the sweet spot of Intuit's small- and medium-sized businesses customer base," said Kiran Patel, the executive vice president and general manager of Intuit's Small Business Group.

 

The acquisition — Intuit's largest ever — is expected to close in May.

 

Founded in 2003, San Franciso-based Demandforce bundles marketing and communications tools into a Web-based application and targets small local businesses — like salons, auto shops, chiropractors, dentists, and veterinarians.

 

Demandforce boasts of 35,000 small business clients in the United States and Canada.

 

The deal is expected to add one to two points to Intuit's revenue growth in fiscal year 2013 and to be neutral to modestly dilutive for earnings per share in fiscal years 2012 and 2013, Intuit said in a statement.

 

Mountain View, California-based Intuit started operations in 1983 and now has annual revenue of about $4 billion and a market valuation of $17 billion.

 

Intuit shares were up about 1 percent at $58.00 on Friday on the Nasdaq.

 

(Reporting by Supantha Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty and Joyjeet Das)