Finance & Investment Club PHO 206 – 10/24/2012 General Meeting #5
Dec 27, 2015
Finance & Investment ClubPHO 206 – 10/24/2012
General Meeting #5
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Finance Club Long-term Goals
Long-term Goals
Education To offer an educational, real-life opportunity for
aspiring investment professionals
Community To foster lasting relationships amongst our
membership in Boston University and beyond
Alpha To continue professional procedures to
maintain an alpha generating process
Growth Personal, career and fund growth
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Investment Management Training: By Ishar Sawhney
© Leverage Academy 2009. All rights reserved.
CLO & Distressed Investment Professional – Marathon Asset ManagementPrior Experiences include:• Founder – LeverageAcademy.com• Founder – MarketRealist.com• SPP Hambro Mezzanine Fund – Mezzanine Investing• Brookside Private Equity – PE & Mezzanine• Moelis – Investment Banking/Restructuring• Bank of America Merrill Lynch – Leveraged Finance• GE Capital – Structured Products• HedgEye – Healthcare Equity Research• KLD Research – Asset Allocation Analyst• Batterymarch Quant Fund – Risk• Legg Mason – Risk & Infrastructure• Citigroup – Infrastructure• ZepInvest.com – Business Development
Saturday AfternoonsNext Meeting Agenda: Regression-confirmed Comps, Beta, Debt Schedule
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Veritas 5th Annual ConferenceVeritas Financial Group-Sheraton Commander (16 Garden Street, Cambridge, MA)
-Saturday, November 3rd, around 10:30AM - 4:30PM
-The event is free and open to all college students
-Lunch is also provided
MANDATORY REGISTRATION: http://tinyurl.com/vfgconference2012RESUME DROP: [email protected]
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Community
Happy Birthday 23rd Kheng Ming!
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Alpha
BUINVEST.COM LEADERBOARD
Stock Pitch: 8x8, Inc. Finance & Investment ClubTelecommunications Sector
Kevin Ng – Investment AssociateArlind Hoxha – Investment Asscoiate
Fall 2012
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Company Overview
8x8, Inc. markets and provides telecommunications services for Internet Protocol telephones and video applications mainly for business customers. The company is also expanding its line of services to include – contact center services– web-based conferencing– unified communications services– cloud based computing services
The company uses Voice over Internet Protocol technology which allows customers to place calls through the internet rather than through traditional switching methods that are more costly and harder to implement
8x8(NASDAQ: EGHT)
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Focusing on Services Has Fueled Revenue Growth
Company is focused on increasing its number of services and retaining customers– The number of services subscribed to per business customer grew to 10.1 in the first quarter of FY13 in comparison to
8.4 in the same period last year– The churn rate fell to a record low of 1.7% in 1Q13, down from 2% at the end of FY12
More services and greater retention have fueled revenue growth– Average revenue per business user grew to a record high of $250 in 1Q13, up from $200 a year earlier
2010 2011 2012 2013e $-
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000
$100,000
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Revenue (Thousands) Business Customers
3 year Revenue CAGR = 9.88%
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VoIP Market Growth in the U.S.
Small & Medium Businesses (SMB)
Large Enterprises Government Sector
SMBs allocated 10% of spending to cloud bundles in 2011, expected to increase to 15% by 2015
• Expected to grow from 12% market share of sector in 2010, to 32% by 2015• VoIP subscribers are expected to grow from 21 million in 2010 to almost 70 million by
2015 (CAGR of 27%)• By 2013, an estimated 79% of U.S. businesses will be using VoIP technologies
Strongest penetration rate with over 48% having VoIP in at least one location
40% of surveyed organizations use videoconferencing services or applications
Saves money by reducing operating costs over time while boosting the customer experience
Simplifies infrastructure and management complexity while being easy to use
41% of SMBs have already switched to VoIP with an additional 20% switching next year
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8x8: Positioned for Market Penetration
Small & Medium Businesses (SMB)
Large Enterprises
8x8
• Dominates the SMB market by providing comprehensive VoIP services
• Larger competitors cannot focus on advertising VoIP without drawing business away from other segments
• Offers a full-fledged contact center typically unaffordable for SMBs
• Cloud communication services can be installed without an IT person and potentially save hundreds of thousands
• Partnered with Level3 (LVLT) for Networx and WITS 3 Contracts
With more than 80 competitors, top market share of Hosted IP lines installed in 2011 (7.9%)
Government Sector
• Competitive advantage in pricing• Acquisition of Contactual in 2012 brought in
dozens of large enterprises for potential cross-selling services
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Patents and Patent Value
Current owns 79 patents valued up to $50 million with more pending
Most valuable patents were issued recently can be licensed to companies
abroadIf liquidated, patents could add $15 to $50 million as a hard asset on balance
sheet (12% to 39% increase)
Makes it an appealing potential takeover target
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Risks
High Probability
• Litigation (medium severity)• Competition (low severity)• Decreasing telecommunication rates (low severity)
Medium
Probability
• Emergency calls may be delayed or disrupted (medium severity)• Regulation changes by the FCC (medium severity)
Low Probability
• Another economic downturn (high severity)
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Conclusion8x8 could potentially be a good investment because of1)Revenue growth created by its focus on customers and services2) The company’s position to take advantage of a growing market3) Strong patent portfolio which makes the company a takeover target
However, the company could be overvalued at a price of 6.36 (as of 10/16) EV/EBITDA of 41.26x is above the comparable mean and median of
7.85 and 3.76, respectively
Company reports earnings on 10/24- do we get in before or after?
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Back Up Slides
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Industry Breakdown and Summary
Industry Breakdown by Market Cap ($BN) Market Share by TTM Revenue
Technology
$ 119,763.3 (100%)
Telecommunications*
$ 42057.2 (35%)
Communication Services and Equipment
$ 3931.8 (3.3%)
Business VoIP
$1.9(1.6%)
*Domestic and Foreign Telecom($908.1 BN), Diversified Communication Services($102.7 BN), Communication Equipment($3931.8 BN), Wireless Communications ($37114.6 BN)
5%
47%
7%
14%
27% 8x8VonageMagicjackShoretelCbeyond
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Comparable Company Analysis
Company % 52 week high
LTM EV ($MM) Debt/Equity
LTM EBITDA Margin
ROA ROE EV / EBITDA
Churn Rate
EGHT 90.60% $413.87 - 10.16% 89.35% 103.76% 41.26x 1.70%
VG 62.50% $499.47 23.20 15.45% 98.97% 312.48% 3.76x 2.50%
CALL 72.04% $355.38 N/A 7.90% 0.65% N/A 33.87x N/A
SHOR 70.05% $266.21 13.24 -2.51% -3.94% -14.22% -42.96x 3.10%
CBEY 90.58% $271.89 2.00 16.58% -1.92% -2.74% 3.32x 1.50%
High 90.60% $ 499.47 23.20 16.58% 98.97% 312.48% 41.26x 3.10%
Median 72.04% $ 355.38 7.62 10.16% 0.65% 50.51% 3.76x 2.10%
Mean 77.15% $ 361.36 9.61 9.51% 36.62% 99.82% 7.85x 2.20%
Low 62.50% $ 266.21 - -2.51% -3.94% -14.22% -42.96x 1.50%
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--- end of analyst report ---
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Tonight’s Speaker Event
Aaron Klein – Vice President• Joined Keybanc in 2005 where he has worked in the Energy and the Clean Tech
• Aaron is a graduate of Ohio University
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Employment Opportunities
Company: Bank of America Merrill Lynch Positions: Investment Banking Summer Analyst, Global
Capital Markets Summer Analyst Location: New York When: Summer 2013 Requirements: Junior standing, 3.2 minimum GPA Send resume to [email protected] by 11:59pm on
October 21st
Company: Citigroup Position: Sales & Trading Summer Analyst Location: New York When: Summer 2013 Requirements: Junior standing Send resume to [email protected] by 11:59pm on
October 21st
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Veritas 5th Annual ConferenceVeritas Financial Group-Sheraton Commander (16 Garden Street, Cambridge, MA)
-Saturday, November 3rd, around 10:30AM - 4:30PM
-The event is free and open to all college students
-Lunch is also provided
MANDATORY REGISTRATION: http://tinyurl.com/vfgconference2012