Top Image Systems - March Quarter 2015 Update
May 29, 2015 9:41 AM ET | About: Top Image Systems, Ltd. (TISA)
Disclosure: The author is long TISA, QADA, LRKMF. (More...)
Summary
March quarter 2015 Revenues and EBITDA disappoint.
2015 Full Year Guidance retained.
Industry consolidation is opening up partnership opportunities.
EFlow capture technology being moved into cloud processing environment.
Top Image Systems (NASDAQ:TISA) develops capture and business process technology which enables faxes, paper documents, internet forms and mobile data to be extracted with automated business logic thereafter applied enabling the data to routed efficiently. The flagship software 'eFlow' is used for mail room and accounts payable and receivables automation with the company's 2014 acquisition of documents storage company eGistics a formal step into business process outsourcing. The software traditionally has been hosted on premise but the company is significantly building its capability in the cloud.
1st Quarter 2015 Metrics
Revenue $8.3 million ($43 million is full year 2015 Target, with sequential quarterly growth) - MISS
Non GAAP EBITDA $8000 ($4.7 million is 2015 Target with sequential quarterly growth) - MISS
Recurring revenue $4.8 million (4th quarter exit run-rate $5.9 million is 2015 Target with sequential quarterly growth) - MISS
Mobile Revenues +100% (+100% was guidance) - HIT/BEAT
Excuses from 1st Quarter
Q1 is a seasonably slow quarter.
SaaS recurring transaction based revenue was weak in Q1.
Significant strengthening of the dollar especially against the Euro.
Sales did not meet expectation with 2 deals pushed into the 2Q.
2015 Guidance
Guidance unchanged at $43 million revenue and non GAAP EBITDA of $4.7 million with profitability expected to sequentially improve over the next three quarters.
Interesting Deals/Updates
Six figure loan approval technology deal in India.
Company in negotiations with top 10 US bank for the use of its CloudDoc product (acquired with eGistics 2014 acquisition).
Proof of concept for eFlow cloud delivered prospective US financial customer (estimated $1-$2 million deal size per annum).
Launch of eFlow lending product which integrates core eFlow capture technology (inclusive of mobile) with CloudDocs (reference client is Titan Lending).
Consolidation in global capture market has opened up opportunities for global partnership agreements in the short term.
The company mentioned that relevant transactions in the capture space are being priced on an EV/Sales of 3 times against TISA current multiple of circa 1.2 times.
Interesting Technology
Snap to Tech - Attaches digital photo images of receipts and tags directly to relevant online record.
The eFlow lending product utilizing CloudDocs is first in a series of intelligent applications to be launched.
SUMMARY
The March quarter 2015 was weaker than expected both at the revenue and EBITDA line with the management team yet to delivery reliable quarterly guidance in my opinion. The fact the new CEO and COO are retaining their full year 2015 guidance after such a miserable Q1 is either fool hardy or reflective of the emergence of a genuinely scale-able business. The most interesting aspect of the Q1 update was the progress TISA is making incorporating eFlow capture technology platform with the recently acquired cloud expertise. The competitive environment also feels pretty good with the likes of Lexmark recently swallowing Kofax. Investors can expect TISA to sign a couple of global partnership agreements over 2015.
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