Finjan Holdings Inc (FNJN)

[dndodd]

By Lisa Thompson

NASDAQ:FNJN

Finjan (FNJN) settled its long running litigation with Symantec and its subsidiary Blue Coat for $65 million to be paid within the next 20 calendar days. Also part of the agreement is for Symantec to pay another $45 million to Finjan for licensing for any other company it might buy in the next four years that is on an extensive list of names agreed upon by the two. Once the $65 million has been received, Finjan will retire the rest of the preferred outstanding, part of which was already paid down in Q4 2017.

We have adjusted earnings estimates based on this settlement and tentatively expecting $82.5 million in revenues for 2018, of which $65 million is booked in Q1 2018. EPS for the year could be $1.17 versus an expected $0.44 in 2017. The company has not yet reported it Q4 2017 quarter.

Q4 2017

We expect the company to report Q4 revenues of $25 million: resulting from the $17.5 million settlement with Sophos, ending a dispute amicably with Avast, and a license with Veracode. It also has prepaid revenues that were due in 2018 from Proofpoint ($3.3 million) and Sophos ($1.25 million.) The company also booked its first revenues from the patents bought from IBM and called Finjan Blue. It received $2 million from an unknown licensor, which paid back the cost of the patents.

Finjan settled with FireEye for a net $12.5 in cash that was paid in Q4 2017. FireEye agreed to pay Finjan $17.5 million in license fees comprised of $12.5 million in cash which was paid on December 29, 2017, and $5.0 million which will be offset by $5 million in license fees from Finjan to FireEye under the FireEye cross license agreement. With this payment, Finjan redeemed about 31% of the Series A-1 preferred shares or $4.7 million of the $15.3 million Series A-1 Preferred Stock financing in January. From December 16, 2017 to March 16, 2018 Finjan is able to redeem this stock at 1.3 times the original purchase price. It will now pay off the remaining $13 million of preferred outstanding with the proceeds from Symantec.

Q4 2017 and Q1 2018 have been very successful for Finjan. If we take the cash at the end of December 2017 of $41 million and add the $65 million about to be received, we reach $106 million total cash. From that amount the company needed to pay a quarter of operating expenses, and will pay off the preferred which should cost approximately $20 million. It could have $66 million left or $2.38 per share in cash and no debt. A market value of $86 million then equates to a current enterprise value of $20 million. Based on $82.5 million in sales in 2018, and the 2.0 times industry average sales multiple the stock should be worth $231 million or $8.33 per share if we add $66 million in cash to the enterprise value to get market value.