Consensus community valuation
$3.27
Average Intrinsic Value
25.5%
Overvalued by
Active Member Straws
#Contract renewal
Added 5 months ago

Integrated reserach has disclosed its largest ever deal; a 5-year US10m renewal and extension contract with long-standing customer JP Morgan Chase (a client of over 25 years).

For context, IRI reported ~US$35m in revenue for the half just ended. 

It's only a single data point, but a sign of IRI's defensive revenue stream and the continued relevance/importance of its offering.

Announcement here

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#HY2020 Results
Last edited 6 months ago

Results came out towards the upper end of last year's revised guidance, with Net profit up 1% to $11.8m. This was on a 6% lift in revenue to $53.2m and a 7% rise in license sales. With 95% of revenues sourced offshore, a weaker AUD was very helpful.. 

The groups largest segment, Unified Communications returned to growth with revenue up 10%, and the outlook for the full year is positive.

Payments revenue (which represents about 1/7th of the total) was down 14% after a very strong prior period, but remains roughly double that of 2018's half and management said there were clear signs the revenue stream is growing.

The Asia Pacific region did especilly well with 62% growth, and CEO John Ruthven said he expected "a strong result for the full year based on the quality of the second half pipeline".

Cashflow from operations grew 28%, and net margins remain steady at an impressive 22%. The company remains debt free and has $7.6m in cash.

This is a company with a long history of delivering steady and profitable growth, it has a strong market position and very sticky customers. Not many company can maintain net profit margins >20% without enjoying some pretty major competitive advantages.

While they hit some operational snags a couple years back, there's nothing structurally wrong with this business in my view.

Results presentation here

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#Bull Case
Last edited 6 months ago

Very strong business with a 30 year pedigree. It is the global leader in performance management software

  • AUD$7m in cash, zero debt.
  • 95% recurring revenue
  • High retention
  • Double digit earnings growth over an extended period, with continued strong outlook
  • Big R&D investment -- >20% of revenues -- ensuring it remains best in breed and bringing new products to market. 
  • Most sales earned offshore (benefits from falling AUD, and little exposure to domestic economy)
  • Well diversified across geographies, industries and clients
  • Net margins of >20%, having steadily increased over the past decade
  • Share count has been flat for the past decade -- growth has been extremely capital efficient.
  • Pays a reliable fully franked dvidend
  • Dominant market position

Lots to like

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#FY2020 results guidance
Added 3 weeks ago

Integrated Research said it expects to report record revenue and profit for the year ending Jun 2020.

Revenue should come in 9-10% higher at $109.5-$111m.

Profit likely between 8-11% stronger between $23.6-24.2m. 

License sales should be up 13-15% between $70.8 and $72.3m, driven by Unified Communications segment.

ASX announcement is here

 

At the midpoint, this gives IRI an EPS of 13.9c (just shy of my 14c estimate). Will wait for detail in the full results report, but happy to keep my valuation unchanged for now.

 

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#FY2020 results guidance
Added 3 weeks ago

Profit guidance

Maintaining strong growth guidance for the rest of FY20

The market has opened well, with shares up 4.5% at time of writing.

 

View Attachment

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