Professional Documents
Culture Documents
5/6/2015
Share Price
$0.75
Exchange
OTC
52 Week Range
0.44-1.30
8.70
9.51
6.32
12.67
8,468
0.00
2014 2015E
Revenue (MM)
8.295
12.5
25
0.5
0.10
EPS
2016E
P/E
20x
20x
PPS
$1.00
2.00
May 6, 2015
Original
Initiation
Price: $0.58
Company Overview: Direct Insite (DIRI) is a profitable $10.4M microcap company whose ERP
agnostic working capital management platform facilitates $160B worth of transactions annually
among over 375,000 companies worldwide. The companys flagship product is PAYBOX, a
component of its platform. PAYBOX is a receivables and payables automation solution that brings
together electronic invoicing, online approvals and adjustments, electronic payments and integration
with any legacy accounting, ERP or lockbox system. Banks and corporations use PAYBOX to lower
their days-sales-outstanding or DSO, reduce costs to improve straight through accounts receivable
posting. Direct Insites new strategy to offer PAYBOX to banks and corporations unlocks a significant
opportunity for the company and has, in part, been validated by the signing of a global bank.
Short-Term Catalysts: Signing additional banks to white-label, providing PAYBOX and adding
customers through the existing and recently signed Tier-1 global bank.
Capturing A Massive Trend: PAYBOX for banks is a first mover in the industry and is targeting a
major trend linked to Banks. With the growth of electronic payments diverting bank payment
revenue, banks require a reprieve to (1) replace lost revenue due to declining B2B check volumes,
and (2) find a way to preserve their lockbox franchise. PAYBOX is the solution to preserve banks
treasury management business. Lockbox is a $1 trillion dollar business and between fees, float and
deposits, banks need to protect this massive profit center. This aligns Direct Insites first mover
solution to this major banking trend.
The Opportunity Within This Trend Is Viable: Nearly $1.3 trillion is spent within the global
market on receivables solutions and over 15.5 billion business-to-business invoices are generated in
the U.S. annually. 60% of U.S. corporations are dissatisfied with their receivables and payments
processing operations. As such, there is a clear calling in the marketplace for a clear solution. That
solution is PAYBOX.
Total Available Market: PAYBOXs total market for large corporate volume through bank lockboxes
is $1.25B annually. This does not include the $1,7B total available market for PAYBOX from large
corporations which do not utilize a lockbox.
A Small Companys Solutions Verified By Industry Giants : A Global Bank and BAI: Direct
Insites offerings have been verified and purchased by industry giants such as IBM and Siemens.
Direct Insite reduced IBMs DSO by four days, increased available cash by $50M and accomplished
65% fewer billing disputes with DIRIs solutions. The company now generates over 4.1M invoices
annually for IBM while increasing customer service. Siemens is a major client which benefited from
Direct Insites solutions similarly. PAYBOX has been taken on by a Tier-1 global bank and won the
BAI Payments Innovation Track Award out of over 13 competitors.
An Extremely Clean, Undervalued and Undiscovered Company: With no debt, $3.3M in cash and
receivables and $25M and $20M in Federal and State net operating loss carry forwards, the company
is a clearly a clean and funded microcap distinguishing itself in the microcap realm. Outside of our
original report in November when shares traded at $0.58, there is virtually no coverage on the
company. This offers investors an opportunity to purchase shares prior to analyst coverage.
Valuation: If Direct Insite obtains a 2% marketshare, it would yield $12.5M in additional annual
revenues. Assuming an 70% gross margin and a 5% net income margin (since PAYBOX is a lean
SaaS solution), that would yield $1.25M in income. With a conservative 20X P/E ratio the company
would be valued at $2 per share yielding 100%+ upside potential, with far greater returns possible as
the companys bank market penetration increases.
Bear Scenario: With $6.5M in TTM recurring revenue, we believe Direct Insite could sell itself
based upon a 1.5X multiple on its recurring revenue stream if the companys PAYBOX initiatives do
not come to fruition. This would fetch a sale price of $9.75M, or $0.77 per share. Adding cash and
equivalents to this sale price after subtracting total liabilities leaves an additional $1.38M for
shareholders or $0.88 per share. This represents 5% to 10% upside potential in the bear scenario.
Risks: Lack of uptake by banks customers of PAYBOX; loss of legacy recurring revenue customers;
longer timelines for banks to take on PAYBOX as a solution for their customers.
SecretCaps, LLC