IRI

Company result

The IRI result was a meaningful improvement. Recall that IRI are a performance management (experience monitoring) technology company, with a primary focus on payments systems, and unified communications.

The transition to a SaaS model, and COVID related deal flow impacts (namely delaying them, or causing customers to outright cancel) crushed profits in the 1H, but a much stronger 2H performance helps restore a degree of confidence in the model.

Image

Cashflows, critically, remains strong. IRI is a capital light business model, and a collapse in cashflows would likely have proved deadly to investor support.

Image

The improved top line outcomes, and the solid cashflow generation means the balance sheet drawdowns should cease, leaving IRI in a still solid near net cash position.

Image

Margins are perhaps something of an “adjusted” leap of faith, with a sizeable difference between reported and normalised.

Image

If you think earnings are momentarily depressed, and you take the adjusted margins at face value, than the valuations are not too bad for this pocket of the market.

Image

Of course, if the earnings aren’t, then the whole point is moot. Still, street expectations, will provide for a rebound to around 80% of pre COVID earnings, are below the earnings hurdle to generate a market like return. If management are correct, and that deal flow is genuinely only a function of COVID and the SaaS transition (and not a function of changed consumer preferences) than earnings growth is likely to surprise materially to the upside.

Image

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.