Presentation is loading. Please wait.

Presentation is loading. Please wait.

JDA Software (JDAS) Covering Analyst: Ian Strgar

Similar presentations


Presentation on theme: "JDA Software (JDAS) Covering Analyst: Ian Strgar"— Presentation transcript:

1 JDA Software (JDAS) Covering Analyst: Ian Strgar

2 Company Overview ›Originally founded in 1978 as an IBM software provider in Canada ›Sold in 1985, became JDA Software, developing inventory management software ›Grown organically and through acquisitions to become a leading provider of supply chain management software (SCM) ›More than 6,000 customer companies worldwide ›Based out of Scottsdale, AZ

3 JDA’s Product Offerings ›Software: On-premise, Managed Service, Hosted (SaaS) ›Services: Supplemental to Software

4 JDA’s Software Offerings ›Provides supply chain management software to primarily enterprise businesses: –Planning & Optimization Solutions (planning) ›Demand management, transportation planning, allocation & replenishment –Transaction Systems (management) ›Merchandise operations systems (pricing/inventory management), store systems, transportation management

5 JDA’s Service Offerings ›Offer services in order to maximize usability of software ›Maintenance Services –Customer support (phone, , error diagnosis) ›Consulting Services –Implementation and integration ›Education Services –Training programs for software ›Cloud Services –Integration, error diagnosis, everything cloud (transition)

6 Industry Overview ›Supply Chain Management Software (SCM). Industry categories: –Supply chain planning ›Modeling –Supply chain execution ›Management (real time) of planned execution –Supply chain sourcing ›Optimal suppliers; Procurement –Service parts planning ›Multi-Echelon supply chains; dynamic manufacturing (i2)

7 SCM 2011 Market Shares : 12.3% Growth : 9% CAGR Project 2015 Market Size: $10.9B

8 Macroeconomic Influences ›Globalization –Complex coordination of multiple product parts in multiple continents, countries, languages, currencies, etc. ›Multi-Channel Retail –Pressure to offer seamless cross-channel retail experience –“Showrooming” ›2016: 44% of all retail buy decision will be effected by internet access

9 Notable Competitors ›Oracle ›SAP ›Manhattan Associates ›RedPrairie Software

10 Now to the JDA Software Business

11 Quick Financial Snapshot

12 Internal Reform ›JDA Software has hit recent road bumps (financials), but is operating under a clear plan: –I2 Technologies acquisition –Revenue Model Transformation –3 year systems investment plan

13 I2 Acquisition ›Acquired in January 2010 for $600M, $275M from issuing 8% senior notes ›400 new customers ›Advanced global logistics: multi-leg shipments –Discrete manufacturing

14 Revenue Model Transformation ›Beginning 2012 ›Company wide initiative to change current customer’s strategies; sell SaaS to new customers ›Compensation incentives ›IDC on SaaS: $40.5B by 2014; CAGR of 25.3%

15 3 Year Systems Investment Plan ›Sales process review and optimization ›Implement a new CRM systems ›Implement a new HR system: support leadership training –(leadership replacements) ›Upgrading financial and contract management system ›TC= $20M

16 For these reasons, JDA acquired by RedPrairie ›November 1 st, Definitive merger agreement ›$45 per share, $1.9B: a 16% premium to JDA’s all time high and 33% premium to JDA’s October 26 th close ›Tender offer commenced November 15 th –Expiration: December 14 th, 11:59 pm ECT, unless extended or terminated –Minimum condition: 79% of shares outstanding –“Top-Up” option to ensure majority vote (90%)

17 Discounted Cash Flow Valuation

18 Revenue Model ›Transition from on-premise to subscription ›Maintenance services and consulting services remain strong

19 Working Capital Model ›Most projections done as % of revenue ›Accounts receivable and accounts payable projected based off historical efficiency ratios –Days payable outstanding, days sales outstanding

20 DCF Details ›COGS: % of revenue ›R&D: Historically 11-12% of revenue, projected the top of this range for 2013 due to final i2 integration ›S&M: Historically 14-16% of revenue, projected this going forward but slightly more aggressively in 2013 (top 250 marketing plan) ›G&A: Historically between 10-12% of revenue (except SEC investigation), projected to decrease due to SaaS transition, more efficiently handling costs

21 DCF Details cont… ›Amortization of intangibles: projected % of revenues going forward, slight decreases (no huge acquisitions) ›Restructuring charges: Projected slightly high (relative to historicals) due to 3 year investment plan through 2015 ›Acquisition: Left room for a small acquisition ›Litigation settlement: Competitive advantage for JDA Software, projected normalized, small amounts of income from litigation settlements

22 Beta ›3 year optimal time frame: balance of long/short term ›Hamada: chosen to encompass industry behavior/risk while acknowledging JDA’s capital structure

23 Growth Rates ›4% intermediate growth rate chosen to smooth cash flow growth; reflect more accurate FCF growth and growth decline ›3% terminal growth to reflect projected economic growth into perpetuity

24 Final DCF Valuation

25 Comparable Analysis: Two Groups

26 Industry Comparables ›Comparability lies in product offering, industry risk, projected growth ›SAP (20%), Oracle (15%), Manhattan Associates (35%), Retalix (30%)

27 Fundamental Comparables ›Comparability lies in growth rates, sizes, capital structures, and geographical revenue spreads ›CA Technologies (25%), ValueClick (25%), SS&C Technology (25%), Acuity Brands (25%)

28 Metrics/Multiples ›For both groups of comparables, I chose the following weights: ›FCF proxies: cash generation representative of competitive offering ›Remaining 30% on metrics that represent ability to generate revenues and sustain healthy margins

29 Final Relative Valuation

30 Final Valuation -Given JDA’s current acquisition situation, how relevant is this information? -What else can we look at to gain insights into JDA’s acquisition valuation?

31 Comparable Acquisition Analysis ›Four enterprise software acquisitions: look at relevant metrics that may give insights into fair valuation for the JDA acquisition… ›Weights Product:SCM Software CRM Software HCM Software HCM Software Acquired By: SAP Oracle IBM SAP Price: $4.3B $1.5B $1.3B $3.4B

32 Relevant Metrics ›Acquisition Price Premium ›Merger Arbitrage Spread

33 Conclusion ›Final valuation PT: $43.67, a 3% discount to acquisition price ›JDA’s comparable acquisition metrics are in line with comps ›Bloomberg: 60+ enterprise software acquisitions since median multiple of 16x EV/EBITDA –JDA Acquisition: 11x EV/EBITDA –Growth Rates ›In conclusion, I believe the JDA acquisition is fairly valued at $45 per share, $1.9B

34 Recommendation ›Due to JDA Software’s RedPrairie acquisition, I am happy to be forced to recommend a sell –Svigals return: 50.2%, should we sell in the tender offer –Tall Firs return: 48.8% (sold for $44.72 on Friday Nov. 9 th )

35 Questions


Download ppt "JDA Software (JDAS) Covering Analyst: Ian Strgar"

Similar presentations


Ads by Google