The Company is engaged in the business of designing, developing, and marketing proprietary computer-integrated facilities management ("CIFM") software products. CIFM is a term used by the company to describe the integrated products and services which the company provides to the facilities management industry.
The Company has developed, field-tested and actively markets an exclusive line of facilities management software products called SPAN FM™. Each of the Company's products can be sold as stand-alone systems or various modules can be purchased and run as integrated systems. The Company believes that its integrated product line meets the needs of a wide range of users in the facilities and asset management market place.
The Company's product line operates on DOS-based and Microsoft Windows® based PC'S and LANS, but has the ability to operate under various UNIX-based operating systems.
The SPAN FM™ series of products automates the tracking of existing facilities and assets in those facilities as well as providing the capability of developing extremely accurate cost analysis for new facilities. The SPAN FM™ series of products is one of the few existing facilities management PC-based products that will run without an associated computer-aided design (CAD) package.
The SPAN FM™ family of products are engineered for use by facility managers, space planners, architects, interior designers, asset managers, telecommunications and cable professionals, maintenance managers, and strategic planners. All of the SPAN FM™ products are integrated for use with one another, which enables users to easily add new modules to their existing SPAN FM™ system.
SPAN FM™ for Windows consists of products that stand alone or integrate to form a total Facilities Management solution.
1. Property Portfolio
2. Asset Management
3. Maintenance Management
4. Materials Handling
5. Space Analysis
6. Lease Management
7. Project Budgeting
8. Cable Management
9. WinStack
10. CAD Integrator
The Company's customers include com-panies in the fields of insurance, banking and health care.
They also include public utilities, govern-ment agencies and acade-mic institutions. In addition, professional entities such as architectural/engineering, interior design, accounting and management consulting firms, use the SPAN FM™ series of products in providing facilities management services to their clients.
The Company pursues the following strategies with respect to marketing and distribution of its products:
1. Direct marketing - majority of its revenues are generated by direct sales by the Company's sales staff. The Company also institutes direct mail, trade journal and telephone solicitation campaigns in order to develop new customers.
2. Indirect marketing: Under the terms of an exclusive five-year OEM distribution agreement, Intergraph Corporation is privately labeling certain Innovative Tech software packages.
3. International markets - To date, ITSY has focused on distribution of its product primarily in the US and Canada.
Services and Support: ITSY provides complete facilities management solutions to end-users. The Company provides comprehensive end-user service and support. The Company's support programs that are currently offered by the Company are:
1. Software upgrades and telephone support
2. Direct support
3. Consulting services
May 4, 1995 - Innovative Tech Systems, Inc. (ITSY, ITSYW), developer of SPAN FM™, a leading software solution for facilities management, announces the release of SPAN FM™ for Windows.
August 25, 1995 - Innovative Tech Systems, Inc. declared a 3 for 1 forward stock split.
October 27, 1995 - Innovative
Tech Systems, Inc. announced that it has been awarded three software
and service contracts totalling $1.1 million. The contracts are
with Department of Defense, Canadian Imperial Bank and Principal
Financial Group.
Contained in Chart B is a group of software companies that are very similar to ITSY; that is, they are all involved in maintenance and facilities management. The four peer companies are all more mature and seasoned and of course trade at much higher prices due to revenue and earnings projections.
Upon review of ITSY's PE estimate for fiscal 97, that is 17.5x and comparing that value to the average PE valuation of PSDI, MCAM, WNDR and DSTM, which result in a somewhat bloated PE estimate of 46.6x, investors should be able to conclude that ITSY could trade at a higher multiple, which in turn would elevate the share valuation to a higher price level.
Upon review of chart A, revenue growth from fiscal 96 (just ended) to estimated fiscal 97 results in a 196% growth rate. When we compare 1997E to 1998E, our revenue growth equals 106%. Earnings growth from fiscal 97E to fiscal 98E equals 110%. From all this data we conclude that ITSY could easily sport a PE of 30 and be considered fairly priced when considering its peers' PE estimate, revenue growth and earnings growth. (Note: MCAM with a PE of 98x 96 estimates skews our peer group. If we disregard and calculate a PE based upon the other three companies, a value for the current year of business equals around 30x.)
To many a 30 PE is an extremely high value, but this group of companies is obviously unique and the growth potential that exists for this software segment demands a higher multiple. Please review Pie #C, #D, as well as graph D and E and you will see why this group can sport such lofty multiples.
If an investor sees and believes the emerging potential in growth and earnings for this group and for ITSY, a multiple of 30x is believable and from all indications substantiable. If ITSY were to trade at an estimated PE of 30x and based upon earnings estimates of .20, then ITSY would and should trade towards $6.00 - a 71% appreciation from current levels.
If we examine next year's earnings and PE estimates and average our group of peer companies, a PE multiple of 20.5x is calculated. ITSY's PE estimate for next year comes in at 8.3x or 147% below its peer companies. If ITSY were to trade in line with the group listed in Chart B and using its earnings estimate of .42, then a share valuation of $8.61 results - roughly a 146% appreciate from current prices.
If ITSY were to trade at a 30x PE based upon fiscal
98 and earnings of .42, then the share valuation could approach
$12.60.
9 months
1993A 1994A 1995A 1996A 1996E 1997E 1998E
Revenue 1 mil 1.7 mil 1.3 mil 1.8 mil 2.7 mil 8 mil 16.50 mil
Net Income (loss) 58.6K 138K (1 mil) (727K) (850K) 2 mil 4.3 mil
Net income/share (loss) .03 .07 (.41) (.07) (.08) .20 .42
Shares outstanding 10.2 mil
Shareholders Equity 5.3 mil
Estimated PE 17.5x 8.3x
Book value .52
A= actual; E = Estimate; PE = Price to Earnings ratio
Company Symbol Current Earnings/Share Est Earnings/sh E
Price fiscal yr end & PE est next year & PE est.
Innovative Tech Systems Inc. ITSY $3.50 .20 Jan 97 .42 Jan 98
(NASDAQ) 17.5X 8.3X
2. Project Software & Develop- PSDI 35.25 .96 Sept 96 1.26 Sept 97
ment Inc. (NASDAQ) 36.7x 28x
3. Marcam Corp. MCAM 13.75 .14 Sept 96 .83 Sept 97
(NASDAQ) 98x 16.5x
4. Wonderware Corp WNDR 21.75 .87 Dec 96 1.32 Dec 97
(NASDAQ) 25x 16.5x
5. Data Stream Systems Inc. DSTM 21.00 .78 Dec 96 1.00 Dec 97
(NASDAQ) 27x 21x
PE Est average #2 - #5 46.6x 20.5x Project Software & Development, Inc. (PSDI) develops, markets and supports enterprise-wide client/server appreciation software used by business, government and other organizations to improve the productivity of facilities, plants and production equipment. The company's asset maintenance management systems enable these organizations to increase revenues and reduce operating cost by reducing downtime, controlling maintenance expenses, minimizing spare parts inventories and costs, improving purchasing efficiency and more effectively deploying productive assets, personnel and other resources.
Marcam Corp (MCAM) is a worldwide provider of enterprise applications and services for manufacturing and distribution companies using mid-range and personal computer and work stations. The company's PTDTEAN, PRISM, MAPICS and maintenance management products have been installed worldwide. During 95 Marcam achieved an industry milestone as an ERP vendor by Microsoft to the Window 95 launch.
Wonderware Corp. (WNDR) is the leading independent supplier of Windows-based software for the industrial automation marketplace, including man-machine interface MMI software, associated I/O drivers, network connectivity, tools, PC-based troubleshooting and repair software and manufacturing execution system (MES).
Data Stream Systems, Inc.
(DSTM) is the leading developer of maintenance and facility management
software designed to decrease maintenance costs by reducing the
downtime associated with key equipment failure. DSTM develops,
markets, sells and supports Microsoft Windows - based PC software.
Contained in Chart B is a group of software companies that are very similar to ITSY; that is, they are all involved in maintenance and facilities management. The four peer companies are all more mature and seasoned and of course trade at much higher prices due to revenue and earnings projections.
Upon review of ITSY's PE estimate for fiscal 97, that is 17.5x and comparing that value to the average PE valuation of PSDI, MCAM, WNDR and DSTM, which result in a somewhat bloated PE estimate of 46.6x, investors should be able to conclude that ITSY could trade at a higher multiple, which in turn would elevate the share valuation to a higher price level.
Upon review of chart A, revenue growth from fiscal 96 (just ended) to estimated fiscal 97 results in a 196% growth rate. When we compare 1997E to 1998E, our revenue growth equals 106%. Earnings growth from fiscal 97E to fiscal 98E equals 110%. From all this data we conclude that ITSY could easily sport a PE of 30 and be considered fairly priced when considering its peers' PE estimate, revenue growth and earnings growth. (Note: MCAM with a PE of 98x 96 estimates skews our peer group. If we disregard and calculate a PE based upon the other three companies, a value for the current year of business equals around 30x.)
To many a 30 PE is an extremely high value, but this group of companies is obviously unique and the growth potential that exists for this software segment demands a higher multiple. Please review Pie #C, #D, as well as graph D and E and you will see why this group can sport such lofty multiples.
If an investor sees and believes the emerging potential in growth and earnings for this group and for ITSY, a multiple of 30x is believable and from all indications substantiable. If ITSY were to trade at an estimated PE of 30x and based upon earnings estimates of .20, then ITSY would and should trade towards $6.00 - a 71% appreciation from current levels.
If we examine next year's earnings and PE estimates and average our group of peer companies, a PE multiple of 20.5x is calculated. ITSY's PE estimate for next year comes in at 8.3x or 147% below its peer companies. If ITSY were to trade in line with the group listed in Chart B and using its earnings estimate of .42, then a share valuation of $8.61 results - roughly a 146% appreciate from current prices.
If ITSY were to trade at a 30x PE based upon fiscal
98 and earnings of .42, then the share valuation could approach
$12.60.
Company Symbol Bk/sh Share Price Reporting Bk
Price/Bk
1. ITSY .52 3.50 9-30-95 7x
2. PSDI 5.01 35.25 12-31-95 7x
3. MCAM 2.12 13.75 12-31-95 6.5x
4. WNDR 5.99 21.75 9-30-95 3.6x
5. DSTM 2.77 21.00 9-30-95 7.6x
Average P/Bk #2 - #5 6.2x
All Companies roughly trading at high price to book
ITSY - 7x - average of PSDI, MCAM, WNDR and DSTM
= 6.2x
Company Symbol Cash Flow/sh Est Share Price P/CF
current fiscal yr
1. ITSY .20 $3.50 17.5x
2. PSDI 1.16 35.25 30,.3x
3. MCAM .99 13.75 14x
4. WNDR .94 21.75 23x
5. DSTM .80 21.00 26x
Average P/CF #2 - #5 23.3x
At present ITSY trades at a 33% P/CF discount to the average of its peers. If ITSY
were to mirror the averages its share price would
equal at least $4.65.
1. From Chart B we have compared ITSY, PSDI, MCAM WNDR and DSTM with respect to PE valuations. Even though their PE values vary, they have some strong similarities; namely, Microsoft Windows exposure, as well as facilities ma-nagement software development. From pie #C you can see how this segment is domi-nant. From pie #D you see how Windows even during 1994 has the presence and its domination is engulfing the whole market.
2. Primarily all of the members of Chart B produce software suites that, of course, are multifunctional software packages. From graph #D we can see the worldwide growth from demand bodes well for software firms developing such products.
3. Referring to all of our members of Chart B, all companies produce
PC application software. The growth is slowing worldwide, but
remains consistent and firm - see graph E.
It is quite evident upon review of this corporate analysis that this group of stocks is very unique and cutting-edge and is also somewhat expensive, when one compares the stocks to other industrial segments.
Technology has always and will always demand a premium over obsolescence. Increasing productivity yields greater profitability. ITSY and the like develop software products that enhance business functions at all levels - yielding, of course, great efficiency.
From Overview #1 it is evident that this software group plays where it is "HOT"; that is, Windows™, facilities management, suite and application.
In addition to the "hot" ticket, ITSY has no debt, attractive fundamentals, over $3 million in cash, qualified management, unique and cutting edge software and at a stage in development when revenues are anticipated to soar!
If the investor believes that this software segment belongs in
his or her diverse portfolio, it is in our opinion that ITSY is
S. A. Advisory's low priced choice!
Geared towards "risk tolerant" investors. Dramatic growth potential exists during the next 12 - 24 months.
ITSY is considered speculative and suitable for risk adverse accounts. Before investing in micro or mini caps, all the adversities of investing in the category should be fully understood.
Three ways to play:
1. Very aggressive: a position in ITSY
2. Aggressive: A position in ITSY and DSTM (50% mix)
Innovative Tech Systems, Inc. completed a public offering of 1.3 million shares of common stock and 1.8 million redeemable warrants (July 94). The net proceeds of the offering equalled $6 million. An additional $745K was received on or about September 9 due to the underwriter exercising an over-allotment option.
Fiscal Year: January 31
Total Authorized: 100 million
Outstanding Shares as of Jan 31, 1996: 10,227,837
Free trading: 5,826,728
Management control - 43%
Current Price: $3.50
Market Cap as of March 11 96: $35.8 million
PE estimate fiscal 97: 17.5x
PE estimate fiscal 98: 8.3x
Dividend: NA
On or about Aug 25, 1995 ITSY approved a 3 for 1 forward stock and warrant split
Long-term debt: 0
Employees: 46
Legal Proceeding: None
Shareholders: 1200
Auditor: Coopers & Lybrand
Transfer Agent: Continental Stock Transfer & Trust, NY