8311 (DWCH) research, news, and more from GeoInvesting

Company description

Mon, 24 Sep 2018 14:21:33 GMT

Datawatch Corp designs, develops, markets and distributes self-service data preparation and visual data discovery software which deliver analytics to reveal insights for improving business. Its product portfolio includes Monarch, Monarch swarm, Monarch server, Panopticon. The company also provides Educational, Professional and Customer support services. It offers its products to the industries such as Banking, Credit unions, Healthcare, Manufacturing, Retail Telecom, Energy etc. It derives the majority of its revenues from Software licenses and Maintenance.

Research

Mon, 05 Nov 2018 19:06:14 GMT

Datawatch Corporation (NASDAQ:DWCH) ($9.69;$123.3M market cap), a company on which we released a Reasons For Tracking (RFT) article on October 12, 2018, today announced it has agreed to be acquired by Altair Engineering (NASDAQ:ALTR) for $13.10 per share in cash. DWCH designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally.

Our "Reasons for Tracking" report highlighted why we believed DWCH was in the sixth or seventh inning of transitioning from a perpetual licensing business model to a recurring revenue software model that we felt could eventually provide the company with a more predictable revenue stream, better growth outlook and an expansion in its valuation multiples.

The stock was trading for $9.84 per share at the time our article. See the article here.

In today’s press release, the company talked about joining Altair, and the terms of the acquisition.

“The Datawatch team is excited to join Altair and benefit from its long track record of success with developing and bringing to market highly differentiated software technology across diverse industry verticals. We feel great about the cultural alignment and look forward to driving continued innovation in our market-leading solutions as an integral part of Altair’s vision.”

“Under the terms of the definitive merger agreement, Altair will commence a tender offer within ten business days to acquire all of the outstanding shares of common stock of Datawatch for $13.10 per share in cash. This represents a 35% percent premium to the closing price of Datawatch’s common stock on November 2, 2018.”

The deal expected to close in the fourth quarter of 2018.

While it is nice to see this event, we feel the acquisition still undervalues DWCH when compared to its peers. We are disappointed that management is selling the company at a valuation well below its closest competitor Alteryx, Inc. (NYSE:AYX) which sits at a 350% higher P/S valuation than DWCH’s takeover multiple, especially when it appears that the company has the best in class and the most complete product offering amongst its competitors.

Last week, we mentioned that we were disappointed that management of Intersections, Inc. (NASDAQ:INTX) sold its company at a significantly lower valuation than comps. DWCH is especially disappointing, as management commented on recent conference calls and press releases how cheap the stock was compared to comps that had been taken over. We are also looking at the DWCH deal on these same merits.

Reasons For Tracking

Fri, 12 Oct 2018 04:00:00 GMT

After a few interviews with management, and over the past several weeks, we have been working on a comprehensive research report on Datawatch Corporation (NASDAQ:DWCH) ($9.84; $125.2M market cap). DWCH designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally. (Big Data)

We believe that DWCH is in the sixth or seventh inning of transitioning from a perpetual licensing business model to one of recurring revenue software that we think could eventually provide the company with a more predictable revenue stream, better growth outlook and an expansion in its valuation multiples.

You can see our full reasons for tracking DWCH here. We do not currently have a position in the company.

Research

Mon, 24 Sep 2018 17:00:43 GMT

**Adding DWCH to Our Multi-bagger Mock Portfolio

We are adding 25+ year old data management software company, Datawatch Corporation (NASDAQ:DWCH) ($11.45) to our Multi-bagger Model Portfolio. We considered adding the stock to our Favorite Stocks Model Portfolio too, but as we will explain, we believe growth could be somewhat lumpy on a quarterly basis in the near-term as the company completes a shift in its business model. We have not added this stock to our Select Longs at this point. We have no long position.

As a reminder, our Favorite Stocks Model Portfolio is designed for stocks that we think are timely in the short term.

The Multi-bagger Model Portfolio is designed to highlight stocks that we think have the right management teams and share structures in place to increase several times over the next 3 to 5 years. However, we may deem that some these stocks are not timely when operational issues pose a near-term risk. When this is the case, we try to point this out, as we are doing with DWCH. When we hold the opinion that a stock is both timely and offers longer term compounding potential, both model portfolios are potentially in play.

Originally, we were going to provide a summary of Maj’s call with DWCH management. However, the more we dug into the story, the more we liked it. Instead, we will be publishing our comprehensive research on the company, including several caveats we are considering that you may find important when forming your own investment decisions. We will share the piece shortly.

Research

Wed, 05 Sep 2018 15:21:05 GMT

Datawatch Corporation (NASDAQ:DWCH) ($12.85;$163.6M market cap) designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally. (Big Data)

Maj had a chance to interview management over the weekend. The company discussed its shift to a recurring revenue model business from its lumpy legacy revenue model. The Company, through organic growth and acquisitions, is already at a 60% recurring revenue model. DWCH’s transformation is similar to many past SaaS transformation plays we have encountered over the past several years which we felt are worth looking into.

Maj is preparing a recap summary of his interview, and we plan on publishing a follow up on the steps the company is taking to transition itself to a more predictable business model.

If you want to take a look at the best publicly traded comp to DWCH, you can take a look at Alteryx Inc. (NYSE:AYX).