SMART Tech (Nasdaq: SMT)
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SMART Tech (Nasdaq: SMT) $600mm IPO at price range mid-point of $17 |
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Scheduled for Thursday, July 15 |
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BUSINESS OVERVIEW |
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Interactive white boards sold primarily to the education market |
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SUMMARY |
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. Market leader with 48% market share worldwide
. Rapid growth in the past year, profit margins expanded
. US stimulus package helped increase revenue for the fiscal year ended March 31, 2010
. Recent acquisition expected to add cross-selling opportunities to customers
. 75% of IPO from selling shareholders
. Principal whiteboard competitor is Promethean World, which trades on the London stock exchange PRW |
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VALUATIONS |
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$180mm swing in foreign exchange gains/losses between last two fiscal years: loss of $90mm in fiscal 2009, profit of $92mm in 2010. For valuation purchase income figures adjusted for 2010 to show no foreign exchange effects on the income statement, see below |
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On a compare & contrast basis SMT is priced at a premium to PRW |
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Both companies are primarily owned by private equity/buyout firms |
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COMPARE |
Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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& CONTRAST |
Cap (mm) |
Sales |
Earnings* |
EBITDA* |
TangibleBV |
in IPO |
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SMART Tech (Nas:SMT) |
$2,108 |
3.3 |
51 |
28.5 |
-12.1 |
28% |
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Promethean World |
$513 |
1.7 |
28 |
10.0 |
-28.3 |
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(LON:PRW) |
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*using foreign exchange adj for price ratios |
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March 31, 2010 fiscal for SMT |
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see below |
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Dec 31, 2009 fiscal for PRW |
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BUSINESS |
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. Designs, develops and sells interactive technology products and solutions that enhance learning and enable people to collaborate in innovative and effective ways.
. The global leader in the interactive whiteboard product category, which is the core of SMT’s interactive technology solutions.
. Introduced the world’s first interactive whiteboard in 1991 and since then have shipped over 1.6 million of our SMART Board interactive whiteboards worldwide. |
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MARKET SHARE & MARKET GROWTH |
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. According to Futuresource Consulting, for the year ended December 31, 2009, SMT’s share of the interactive whiteboard product category was 61% in the United States and 48% worldwide.
. Futuresource also expects the worldwide market for interactive whiteboards to grow from $1.1 billion in 2009 to $1.8 billion in 2012, representing a 19.5% compound annual growth rate |
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GROWTH FOR RECENT FISCAL YEAR |
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. The majority of growth was driven by increased demand for products, in particular in North America as a result of a general expansion of the market for interactive whiteboards and other complementary products.
. In addition, the education market has been aided by various government economic stimulus programs in fiscal 2010 as governments undertook spending initiatives to improve public infrastructure and to help alleviate the effects of the global recession. |
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RECENT DEVELOPMENTS |
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. Bought New Zealand-based NextWindow in April, paying $82 million in cash. NextWindow, with revenue of about $46.4 million for its latest fiscal year, provides components for optical touch screens.
. The deal is expected to help the whiteboard business, and SMT said "we also expect that NextWindow’s existing relationships with leading PC display manufacturers and other electronics equipment manufacturers will accelerate our ability to expand into the market for interactive touch products other than interactive whiteboards." |
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SEGMENT CUSTOMERS |
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Education: New York City Board of Education, the Orange County Department of Education and Ohio State University |
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Business: Cisco Systems, Inc., Ernst & Young, General Electric Company, Microsoft Corporation and Texas Instruments Incorporated. |
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Government: National Aeronautics and Space Administration (NASA) and European Defense and Space Company N.V. (EADS) |
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CUSTOMER SUPPORT |
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. In the fiscal year ended March 31, 2010, end-users completed over 11,245 courses in our online learning management system and participated in more than 2,180 live, online training sessions.
. In addition, SMT delivered approximately 840 face to face fee-based learning events. In total over 166,000 end-users were trained through training programs globally.
. A complimentary phone, email, chat support and online knowledge base services were used by end-users over one million times to answer questions or learn more about our products. |
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INTELLECTUAL PROPERTY |
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59 patents issued in the United States, 57 patents issued in other countries and approximately 456 patent applications pending worldwide. |
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COMPETITION |
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. Competes with other interactive whiteboard developers such as Promethean World PLC |
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(Public, LON:PRW) |
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. Also Hitachi, Ltd., Panasonic Corporation and Samsung Electronics Co.
. In addition, makers of personal computer technologies, television screens, mobile phones and other technology companies such as Apple Inc., Cisco Systems, Inc., Dell Inc., Hewlett-Packard Company, LG Electronics, Inc. and Microsoft Corporation may seek to provide integrated solutions that include interactive learning and collaboration features substantially similar to those offered by SMT’s products. |
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USE OF IPO PROCEEDS |
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$135mm From sale of 8.8mm shares, shareholders intend to sell 26.5mm (75% of IPOshares
. $59 million to repay debt (43% of IPO proceeds),
. Remainder to fund working capital and other general corporate purposes, which may include acquisitions. |
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SELLING SHAREHOLDERS |
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Include Apax (private equity) & Intel but not IFF holdings, owned by SMT’s co-founders |
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SMART Tech |
SMT, C+, 6.5 |
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Post-IPO shares: 124mm |
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Interactive whitebrds |
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March 31 fiscal |
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Calgary Alberta CAN |
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2008 |
2009 |
2010 |
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IPO Mkt |
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Revenue ($mm\) |
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$379 |
$468 |
$648 |
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Cap (mm) |
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Gross margin % |
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40% |
43% |
50% |
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$2,108 |
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Operining income (loss)% |
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11% |
15% |
21% |
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@$17 |
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Interest expense % of Rev |
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16% |
17% |
10% |
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Foreign exc gain (loss) % of rv |
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2% |
-20% |
14% |
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Profit (loss) % of revenue $mm |
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-$24 |
-$107 |
$142 |
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Profit (loss) % of revenue |
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-6% |
-23% |
22% |
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EBITDA |
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$59 |
$91 |
$166 |
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EBITDA margin (% of rev) |
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16% |
19% |
26% |
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Adj: Subtract $92mm in foreign exchange profits & apply a 40% tax rate |
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*Adjusted net income |
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$41 |
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Adj net income % of revenue |
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6% |
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*Similarly adj EBITDA |
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$74 |
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Similarly adj EBITDA % of rev |
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11% |
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*using the above foreign exchange adj for price ratios |
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VALUATION RATIOS |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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last 4 qtrs, ending in March |
Cap (mm) |
Sales |
Earnings* |
EBITDA* |
TangibleBV |
in IPO |
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SMART Tech (Nas:SMT) |
$2,108 |
3.3 |
51 |
28.5 |
-12.1 |
28% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
2 |
2 |
1 |
7 |
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COMPARE |
Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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& CONTRAST |
Cap (mm) |
Sales |
Earnings* |
EBITDA* |
TangibleBV |
in IPO |
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SMART Tech (Nas:SMT) |
$2,108 |
3.3 |
51 |
28.5 |
-12.1 |
28% |
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Promethean World |
$513 |
1.7 |
28 |
10.0 |
-28.3 |
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(LON:PRW) |
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*using foreign exchange adj for price ratios |
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March 31, 2010 fiscal for SMT |
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Dec 31, 2009 fiscal for PRW |
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