Fundamental analysis

I think iv had enough of the technical analysis side of things so it's time to break down the basics of the company.

Market cap: 188 million (153.7 million shares times $1.225 share price)

Cash: 48.9 million. Recently completed capital raising. This raising consisted of 11.1 million shares at $4.50 (almost 4 times today's closing share price) which raised 50 million.

Debt: $0

Enterprise value: 139 million

Top share holders: Founder Joanna Riley- 10.16%,
Harbour asset management group (who participated in the capital raising) - 9.16%
Co-founder Patrick Riley- 7.78%
So the founders have a tick under 20% stake in the company, in other words have a hell of a lot of skin on the game.

What sector is 1pg in? Sourcing: A 450 billion dollar industry.

What does the company do? From Cannacord:
The problem 1-Page is attempting to solve for HR managers

It is our understanding that HR Managers’ primary focus is filling the open positions within the company. To give a sense of the scale of the task, for a company with 122,000 employees and a typical rate of 30% new open positions each year, the HR team must fill approximately 100 positions each day.

1-Page’s Sourcing platform offers HR managers a simple user interface, which allows them to build talent pools of pre-qualified target candidates using the social network affiliations of the existing staff within their organization. These candidates are then ranked by existing staff, based on cultural and professional “fit”, and may be approached directly by the staff members who know the candidate socially. We have outlined the user experience in the graphic on the following page.

According to Jobvite.Com, candidates who come in by referral have longer tenures: 46% are still in a job after 12 months of employment, compared to 33% coming through careers sites, and 22% for hires coming through jobs boards. Capitalising on this, the Sourcing platform identifies candidates with social links to existing employees at the firm, who can then refer the candidates.

Assessment Platform

The Assessment Platform provides an automated mechanism for assessing candidates for a specific role. Rather than assessing a backward-looking CV, the assessment invites candidates to provide a one-page business plan for a set task. This response is then interpreted by the platform’s ‘autoscoring’ process to rapidly produce a forward-looking analysis. This method attempts to improve the hiring decisions, whereby it should reduce staff turnover and provide a more talented pool of staff to promote internally.

We estimate the Assessment platform to represent approximately 6-8% of revenue in our forecast period. Modelling a relatively steady fee per ‘slot’ (i.e., job), we forecast revenue to grow to $4.5 mil in CY16, $10.0 mil in CY17, and $14.8 mil in CY18. We use a ratio of the total number of referrals from the sourcing platform to determine the number of slots that the Assessment customer may require on average over the forecast period.

To date, clients that have signed to the Assessment platform include Sears, Orange and Omnicom (with 250,000, 168,000 and 70,600 employees, respectively).

Innovation Platform

The Innovation platform aims to facilitate innovation within large organisations by providing a forum for staff to suggest innovative ideas, and track/quantifying the success of the ideas against agreed KPIs. Entrepreneurial employees are thus provided with a mechanism for having their ideas heard, while management is able to measure their success. This is an attractive opportunity for large organisations wanting to foster a staff culture of measurable innovation.

We model a similar trajectory in the Assessment platform for the Innovation platform, in terms of clients on the platform and the number of ‘proposals’ per customer. This results in a revenue stream increasing from $3.3 mil in CY16, to $6.8 mil in CY17 and $9.5 in CY18. Innovation accounts for approximately 5-7% of total revenue in our forecasts.

Modelling the Sourcing Platform

Sourcing platform modelling levers

Key variables areagreed upon and outlined in a fixed rate, fixed 12-month enterprise contract that 1-Page and its customer agree to at the commencement of each 12-month period. The revenue is booked monthly.

At the end of each 12-month period, the enterprise agreement is re-negotiated based on the performance metrics realized during the previous contract period.

How do they make money? From cannacord:
Unlike some tech companies, 1-Page seeks to monetise customers immediately by charging an affordable fee to trial the product (typical example is US$25,000) and
then looks to turn that customer into a fully negotiated 12-month fixed price, fixed-
term enterprise contract within a few months. This means that 1-Page is likely to be generating strong cash flow by the end of this calendar year, allowing it to fund its growth strategy.

Major companies they've worked with: Starbucks, Amazon, Hershey's, Deutche bank, Under Armour, Credit Suisse.

Management team:
The 1-Page team are San Francisco based and have substantial experience in US high growth tech companies. Following our recent visit to San Francisco, we have increased our confidence in the team's ability to convert customers, add additional platform opportunities, and drive medium to long-term growth in revenue and earnings.

Earnings and growth trajectory:

• New bookings at the end January 31, 2016 increased 200% to A$4.2M from A$1.4M at the end of November 2015.
  
  
• ●  The number of annual enterprise contracts at the end of Q4 were 24, also a 200% increase over the quarter.
  
  
• ●  Of the 24 annual contracts signed, five were valued at over A$300,000 each, two of which had annual value of over A$500,000 each. Annual contracts contributed to 58% of new bookings.
  
  
• ●  From Q3 to Q4 new bookings grew by over 400%, with new bookings in January of over A$2M.
  
  
• ●  Major enterprise clients that signed large annual revenue generating contracts during Q4 include two Fortune 100 technology giants (over 100,000+ employees each), Deutsche Bank (95,000), a
  
  Fortune 500 real estate company (70,000), McGraw Hill Financial (17,000), Hershey’s (14,000), a Fortune 300 payments company (8,500), Korn Ferry (7,000), Under Armour (11,000), Toll Brothers (3,900), and others.
  
  
• ●  During Q4, 1-Page received a 500% increase in the amount of talent pools requested from new and existing clients, showing strong signs of success with this ‘land and expand’ model.
  
  
• ●  Alexander Mann Solutions, Futurestep, Shaker Advertising, and several other global partners were added to the 1-Page Partner Program in Q4, contributing to 30% of new bookings. The clients of these partners include Citibank, Burger King, Avis, Deutsche Bank, Vanguard, CPK, Nike, and hundreds of other leading enterprise companies.
  
  
• ●  In Q1 2016 1-Page is launching its first small business offering, and is commencing demand marketing to drive long term predictive lead generation.
  
  
• ●  Hired additional executives to 1-Page across technology and sales including ex-CTO of Yahoo!, leading professor of computer science at Carnegie Mellon University, Google data science leaders, principal architect of Baidu, VP Marketo, and other key executives.

●  Momentum remains strong going into Q1 2016 and FY 2016, with large enterprises expressing interest in wanting hundreds or in some cases thousands of pools.

My opinion on the share price drop and why it represents huge value:
The drop in linkedins share price: linkdin recently reported disappointing results resulting in a savage sell off. Linkedin is often compared to 1pg as they are in the same industry.
UBS: Have been dramatically selling down their holdings and can also be attributed to an increase in short positions recently.
Short term expectations not met: People sometimes struggle to look longer term when it comes to high growth stocks like 1pg. On the surface when you see a market cap ranging from 150-800 million and very small revenues it makes it look expensive when you don't dig deeper.

Why do I think this is a great time to buy in? 1pg is a high growth company based in the U.S that is cashed up and has no debt. It has/is working with some of the biggest companies in the world. Just getting your front door into these companies can be a nightmare. The management team have a lot of skin in the game so their interests are highly alligned with share holders. 1pg attracts employees that are highly sought after, this indicates to me that the company has huge potential and highly intelligent people want to be a part of it. The share price has been smashed- $5.69 now down to 52 week lows at $1.225, the share price is down over 50% in the last 10 days.
Hence I expect a sharp bounce sometime shortly, however I am planning on being a long term investor. I plan to add to my position in the coming weeks.

Please add to the discussion and correct anything that may be wrong.

Disclosure: I have been watching the company since the start but bought in this week for the first time.