I want to share a new turnaround opportunity that’s regaining its footing after a mid-year stumble thanks to new products and recent news.
Premiere Global Services (PGI) provides cloud-based solutions that enable virtual meetings through video, voice, mobile, web streaming and file sharing technologies.
PGI began transitioning its business toward a software-as-a-service (SaaS) model in 2011, and ever since has established itself as an industry leader in business collaboration software. The company has a global presence in 25 countries on five continents, with an established base of over 40,000 enterprise customers, including 75% of the Fortune 100. Over the last four years, PGI has hosted nearly one billion people from 137 countries in over 200 million virtual meetings.
Premiere Global offers three primary software solutions:
- iMeet is a next-generation, online meeting solution that lets people meet and collaborate face-to-face online from any device. The technology includes high-definition video conferencing, audio conferencing and other features such as screen sharing, file sharing and storage, and social media integration.
- GlobalMeetis an integrated conference calling and web conferencing solution that delivers online meetings on a global scale. GlobalMeet users gain fast access to meetings with no downloads for meeting guests and industry-leading mobile and desktop applications.
- GlobalMeetAudio is an enterprise-class audio conferencing solution, which provides fast access to schedule, start and manage meetings from any device, with no phone numbers or passcodes to remember.
Management believes it is these products that differentiate PGI from its competition, especially in their design. PGI builds its products from the bottom up, as they allocate a lot of time and resources studying user needs, challenges and design preferences. PGI has also expanded its business offerings through acquisitions. In September, the company acquired ACT Teleconferencing, Inc., a global provider of integrated conferencing solutions, for $44 million. The deal gives PGI a solid base of new enterprise customers who are already interested in its type of services.
Premiere Global’s results have been somewhat of a mixed bag in recent years, as higher volumes have been offset by lower average selling prices. However, results were much improved in 2012. Revenues were up 6.6% to $505.3 million, despite a 1% drag from currency.
While most of the strength was due to volume pick-ups at the company’s traditional audio services, customer acceptance was also strong for iMeet and GlobalMeet. PGI exited 2012 at a $23 million annual run rate from these products, double the amount from 2011. The higher volumes, a lower rate of declining price and good control of marketing expense allowed adjusted EPS to increase to 73 cents per share from 62 cents per share.
The stock responded well in 2013 to the better earnings, reaching a high of $12.62 in June. However, shares started a slide that took them below $10 when the company reported second-quarter results, as management cited slowing business trends, Europe and currency fluctuations (approximately 35% of the company’s sales are from overseas) for lowering annual EPS expectations to 78 cents to 81 cents from previous guidance of 81 cents to 85 cents.
However, third-quarter results were good and operating margins have started to stabilize, aided by growing SaaS sales. As a result of the improving conditions, management raised 2014 guidance to net revenue of $560-$570 million, or 85 cents to 88 cents a share in earnings, compared to expectations of EPS of 81 cents on sales of $546 million.
The company also announced that it has acquired Via-Box, a European-based conferencing and collaboration provider, for $52.6 million. Via-Box, which trades under the name Powwownow, serves 240,000 active users in the U.K., and will give PGI a good foothold to cross-sell its products.
Shares have rallied nearly 14% over the last two days on the news, but I still believe this is a good time to get in on PGI’s turnaround story. Even with this week’s pop, the stock is only up 7% so far this year, and the forward guidance validates the stabilization of results last quarter. That gives me confidence that the company will deliver strong numbers in 2014. Management also said that sales of their SaaS products should increase by more than 50% next year, which should further help stabilize margins.
With the SaaS products showing impressive growth, and with price declines moderating, PGI appears well on its way to regaining its footing after stumbling earlier in the year. The company’s earnings quality is good, and it generates significant free cash flow that should help to reduce debt and buy back stock (PGI has lowered its share count 20% since the end of 2008).