Globoforce IPO A Buy In Proposed Range Of $16-$18

Mar.21.14 | About: Globoforce (THNX)

Summary

Globoforce Group PLC, a provider of cloud-based social recognition software solutions, plans to raise $75.0 million in its upcoming IPO.

THNX, based in Dublin, Ireland, will offer 4.4 million shares at an expected price range of $16-$18 per share.

We rate THNX a buy, due to increasing revenues and avoided losses.

Globoforce Group PLC (Pending:THNX), a provider of cloud-based social recognition software solutions, plans to raise $75.0 million in its upcoming IPO this Friday.

The Dublin, Ireland-based firm will offer 4.4 million shares at an expected price range of $16-$18 per share. If the IPO can find the midpoint of that range at $17 per share, THNX will command a market value of $471 million.

THNX filed on November 8, 2013.
Lead Underwriters: Credit Suisse Securities LLC, JP Morgan Securities LLC, Stifel Nicolaus & Company Inc, UBS Investment Bank
Underwriter: Raymond James and Associates Inc

Summary
THNX provides cloud-based social recognition software, through a SaaS platform, designed to enable employee-to-employee recognition that can be made visible throughout an organization.

THNX's solutions are designed to create alignment with company values and culture--essentially rewarding good behavior on the part of employees in a public manner, so that other employees can be encouraged to emulate that behavior--and to generate data to provide insights about talent and culture.

The firm's solutions deliver this data through graphs and infographics that allow the data to be easily consumed and acted upon. THNX's client base includes over 100 companies, including Abbott Laboratories (NYSE:ABT), CitiCorp North America (NYSE:C), General Electric (NYSE:GE), JetBlue (NASDAQ:JBLU), and many more. Over 1.9 million users across 140 countries use THNX solutions. The firm delivers awards to clients' employees, deriving most of its billings from these rewards and associated transaction fees.

Valuation
THNX offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:

Revenue: $186,797,000.00
Net Loss: ($6,548,000.00)
Total Assets: $78,280,000.00
Total Liabilities: $95,665,000.00
Stockholders' Equity: ($31,858,000.00)

THNX's revenues have expanded significantly in recent years. The firm posted total revenues of $100.0 million, $135.8 million, $157.7 million, and $186.8 million in 2010, 2011, 2012, and 2013, respectively. Over the same periods, the firm posted net incomes (losses) of $3.1 million, ($0.8 million), ($1.8 million), and ($6.5 million), respectively. The firm chalks its increased losses in 2012 and 2013 to heavy spending on the expansion of its sales and marketing team.

Business
THNX faces competition from other providers of incentives and recognition, including internally developed solutions and third-party human resource application providers. THNX lists its primary competitors as traditional incentive vendors including BI Worldwide, Maritz and O.C. Tanner.

Management
Co-founder Eric Mosley has served as the THNX's CEO since 1999. He previously held various management and technology roles with CSK Software, Bull Cara Group, and Logica Aldiscon. Mr. Mosley received a bachelor's degree in Electronics, Computers and Telecommunications Engineering from the University of Dublin, Trinity College.

Conclusion
We rate THNX as a buy within its proposed price range.

The firm has consistently expanded its revenues over the past several years and has, for the most part evaded the large losses that often accompany early expansion. Though its investment in marketing may have been costly over the past two years, it is a necessity for the firm to promote its solution as a superior alternative to in-house recognition solutions. We believe that THNX will see long-term benefits from its current expenditures.

The recent success of tech IPOs is also encouraging.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in THNX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.