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Value investor that seeks intrinsic value and the principles of Warren Buffett. Seeking Alpha placing special emphasis to identify risk and lay it off to the capital markets at profit. Use options to hedge and to deliver a risk adjusted return on investment. Trading Strategy: Sell puts on... More
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  • Unicorn In Hidding Call Center Software Management Market 11B By 2019

    Investment thesis on 100% owned by NOVC Novation Companies traded NOVC OTC/BB trading price today of 33 cts or $28m market cap. No investment advice intended & we are not engaged to represent any searches with Corvisa or its parent. Genesys Paul Segre acquired a Corvisa's peer EchoPass for up to 10 x Gross Revenue about 1 yr ago. is an investment (Cloud, SaaS, PaaS market) in a best of breed solution. There market is est at $11 B by 2019. Corvisa owns 10% of ManyWho x Steve Wood, Dave Norris also owned by Marc Benioff, CEO of Note is big brother to Corvisa.

    Two new board members just added to the board of directors and are a tip of the Affiliate/Associate pile as defined in 8K April 27th; Jeff Eberwein of Lone Star Value and Robert Pearse x HP, NetApp. Lone Star Value Mgt has agreed to invest a total of 3% or est 2,745,000 shares total common stock outstanding is est 91m.


    Jeff Eberwein CEO of LoneStar Value and Robert Pearse (x HP and NetApp) join board of NOVC aka The most important board members post 7.16.15 annual meeting will be Barry Igdaloff 8.4% and Howard Amster 4.4% + 3% the position agreed to in 8k below dated 4.27.15 Jeff Eberwein and Robert Pearse have agreed to accumulate so as to retain 2 board seats 3% total 15.8 % of NOVC common shares outstanding

    Here is why Corvisa should be valued at $1 billion vs today's $28m market cap - ALL TAX FREE DTA.

    Per Q1 10Q Cash or cash equivalents $43m + Value of Portfolio/Legacy $7m annual cash flow is $70m + DTA est $100M (DTA est at $500M GAAP Calc NOL over $600M and realized + unrealized tax losses sitting in NOVC portfolio not accounted for per GAAP, ( Note the latter the unrealized tax losses are hidden by NOVC Board under FAS 109 and APB Opinion 11 these could be worth several hundred million). GAAP EST 290M x 30% tax bracket EST 500M x 30% is $150M. Discounted back because the asset use requires a future taxable income to est $100M) + NOVC key asset could be $600M and $1 billion as follows: Future expected value will depend on gross revenue. The market peers are priced at 3-5 x gross revenue (FIVN, EGHT, SAAS, LPSN, ININ) and as in EchoPass case exited at up to 10 x gross upon sale to Genesys paid for Echopass. Corvisa can become defacto standard in the market (30% x $11B). Presently Corvisa segment of the market has potential to grow to $11 Billion by 2019 see . Can Corvisa absorb 5 to 10% market share or even 30% market share? Let us be conservative and assume 5% so Corvisa potential can see ($11 B x 5% $550M gross revenue x say multiple of 3 x that market cap of $1.6B market capitalization). For this discussion let us cut that in half that is $825M sometime over next 2-3 yrs. This adds up to total Assets over $1 Billion less some trade payables and Sr Debt (per 2014 10K valued at $15M FMV and pays 1% interest rate) provides shareholder equity of est $ 1,000,000,000 one billion vs today's market cap of $25M. Liabilities total est $30m. The real potential book value hidden by NOVC board is more like $1 Billion / 92m CSOS = $10/share. Corvisa is the key.

    What did the board of NOVC share with these big time investors Jeff Eberwein of Lone Star Value Mgt that they want to invest and will spend their time/accept board liability, to ensure an attractive ROI? As the 8K states they will invest via 105b-1 plan program purchases. They and their AFFILIATES have agreed to other terms. 2014 actual gross revenue is not the reason so it must be future revenue expectations. The total call center software market is $300 Billion worldwide and is converting at 25% clip to Corvisa Cloud, the SAAS solution. Corvisa's segment is expected to be $11 Billion by 2015 see (peers produce gross margins in the 70% range and the gross revenue is like an annuity because once installed on Corvisa platform a migration off is painful. Just think of having all your contacts on outlook and work flow management system (Corvisa uses ManyWho which they own 10% of along with CRM CEO Marc Benioff) and someone suggest you migrate off). Customers have their CRM from tightly installed with Corvisa Professional Service team has integrated with Corvisa technology. Corvisa big customers aka enterprise/maybe some SMB will be attracted to Corvisa PAAS platform called Summit which allows Corvisa customers to customized CorvisaONE solution. This PAAS or Corvisa Summit Platform/PaaS solution is similar to RHT Red Hat The PAAS or customization is key to customer control or stickiness of Corvisa solution. Telecom minutes are annuity and gravy on Corvisa's business model.

    Other Market Data: 10 Reason to migrate to Corvisa's Cloud, SaaS, PaaS offering. from Deloitte & Touche$File/CloudContactCenterMarketTrends.pdf from Frost & Sullivan

    May 22 10:40 AM | Link | Comment!
  • Value Play NOVC Aka Ready To Shine All Tax Free DTA & With CRM

    Value play NOVC aka ready to shine all tax free DTA Never underestimate the power of CPA Audited Opinion see Grant Thornton for NOVC clean opinion.

    Investment Thesis on NOVC aka NOVC raises $53m tax free cash, thanks to deferred tax asset mostly written down off FAS 109. NOVC current liquidity has grown to $60M, see 8K defining $30M is ear marked for a killer for Five9, Inc. FIVN ($330m market cap). No mention of extra $30M cash or the estimated $5m cash coming from Portfolio of Securities.
    Babson Capital and parent Mass Mutual are shareholders. NOVC only long term debt matures 2033 owned by Fortress, FBR and RAS (Betsy Cohen CEO of TBBK and RAS). This Senior Debt carries a nominal 1% interest rate till 1.2.2016 then still ultra-attractive (libor + 350 bpts).
    NOVC owns 5 assets; $60M cash, CorvisaCloud, Adventtax, Portfolio Cash Flow and Deferred Tax Asset that shields both taxable income and capital gains. Sale of Streetlinks confirmed this part of their conceal strategy. CEO in recent investor call 4.30th reconfirmed this and reconfirmed it at early June annual meeting NOVC is all in on + 60M cash + cash from portfolio of investments.
    1. 100% owned by NOVC operates in a mission critical market and is expanding head count and office space by 100 heads and to 35k SF respectively. Heartland Payment Systems, Direct Buy are two large customers that have installed CorvisaCloud solution. They partner with and have co invested with them in ManyWho.
    3. Legacy portfolio of subprime mortgages est. $5 Billion is kicked off $5m + cash and increased year over year per 2013 10k.
    4 Deferred Tax Asset of $290M (+ at least $216M of unrealized tax losses hidden by APB Opinion 11). GAAP classification of two tax benefits (NOL of 511m per 2013 10k and unrealized and realized capital losses residing in NOVC portfolio) in the future that will shield NOVC taxable income from taxes. Lance Anderson CEO says this on NOVC web site under Q&A when he states NOVC will be able to efficiently deploy capital free of any tax effect and states NOVC will not pay taxes for years to come.
    5. NOVC stated at June annual meeting they plan to exit this business. I feel confident they will sell it at a reasonable tax free profit.
    6. SOLD for $72m almost 10 x 2013 earnings of 7.4m. I believe the buyer Assurant Insurance 15k employees may have agreed to buy CorvisaCloud solution which will be priced at much higher multiple. All of these proceeds $53m up front were tax free.
    THE MOAT is substantial and patented technology is hard to duplicate. Five9 trades FIVN and has attracted two substantial investors and carries a market cap of $330m but must pay taxes on Taxable Income where CorvisaCloud does not. I believe this will provide CorvisaCloud a tremendous competitive advantage in pricing and the ability to absorb market share.
    CorvisaCloud ability to exit in a success event is also very competitive since NOVC shareholders could sell at an attractive price and pocket the capital gain tax free. Further in 4.30.14 investor call CEO stated CorvisaCloud technology is best of breed and CFO stated they had 60M in cash, 8k ear marked $30m for CorvisaCloud but they could deploy the extra $30m to buyback common shares while their price is manipulated at 29 cts. This represents 9M share buyback or est 10% of common shares outstanding. They could retire debt but this debt does not mature until 2033 and carries an attractive rate. Based on past behavior they could invest in another business. (AFS - HR Block peer) AFS services the unique financial service requirements for the 70M non or under banked in Americans in the USA, see Meredith Whitney comments as well as Goldman Sachs prospectus NTSP 2010. Currently AFS offers three solutions for this large market; a RAL replacement via Settlement Products and GDOT like prepaid debit card solution and Check Cashing Services - 100% owned by NOVC. Payday Lenders have more locations (22k) or more branches then Burger King and McD combined. AFS offers financial solutions to the unique 70M NON or Under Bank US Citizens. Most of the bank regulators (FDIC and Comptroller of the Currency) are forcing the lenders out of RAL market. State regulators will continue to pressure PAYDAY lenders, (400% APR percentage rate). AFS solution to the 70M non/under banked (per Goldman Sachs NTSP prospectus 2010) is far more efficient then RAL or PAYDAY Lenders. Aspen Institute recently awarded AFS President John Thompson an award for his work with NON Banked market. AFS founders, Mark Ernst and John Thompson still own 13.5% and 6.5% of AFS and were CEO of HRBlock/#2 at IRS/now COO of FISV and SVP at HRBlock, respectively.
    Deferred Tax Asset DTA NOVC has DTA which acts as tax shield on future taxable income and capital gains. Streetlinks sale early this year confirms this fact. This asset will allow NOVC to deploy capital more efficiently and avoid taxes on future earnings. It is comprised of two tax benefits NOL (est. $511M per 2013 10K) and estimated $216M plus unrealized tax losses in their portfolio shield by GAAP APB Opinion # 11. The latter components is hard to calc since APB Opinion 11 allows NOVC to hide or not disclose all the unrealized tax losses. The Deferred Tax Asset (DTA) has been almost completely written off or reserved against under FAS 109, however shielded 100% of sale of Streetlinks proceeds from taxation, (this fact was hidden in all SEC docs yet confirmed by CEO on 4.30th investor call). 2013 NOVC auditors Grant Thornton provided a clean opinion to SEC. Prior year Deloitte & Touche did so as well.
    Today you and I can buy NOVC at .29 however I believe NOVC true price should carry a range of $5-6 with upside of 20 per share. This price dislocation is attributable to NOVC board stealth mode and failure to be transparent. NOVC has no relationship with the investment community. It is enhanced by a misleading GAAP representation and management's incentive to remain quite while they pocket compensation well in access of fair market value. CEO is paid $655k per year in non-incentive base salary. In addition he was awarded 4.4 m shares of stock options (capped only by NOVC poison pill to protect DTA under Sec 382 of IRS code) which he has vested on half 2.1m shares at 51 cts. He also is provided 5% x annual cash earnings. The board is controlled by CEO and his close friend Gregory Barmore Founding Board Member, lead director and Chairman of the Compensation Committee. Two of the six board members Edward Mehrer and Art Burtscher are paper dolls to allow CEO and Lead Director to control the board. This fact breaches Sarbanes Oxley independence requirement. None have bought a material % of stock. The remaining two of six board members Barry Igdaloff/Howard Amster I believe own and control 20% of NOVC and I know are sick and tired of this condition.

    Disclosure: The author is long NOVC.

    Tags: NOVC
    Jul 26 1:13 PM | Link | 1 Comment
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