MobileIron Acquires Incapptic For Mobile Deployment Tech
Summary
- MobileIron has announced the acquisition of incapptic Connect for an undisclosed sum.
- Incapptic provides software to enterprises to automate their mobile system release updates.
- MOBL is bringing in-house an existing partner as it navigates macro and business uncertainties amid low revenue growth; my bias on the stock is Neutral.
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Quick Take
MobileIron (NASDAQ:MOBL) has announced the acquisition of incapptic Connect for an undisclosed amount.
incapptic has developed a system to improve the release processing of mobile applications.
With the deal, MOBL brings in-house an existing partner as it navigates a transition to a subscription revenue model amid a global pandemic.
My bias on the stock is Neutral given the firm’s slow revenue growth combined with these operational and business model uncertainties.
Target Company
Berlin, Germany-based incapptic was founded to develop a mobile software system that automates the app deployment process which promises to improve the app upgrading process for developers.
Management is headed by founder and CEO Rafal Kobylinski, who was previously a software test engineer at Samsung and received his engineering education at the Warsaw University of Technology.
Below is an overview video of incapptic's solution on the MobileIron app store:
Source: incapptic Connect
Company major customers include:
- Lufthansa
- Claas
- Schindler
- Henkel
Market & Competition
According to a 2019 market research report by Technavio, the market for global unified endpoint management is expected to grow by more than $11 billion through 2024.
This represents a forecast CAGR (Compound Annual Growth Rate) of nearly 36% from 2020 to 2024, as shown in the chart below:
The main drivers for this expected growth are the increasing complexity of IT infrastructure, growing use of IoT devices and increasing frequency of system updating is expected to drive growth in demand.
Major vendors that provide competitive services include:
Source: Research Report
Acquisition Terms & Financials
MobileIron did not disclose the acquisition price or terms and didn’t file a form 8-K, so the deal was likely for a financially non-material amount.
Management also didn’t provide a change in financial guidance as a result of the transaction.
A review of the firm’s most recently published financial results indicate that as of March 31, 2020 MobileIron had $98.6 million in cash and equivalents.
Free cash flow for the twelve months ended March 31, 2020 was $1.7 million.
In the past 12 months, MobileIron’s stock price has fallen 19.4% vs. the U.S. Software industry’s rise of 19.6% and the U.S. overall market index’ fall of 0.9%, as the MOBL chart indicates below:
Source: Simply Wall St.
Earnings surprises versus analyst consensus estimates in seven of the last twelve quarters, as the chart shows here:
Source: Seeking Alpha
Valuation Metrics
Below is a table of relevant capitalization and valuation figures for the company:
Measure | Amount |
Market Capitalization | $588,300,000 |
Enterprise Value | $503,780,000 |
Price / Sales | 2.73 |
Enterprise Value / Sales | 2.45 |
Enterprise Value / EBITDA | -11.31 |
Free Cash Flow [TTM] | $11,260,000 |
Revenue Growth Rate | 6.23% |
Earnings Per Share [FWD] | -$0.12 |
Source: Company Financials
If no DCF: As a reference, a potential public comparable to MOBL would be Rapid7 (RPD); shown below is a comparison of their primary valuation metrics:
Metric | Rapid7 (RPD) | MobileIron (MOBL) | Variance |
Price / Sales | 6.79 | 2.73 | -59.8% |
Enterprise Value / Sales | 7.07 | 2.45 | -65.3% |
Enterprise Value / EBITDA | -98.36 | -11.31 | -88.5% |
Free Cash Flow [TTM] | $12,350,000 | $11,260,000 | -8.8% |
Revenue Growth Rate | 33.9% | 6.2% | -81.6% |
Source: Seeking Alpha
Commentary
MOBL acquired incapptic to add its automatic mobile release updating technology offering to its unified endpoint management platform.
As MOBL president and CEO Simon Biddiscombe stated in the deal announcement,
As companies increasingly turn to in-house software development to transform work processes and deliver great employee experiences, their competitive differentiation will be tied to their ability to quickly, easily and securely build and distribute applications to their users. Together, with incapptic Connect as a part of MobileIron, we will help companies confidently and securely accelerate the realization of their digital workplace initiatives.
So, the acquisition is essentially a bolt-on deal. While we don’t know how much MOBL paid for the company, it was likely on a ‘team and technology’ basis.
There is likely no integration risk, as the two firms have partnered with each other for several years.
The deal will probably not move MOBL’ stock, but provides a window into management’s priorities in allocating resources.
MobileIron needs to reignite growth. Compared to Rapid7, the company’s revenue growth has been disappointing, so it isn’t surprising the firm’s stock has a lower valuation.
Will MOBL benefit from the effects of the Covid19 pandemic, which is expected to increase demand for distributed work arrangements and endpoint management?
Investors may be optimistic in this regard, but I would caution against too much optimism.
MOBL is also navigating a transition to a subscription revenue model in 2020 at the same time as dealing with the pandemic’s effects on its operations and likely lengthier sales cycles.
While management may be preparing for a longer term business shift, the short-term results may suffer, so my bias on the stock is Neutral. 
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This article was written by
Donovan Jones is a research specialist with 15 years of experience identifying opportunities for IPOs and software companies.
He also leads the investing group
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