01 · Challenge
The Challenge
When Hayden IR began representing NAPCO on November 16, 2011, the stock traded at $2.02, a $38.6 million market cap. The company’s presentation hid its leverage and its $1.00-per-share earnings power at $100 million in revenue, and the company went on to report four consecutive quarters of flat to down revenues.
02 · Solution
Our Solution
- Reworked corporate materials and messaging, converting financial text tables into graphics to illustrate leverage and earnings power of $1.00 per share at $100 million in revenue
- Positioned the company as ramping recurring revenue, with $1.00-per-share earnings power in two to three years and a significant discount to its future potential
- Worked with management to provide more consistent, tangible examples of the changing product mix
- Kept shareholder communications focused on long-term opportunities through four quarters of flat to down revenues, highlighting margin improvement and revenue growth across divisions that was being masked by a single underperforming division
- Suggested a press release to continue branding NAPCO’s recurring revenue
- Secured invitations to the Noble, Roth, B. Riley, Benchmark and LD Micro conferences and scheduled multi-city roadshows including New York, Chicago, Minneapolis, Milwaukee, Dallas, Boca Raton and Los Angeles
03 · Impact
The Impact
- Share price rose 80%, from $2.02 (November 16, 2011) to $3.64 (December 31, 2012), and market cap rose 80%, from $38.6 million to $69.5 million, with the stock hitting 52-week highs
- On the first roadshow, one month after engagement, Walrus Partners became a shareholder on its way to a 300,000-share position
- Gagnon Securities responded to the recurring revenue press release by purchasing 300,000 shares; its principals came to own 1.0 million shares
- Invitations to present at five conferences in the first 13 months
- Coverage in an unpaid June 13, 2012 research note with an investor model and a $15 price target
- Built a broad, long-term-focused shareholder base that supported a higher valuation even as quarterly revenues were flat to down
Past results are not indicative of future performance. Figures are as reported in Hayden IR’s case study for NAPCO Security Technologies, Inc. See our disclosures.
