RE:RE:RE:RE:$400 million to be deployed over 5 years?Mrmoribund, I don't trivialize the difficulty in making acquisitions. That is why I continue to believe that execution over the balance of this year will be pivotal to establishing credibility that the strategy can bear fruit.
It is important to recognize that the strategy has shifted twice since originally announced, each time significantly imo. As you may recall, the strategy was to acquire companies in the IIoT space, hence the acquisitions of IRD (pure IIoT) and Viziya (IIoT, but more software). Enter Doug Parker and he altered the focus to vertical/enterprise software. He was unable to execute, for whatever reasons. Possibly there were too too many aggregators and acquirers chasing the same assets; possibly they drove mutiples to unacceptably high levels; possibly QTRH had lots of cash but insuffiecent cred in software. The bottom line is he did not execute. I think the BoD recognized the challenge in the vertical/enterprise software shift for QTRH/IIoT and unloaded Viziya for a respectable return. Enter Paul Hill. The strategy changed again, returning more to its IIoT roots, but with an even sharper focus on ITS.
ITS will be a significant growth market for the next several years according to many experts. The market has a few large players, but is mostly fragmented and ripe for consolidation. This is a landscape that is fertile ground for acquisitions. QTRH still has to execute, but by leveraging and building on the brand equity in IRD, they have something more to offer potential targets than just a "bag of money." This should prove to be a significant facilitating factor.
Think again to the Sensor LIne deal and consider it a go-forward template. QTRH paid $6M with projected EBITDA of $700K - $800K from the Sensor Line deal. IRD has a valuation mutiple of 12x EBITDA. At the $750k EBITDA midpoint, Sensor Line adds $9M valuation, again at a cost of $6M. Not a bad deal. More of these types of acquisitions are available imo - both of a similar size to Sensor LIne and larger.
Lastly, I appreciate the confidence that Paul Hill has shown in his ability to execute the acquisition strategy. First, he has significantly invested in QTRH stock (>250K shares) and, second, a substantial portion of his performance compensation is linked to acquisitions (30%).
Clearly the jury is still out, but the tea leaves are positive for me. This time it looks different.