clarus Summary Judgment Denied We Expect a Jury Trial in February
Judge Hilton denied LogMeIn’s renewed motion for summary judgment today,
which now clears the way for a jury trial that could take place as soon as
February. This ruling is very positive for ONE and investors can now breath a sigh of
releif as the case proceeds to trial. We continue to believe that ONE has a very strong
case against LogMeIn, which could result in damages in excess of $120 million. On
the back of this ruling we believe the stock has been de-risked significantly and
investors should be buying shares ahead of the trial.
• This news is very postive for ONE as LogMeIn will now face a jury trial early
in the new year. Given the strong claim construction supported by the Appeal
court and the fact that the USPTO is essentially finshed a reexam of the patent, we
believe LogMeIn will have trouble proving the patent invalid or non-infringement.
LogMeIn’s exposure may be larger than people believe given the company
has been giving the technology away for free and a jury could rule willful
infringement, tripling damages.
• We estimate that a 10-year license from LogMeIn could generate revenue of
$123.6 million (based on 1x damages), while Citrix could be much larger at
$270.8 million. While our estimates above are based on a percentage of revenue,
we believe LogMeIn could be ordered to pay additional damages for its ~15
million free users. Unlike Citrix, LogMeIn uses a freemium model and has built
its brand by giving away free versions of its software and then attempting to
convert users to premium users that pay. If found to be infringing on the patent,
we believe ONE could argue that LogMeIn has caused signific damage by
giving the software away for free and therefore ask for higher damages.
• A Scheduling Hearing has been set for January 17, 2013. Typically the trial
will be scheduled 4-6 weeks following this hearing. Therefore we are currently
estimating a trial date to fall in February or March 2013. We note that 90% of
cases settle before trial.
• We are reiterating our BUY rating and $2.80 price target. Our price target of
$2.80 is based on a DCF that assumes LogMeIn and Citrix sign a license in 2013.
We assume a royalty rate of 9% (industry avg. is 11.5%) and discount rate of 18%.
We believe ONE could generate recurring cash EPS of $0.37/year with a license
from Citrix and LogMeIn. If ONE is successful in signing LogMeIn, we believe
the stock will re-rate as additional licensing potential gets incorporated into
the share price.
2011A 2012E 2013E
Estimates
Revenue (mm) $ 0 .476 $ 1 0.8 $ 30.0
OpEx (mm) $ 3.7 $ 3 .9 $ 5 .6
EBITDA $ ( 3.2) $ 6 .7 $ 24.2
EBITDA % nm 62% 81%
Cash EPS $ (0.05) $ 0 .10 $ 0.36
Valuation
P/E nm 11.1x 3.0x
EV/EBITDA nm 9.7x 2.7x
Stock Data
Previous Close $1.10
Potential Return 164%
52-Week High-Low $1.39 / $0.44
Avg. Daily Volume (mm)
Basic SO (millions) 64.1
Fully Diluted SO (millions) 66.6
Float (millions) 5 4.8
Market Cap. (millions) $70.5
Net Cash (millions) $5.1
Enterprise Value (millions) $65
Fiscal Year End 31-Oct
Shareholders
Management & Insiders 14.6%
Current Litigation
LogMeIn - Following Appeal ruling, trial expected
in September/October, 2012.
Citrix - Currently stayed pending re-exam, waiting
for ruling on whether Judge will lift the stay.
Source: Capital IQ
134,380
01 Communique Laboratory Inc. is an innovative
technology company in the development and delivery of
integrated communications software and services. The
Company is looking to grow its remote access technology
platform, while protecting its intellectual property.
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01 Communique Laboratory Inc. (ONE-TSX)
Sean