Bel Fuse, Inc. (BELFA) has revenue of $625 million and continues to grow through acquisitions, according to President/Chief Executive Officer Daniel Bernstein. He was speaking at the 17th annual Needham Growth Conference at the Palace Hotel in New York City.
Bernstein, whose father founded the company 65 years ago, runs a company that offers power solutions and protection, magnetic solutions and connectivity solutions. Its products include RF coax connectors and cables, microwave components, and harsh environment optical products. Customers include such high-profile companies as Boeing, Facebook, IBM, Echelon, Intel and Philips.
“A lot of growth has come through acquisitions over the last five years,” said Bernstein, noting that management restructuring and elimination of redundancies happens quickly after deals close, and the Bel Fuse culture immediately instituted.
The company will be looking to continue its expansion through assimilation. “We focus on products and markets we understand,” Bernstein said, noting the company has made eight successful acquisitions over the last five years, four of them divestitures from billion-dollar conglomerates.
North America accounts for 35.4% of Bel Fuse revenue, Europe 20.2% and Asia 44.4%. Of those totals, networking accounts for 40% of revenue, mil-aero is 25%, industrial 20% and telecom 15%, Bernstein said.
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Northern Power Systems Corp (TSE:NPS) had revenue of $42.6 million as of September 14, a 250% year-over-year increase, according to Troy Patton, CEO of the company. He was speaking at the 17th annual Needham Growth Conference at the Palace Hotel in New York City.
The company designs, manufactures, sells and services Permanent Magnet Direct Drive wind turbines, which can be used in other power management applications. The Northern Power customers “don’t care about wind or trees — they care about low-cost power,” Patton said.
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Patton did not take questions after his presentation. Northern Power Systems has filed a registration statement with the SEC relating to a proposed public offering of common shares. It has applied for listing on the NASDAQ Capital Market. The shares to be offered and price range has not been determined.
Northern Power has an installed base of 450 turbines globally, which translates to a “50% market share and growing,” Patton said. The company has a backlog of $47 million as of September 30, representing a 30% increase year-over-year, and is targeting its gross margin expansion to between 25% and 30% by year end, Patton said.
Product sales and service account for 90% of revenue, with the remainder coming from technology licensing and technology development, Patton said.
The company has a strong presence in Europe and the U.K., and hopes to expand in the U.S. and enter the Asian market, Patton said. Its growth strategy includes directly selling utility scale turbines in smaller, underserved markets.
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Constant Contact Inc (CTCT) is continuing to grow its customer base and is on track with its share price guidance, according to Harpreet Grewal, the company’s Chief Financial Officer. He was speaking at the 17th annual Needham Growth Conference at the Palace Hotel in New York City.
Constant Contact Inc. provides marketing tools in e-mail, social media marketing, event marketing, local deals and survey products that enable to create, send and track permission-based marketing campaigns.
Speaking in advance of its fourth quarter earnings call on January 29, Grewal said Constant Contact is on track with its stated guidance for the year of $46-$47. The company has 625,000 customers as of the end of Q3, he added. Grewal said the average customer retention rate is now at 50 months.
Grewal noted that there was a slight headwind to company financials in 2014 attributed to credit card failure rates, as customers felt the effects of data breaches at major retailers and did not update their information with Constant Contact. “But that doesn’t take away from accelerating growth,” Grewal said. “We’re executing quite well.”
Constant Contact sends out an estimated 60 billion to 70 billion e-mails per year on behalf of customers, Grewal said.
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Apogee Enterprises Inc (APOG) expects to report over $925 million in revenue for its fiscal year ending Feb. 28, according to Chief Executive Officer/President Joseph F. Puishys. He was speaking at the 17th Annual Needham Growth Conference, held at the New York Palace Hotel in New York City.
“Revenue growth is coming from orders growth, not a reduction of our backlog,” said Puishys, who added that revenue is being driven by acquisitions and entering new geographic markets. “You’re seeing a business growing faster than its end market.”
Apogee Enterprises is headquarted in Minneapolis and is involved in the design and development of value-added glass products and framing services. The company is organized in four segments: architectural glass, architectural services, architectural framing systems and large-scale opticals. Puishys said the company is “continuing to look for strategic investments,” and that the company has a $125 million line of credit, with positive cash and little debt.
Puishys said the commercial construction market makes up the bulk of revenue for its three operating segments, and that the overall end markets are expected to grow roughly 10% this year. “I am very confident of sustained double-digit growth in our market,” Puishys said.
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Senior Analyst Kevin Barker of Compass Point Research & Trading says Synovus Financial Corp. (SNV) is one of the best-positioned midcap regional banks due to a large deferred tax asset that he believes will open doors for the company.
“It has a large deferred tax asset that will reduce the cash taxes paid in the near term and increase the regulatory capital ratios faster than book value growth,” Barker said.
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Barker says this will in turn create opportunities for Synovus to do tuck-in acquisitions and grow the balance sheet.
“You’re going to see the company continue to increase the amount of capital that it is going to return to shareholders via buybacks, dividends and tuck-in acquisitions primarily as it eats up DTA. Also, it is well-positioned in Georgia and Florida, where we are seeing the most growth,” Barker added.
RigNet Inc (RNET) has seen its stock price decline significantly in the last few months due to investor lack of confidence in the company’s ability to grow the customer base in a falling oil price environment, despite the company’s leading position among data providers to rigs in a world with growing data needs, says Brandon Dobell, Partner and Group Head of Global Services at William Blair & Company, L.L.C.
“We feel pretty confident that investor expectations have gotten so low relative to RigNet’s ability to add customers and importantly drive more bandwidth to those customers as the need for data continues to grow. We think the expectations in the stock are now at a very low point, which should set it up pretty well,” Dobell said.
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Dobell says RigNet is one of the few companies capable of providing oil and gas producers with the network services they require to operate, and he expects investors to rethink their current perception in the next couple of months, after RNET surprises them with its positive performance.
“An offshore rig has information that need to back and forth with the control rooms back in Houston; production data has to go back to the E&P, telephone calls, compliance, safety monitoring, both data, video and calls. Somebody needs to get that communications network set up so the rig that’s 20 miles offshore, 200 miles offshore can communicate with the shore and vice versa. And RigNet is one of really two major players offshore and one of a few companies onshore that has a network big enough and robust enough to deliver any kind of communications to anywhere in the world through a variety of technology platforms,” Dobell said.
Senior Equity Analyst Kevin Barker of Compass Point Research & Trading says KeyCorp (KEY) is one of his favorite stocks within his domestic regional bank coverage. He says the bank has the ability to cut expenses without affecting operations.
“It continues to cut expenses, the bank gets little credit for its asset sensitivity and it holds an outsized amount of capital compared to peers. Over time, this will give the bank the capacity to lower its share count and deploy capital via growth initiatives,” Barker said.
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Barker says that KeyCorp’s management has shown it can make difficult decisions in order to increase operating leverage by closing branches and reducing headcount in other areas of the business.
“KeyCorp has a large investment bank, which is a larger portion of their overall earnings profile compared to most regional banks of its size,” Barker said. “Key is particularly focused on not just cutting branches, but also moving back on some of its trading personnel and investment banking in particular, given those are higher-cost jobs. I think it has an ability to cut a little bit there.”
U.S. Silica Holdings Inc. (SLCA) has been underestimated by investors worried about frac spending as oil prices continue dropping, says Brandon Dobell, Partner and Group Head of Global Services at William Blair & Company, L.L.C. He expects SLCA to capitalize on growing demand for frac sand.
“I think we feel pretty good that the amount of sand being used in the industry will continue to grow at a pretty healthy clip, and on top of that large providers of frac sand are going to continue to take market share at a pretty significant pace because of the logistical complexities of delivering a lot of sand to many different basins on a very short time frame. I think that’s what Silica is well-positioned to do,” Dobell said.
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Dobell says U.S. Silica will surprise investors with its performance in the next couple of months, changing their perception about the company, which will he expects will result in a higher stock price.
“Part of it is just the industry structure I think is underestimated in terms of the amount of sand that the industry is going to need because it’s one of the best ways to drive production higher without really spending a lot more money, and then second is logistics driving market share, and then finally, the stock is retraced significantly over the last three, four weeks on the heels of lower oil prices,” Dobell said.
Seadrill Ltd (SDRL) suffers from declining demand due to the strong fall of oil prices and increasingly challenged access to capital, leading Darren Gacicia, Director and Senior Analyst at Guggenheim Securities, LLC, to downgrade the oil and gas service company to a “neutral.”
“If you think back about my view on the names say six months ago, I have looked at it and said, if oil’s in $100, if capital markets are open, my thought on how IOCs will proceed with the projects would be fairly favorable,” Gacicia said. “You don’t have to turn on the TV and see what’s happened with the oil price and what’s happened with OPEC not coming to support the market, and maybe the implication that has over the next say six to 12 months on people’s outlook for the commodity.”
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Gacicia says SDRL cut the dividend, further signaling difficulty accessing capital to finance growth or fleet renewal. He has dropped the bullish stance on the company for the time being, and he is waiting for a catalyst before he can be more positive on the stock again.
“It was time to rethink our bullish bias and think about kind of moving to the sidelines until we see a catalyst to get things moving in the direction. I think the first signs of that catalyst, again, referring to your last question, will be seeing rig retirement help the supply side of the equation,” Gacicia said.
Baker Hughes Incorporated (BHI) faces higher-than-average operational risk due to a decline in spending caused by falling commodity prices and continued operational risk from the yet-to-complete restructuring of its legacy BJ Services business, says Edward C. Muztafago, Director of Investment Research at Societe Generale.
“If you look at North America, the biggest challenge that Baker has run into has been restructuring the legacy BJ Services business, and it required a lot of investment and a lot of change in both contract structure and just sort of basinal footprint within North America. Now they have certainly made some tangible progress there, but again, it’s not all done, so there is always a bit of risk there associated with that,” Muztafago said.
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But not all is terrible news for BHI, Muztafago says. The multiservice oil and gas company could see the Norwegian exposure result in some good tailwinds for the company, but he adds that internationally, the declining spending could result in the delaying of projects.
“Baker still has to really penetrate the BJ Services and legacy BJ Services entity in the places like the Middle East and Asia Pacific, which have been really key regions for development activity for multiservice companies globally. And just given the bit of a slowdown that we are seeing right now, or let’s kind of call it slowdown in growth, that could be a little bit more of a challenge as you potentially see some new projects get pushed farther down the road,” Muztafago said.
