Sonasoft Corp. (OTC Pink: SSFT), a leader in enterprise email archiving and eDiscovery solutions, recently announced the hiring of James McDonald as a sales representative. With over 40 years of experience in information technology sales, Mr. McDonald has extensive experience working with financial institutions to install critical software solutions, such as Core Accounting Systems (“CAS”), proof of deposit, imaging, networking, migrations, and similar systems.
“Sonasoft could not have found a better person to be our account representative for regional banks and credit unions,” said Sonasoft President & CEO Andy Khanna in a recent press release announcing the new hire. “Mr. McDonald is one of those rare, talented professionals that not only knows the nuts and bolts of technology, but also has the persuasion skills to convey the bottom line value Sonasoft’s email archiving and eDiscovery solutions bring to the financial sector.”
Investors may want to look beyond the surface of this announcement to grasp the real potential ahead for the company via its move into the banking sector.
Banking’s Big Opportunity
Sonasoft’s move into the banking sector represents a savvy play that could pay off significantly over the coming years. With a growing need for email archiving and eDiscovery – especially since financial institutions are required by law to have these solutions in place – the company’s products fill a key void in the market for a competitively priced enterprise class solution backed by a top-notch customer support team to help with installation and answering any questions.
In one case study, Baton Rouge-based Investar Bank selected Sonasoft’s Email Archiving Software due to customer feedback and its reputation for functionality, ease of use, and outstanding technical support. The bank’s three-person team was able to install the solution in just a couple hours and benefited from non-proprietary file formats and other features. Since then, the bank has tripled in size and the customer support team has helped the product grow with them.
With more than 7,000 banks throughout the U.S., the industry represents an attractive target for the company’s solutions. The three-dozen large banks with assets of $20 billion to $350 billion may be focused on larger competitors, like Hewlett-Packard Company (NYSE: HPQ) or Symantec Corp. (NASDAQ: SYMC), but smaller regional banks will likely respond well to a combination of competitive pricing and excellent customer support when it comes to choose the vendor right for them.
Moving into the Cloud
Sonasoft’s recent move into the cloud could also help accelerate adoption at many financial institutions. According to Gartner, 60% to 70% of new or replacement email archiving implementations are cloud-based, as customers look to reduce upfront costs, simplify maintenance, and avoid having to hire a dedicated IT administrator to monitor an on-premise installation.
SonaCloud enables businesses of all sizes to easily setup and scale the number of mailboxes to archive as business cycles and growth dictate. Since the installation is entirely “in the cloud”, there are no servers, hardware requirements, or storage limitations. The use of Amazon Inc.’s (NASDAQ: AMZN) data centers provides nearly 100% up-time with military grade security and no “co-mingling” of data, ensuring that client information is kept safe and secure at all times.
Cloud-based email archiving and eDiscovery solutions should help improve the company’s financial condition, too. Since cloud-based solutions require an ongoing payment to remain in operation, they generate stable recurring revenue and provide an easy path to upgrade and increase those revenues over time. The margins on these revenues may also be higher given lower installation and support instances associated with their use compared to on-premise software.
Sonasoft trades with a market capitalization of just $16.5 mil, according to OTC Markets, despite generating $802 k in revenue in fiscal year 2014 (a 58% increase over the previous year), $752 k in gross profit, and net income of $52 k last year. The company has stated that it expects top line revenue to increase during the first quarter 2015 at least 60% over the first quarter 2014. With significant revenue growth opportunities ahead, the company is well positioned to continue to build long-term value for shareholders, while reinvesting into growth opportunities. These opportunities include its recent hire and expansion into the banking industry.
Investors in email archiving or eDiscovery companies, like Daegis Inc. (NASDAQ: DAEG) and EPIQ Systems Inc. (NASDAQ: EPIQ), may want to take a look at Sonasoft as a micro-cap opportunity with potentially greater upside. After all, it’s much easier to double a $16 million market capitalization than double a $500 million market capitalization – as evidenced by its ~400% rise so far this year. The firm’s profitability reduces some risks associated with investing in micro-cap stocks. Additionally, the company is currently conducting an audit of two year’s worth of financials and intends to uplist soon to the OTCBB. With its commitment to transparency, revenue growth and a healthy bottom line, Sonasoft appears to be on track for bigger and better things.
For more information, visit the company’s website at www.sonasoft.com.