There is little doubt that we live in a litigious society, especially when it comes to large corporations. According to Forbes, 5,000 lawsuits are filed against Wal-Mart Corporation (NYSE: WMT) each year, which amounts to 17 lawsuits for each working day. Governments are no exception: The New York Police Department alone gets sued an average of 10 times each day, according to Gothamist.
With many lawsuits hinging on evidence from communications, the market for email archiving – software used to store and easily access corporate or governmental email communications – has skyrocketed. Transparency Market Research projects that the global e-Discovery market will grow at a 15.4% clip through 2017 to reach nearly $10 billion in size, driven by increased litigation and the need for records.
Sonasoft Corp. (OTC: SSFT) is a leader in email archiving and e-Discovery software solutions that doubled its revenue last year and registered a profit on the bottom line – a rare occurrence in the world of micro-cap stocks trading over-the-counter. In this article, we’ll take a look at why investors may want to take note of the company moving forward.
There are many competitors within the email archiving and e-Discovery space, including technology giants like Google Inc.’s (NASDAQ: GOOG) Google Vault and Symantec Corporation’s (NASDAQ: SMYC) Enterprise Vault, but these companies are primarily focused on other industries, like search and security. As a result, investors are not gaining much specific exposure to the growth in the e-Discovery market.
Sonasoft provides investors with direct exposure to the e-Discovery market and tremendous room for growth given its current market share. With a market capitalization of just $20 million, the company could see significant long-term upside by capturing just a fraction of the growing market. The recurring revenue nature of the business means that even small gains create a big impact.
The company differentiates itself from its larger competitors in a few ways. With its relatively small size, the company takes a much more hands-on approach to customer service, which builds strong and lasting customer relationships. The firm’s products are also competitively priced compared to many larger options, which helps it effectively target and serve the bottom half of the market.
The Sonasoft story does not end at a great growth opportunity ahead – as most micro-cap stocks do – but continues with the stock’s compelling valuation. The company has managed to produce double-digit revenue growth and bottom-line profitability in an industry that has seen increasing interest in mergers and acquisitions.
During FY 2014, the company reported revenue that increased 58% to $802,819, driven by the launch of its cloud-based email archiving services and expanded professional services aimed at migrating data from competing systems. The firm also reached a key milestone in swinging to a net income of $52,795 compared to a loss of around $420,000 the previous year.
The equity may deserve a higher multiple given the recent interest in the e-Discovery industry. For instance, Spire Capital acquired Lighthouse eDiscovery for a rumored $30 million. The company’s existing investor – Columbia Pacific Advisors – said the deal was a “compelling multiple”. Microsoft Corp.’s (NASDAQ: MSFT) acquisition of Equivio for $200 million and other deals further confirm these trends.
Sonasoft’s employees are committed to the company’s success with 20%+ ownership of its common stock. Over the next 30 days, the team plans to complete its audit and up-list to the OTCQX in order to gain more visibility within the financial community and raise growth capital. This capital will be used to leverage its sales force and accelerate revenue growth over the coming quarters.
The company stands at a key tipping point in its corporate history, with a refined product, committed team, strong customer endorsements, and soon, the capital needed to accelerate its growth. With recurring revenue contracts amounting to 20% of the purchase price of its solutions, the company is well positioned to generate long-term value for shareholders as it scales.
To learn more, visit the company’s website at www.sonasoft.com.