Direct Insite Update: $DIRI $IBM $HPQ $SI

Direct Insite reports at the end of the month, likely on March 24th. They are also planning a call as well for the week after.

The key for the company is that they signed a global bank to their service. It is confusing but the bank is white-labeling the company's working capital management solution, and then is selling it to their corporate customers for use.

I believe the company likely did not earn much revenue from this agreement - better to gain traction, but after speaking with management the customer is happy with the product.

The major point here is that they signed a global bank - which is a great feat for a $10M company. The main thesis is underway (my original thesis was banking on them signing a bank and they did).

There are two areas for growth for the company (1) having its existing global bank white label and sell PayBox to more of its customers and (2) signing more global banks. This strategy is a bit different than what the company did with IBM, but the product is essentially the same. 

Keep in mind the benefits IBM received (and still does), such as reducing their days-sales-outstanding or DSO by 4 days. This is a huge number and saved opportunity cost to get funds earlier when you're a massive entity. 

(DIRI Case Studies)

Management is non-promotional so they have not hired an IR firm, and they would rather focus on long-term goals, which I agree with, such as increasing their sales force and demonstrating the viability of their product, such as the  award they won at BAI a few days ago.


Am I waiting to see Direct Insite blow earnings Q/Q in two weeks? No. Although for a $10M company to (1) work with industry giants such as IBM and HP, (2) validate my original thesis and sign a global bank and have a growth strategy linked to (A) signing more banks and (B) increasing sales from each individual bank - the company is more than compelling at $0.80. 

We bought shares at lower levels and are up roughly 40%, but will be looking to average up in the coming weeks. 

As Direct Insite grows, the company can greatly outpace its $10M market cap as they sign on more banks, and banks resell their PayBox solution. This is a trillion dollar plus market that should not be forgotten about. Our timeline is 1-2+ years, and we are not trading the company, only investing.

Overall, I believe signing a global bank that can white-label and sell PayBox to its customers is a very big deal. Likely, it wont affect earnings since the company needs to attract banks at a favorable rate to start, but if the company can attract 2-3 banks with 3-4 customers each this can be a very big deal. 

In this instance, the company can easily be worth $50M to $150M and be a potential buy out by another company. This is optimistic, but a global bank has already been signed. This is in the face of a very long sales turnaround time, as closing these deals with banks and then the banks with their customers takes a long time - so investors needs a longer time horizon (1-2 years).

To view our original thesis:

To View our recorded CEO interview with Matthew Oakes:

DIRI Investor Presentation:

Following the company's earnings release and call, I may formally revise my original thesis for members. This post is only meant to be a quick update.

By reading this post you agree to SecretCaps' full disclosure. This post is not investment advice and is strictly informational. Do not trade based upon the content in this post and always contact a financial professional before executing any trades.

Posted to SecretCaps on Mar 06, 2015 — 5:03 PM
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