Technology

Bankers

Gregory Kouvelas

Senior Managing Director, Technology Investment Banking

Mr. Gregory Kouvelas joined National Securities Corporation as a Senior Managing Director of Technology Investment Banking. Previously, Mr. Kouvelas served as a Senior Banker at Wunderlich Securities, Seven Hills Partners, ING and Robertson Stephens. In addition, Mr. Kouvelas also has experience as a consultant at Andersen Consulting (Accenture) Strategic Services Group and an executive at a Silicon Valley software startup. Mr. Kouvelas earned an MBA in Finance from the University of Chicago Booth School of Business and an AB from Harvard University.

Technology Sector Expertise

National has built a robust banking practice across the massive technology industry, including in exponentially growing sectors like software, internet apps, social media, hardware, data mining platforms and fin tech, as well as large crossover segments like 3D printing, self-driving cars and the Internet of Things (IoT). Our banking team’s capabilities center on capital raising activities, primarily through private placements for early stage companies, as well as investment funds and SPVs dedicated to well-known tech “unicorns,” both in primary and secondary markets.

While we sometimes displace traditional VC investors, we also co-invest alongside them to support the development, market penetration and adoption of promising technologies.

Completed Transactions

Analysts

Ilya Grozovsky

Managing Director, Equity Research

Ilya Grozovsky is the Managing Director covering the Technology sector. Ilya’s focus on technology includes software, cloud computing infrastructure and applications. Ilya is a seasoned analyst with over 15 years of experience on both the sell-side and the buy-side, working for firms such as ING, JP Morgan, SoundView Technology Group, MAC Investment Management, and Morgan Joseph & Co. He holds the FINRA Series 7, 63, 86, and 87 licenses and received his Bachelor of Arts in Economics from the University of Maryland.

    Matthew Galinko

    Senior Equity Research Analyst

    Matthew Galinko joined National Securities in June 2018 as a Senior Equity Research Analyst covering Technology and focused on the Internet of Things. Matt has covered the technology sector since 2007, including small cap at Sidoti & Company and multi-cap at Battle Road Research. Matt earned a B.A. in Economics, minor in Business, and led the investment club at Brandeis University.

      Technology Sector Coverage

      Technology research coverage at National focuses on sub-sectors such as software as a service (SaaS), the Internet of Things (IoT), and other unique opportunities in tech. The technology analyst team looks for companies with unique products, a growing market opportunity, expanding market share and recurring revenues. All types of valuation methodologies are used, with a consistent eye toward profitability.

      AudioEye, Inc. (AEYE: Buy, $12.50 PT)

      August 15, 2019– Yesterday, after the close of trading, AudioEye reported its June quarter results. Revenues in the
      quarter were $2.4 million, essentially in line with our estimate and compared to $2.0 million in the
      March quarter and $1.2 million in the year ago quarter. Adjusted EBITDA for the quarter was a loss of
      $1.6 million, higher than our estimate of a loss of $1.0 million and higher than the previous quarter’s
      loss of $1.5 million and up from the year ago quarter’s loss of $0.5 million.






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      AzurRx BioPharma, Inc. (AZRX: Buy, $9 PT)

      June 11, 2019– We are initiating coverage of AzurRx BioPharma, Inc. with a Buy rating and a 1-year target price of $9, which is supported by a DCF analysis using a 30% discount rate and a 5 multiple of the terminal value for the projected 2030 EBITDA of $470 million, calculated using an annual MS1819 cost of $18,000 in the US, consistent with the price of the market dominating pig derived pancreatic enzyme replacement therapies (PERTs). We base our valuation on US sales from MS1819 in exocrine pancreatic insufficiency (EPI) associated with cystic fibrosis (CF) and chronic pancreatitis (CP), with any ex-US commercial success from MS1819, or any commercial success from the early stage beta-lactamase program, serving as upside to our valuation.






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      Aqua Metals, Inc. (AQMS: Buy, $6.60 PT)

      August 1, 2019– Today, Aqua Metals reported June quarter results, the conference call was this morning
      during trading. Revenues in the quarter were $1.4 million compared to our estimate of $1.1
      million and compared to $0.4 million in the previous quarter and $0.5 million in the year ago
      quarter. Adjusted EBITDA in the quarter was a loss of $7.7 million, ahead of our estimate
      of a loss of $6 million and down from the previous quarter’s $8.0 million.






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      Digimarc Corp. (DMRC: NEUTRAL)

      July 25, 2019– Digimarc shares are currently trading at approximately
      16x our 2020 EV/Revenue estimate. We are maintaining our NEUTRAL rating based on
      our belief that Digimarc shares are fully valued at this time as our DCF model yields a
      value of approximately $46 per share.






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      Digital Turbine, Inc.. (APPS: Buy, $4.50 PT)

      June 4, 2019– Yesterday, after the close of trading, Digital Turbine reported its March quarter results. Revenues in the quarter were $27.2 million compared to our estimate of $26.6 million and compared to $21.0 million in the year ago quarter. The company reported adjusted EBITDA of $3.3 million compared to our estimate of $1.9 million though down from the previous quarter’s $3.8 million (a seasonally strong quarter) and up from the year ago break-even.






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      Energous Corp. (WATT: Buy, $13 PT)

      August 9, 2019–Yesterday, after the close of trading, Energous Corp. reported its June quarter results. The
      company generated $47,500 in revenues compared to our estimate of $150,000 and
      compared to the previous quarter’s $66,500. Operating expenses of $10 million in the
      quarter were lower than our estimate of $12 million and down from $11 million in the prior
      quarter. We believe that the company has focused on managing expenses in a need to
      conserve capital. Adjusted EBITDA in the quarter was a loss of $7 million, in line with our
      expectations and down from a loss of $8 million in the previous and year ago quarters.






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      I.D. Systems, Inc. (IDSY: Buy, $10 PT)

      August 2, 2019– IDSY reported 2Q:19 Non-GAAP EPS of $0.01 on revenue of $16.3 million, which compared to our estimates for $0.07 on $14.5 million revenue. Gross margin came in below our estimate, although we expect the revenue mix will likely improve gross margin in 2H:19.






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      Identiv, Inc. (INVE: Buy, $8 PT)

      August 9, 2019– INVE reported 2Q:19 revenue of $22.2 million, adjusted EBITDA of $2.4 million, and Non-GAAP
      EPS of $0.01, which compared to our estimates for $22.4 million, $2.0 million, and $0.01
      respectively. Software revenue grew 47% year over year to 12% of the total mix, supporting gross
      margin expansion to 44.4% (from 40.2%).






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      InterDigital, Inc. (IDCC: Buy, $96 PT)

      May 2, 2019– IDCC reported 1Q:19 Non-GAAP EPS of $0.13 on revenue of $68.6 million this morning, beating our estimate for $0.04 on $72.7 million. Our 1Q:19 estimate did not include a $5.8 million contra-revenue charge taken in 1Q:19. Note that revenue guidance was previously $70-$75 million. Backing out the revenue adjustment, IDCC would have reported approximately $74.4 million revenue and $0.31 of Non-GAAP EPS.






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      Inseego Corp. (INSG: Buy, $5.50 PT from $6)

      August 7, 2019– We maintain a BUY rating and lower our price target to $5.50 (from $6.00) based on 17x our 2022
      EBITDA estimate and applying an 11% discount rate. We switched to the longer-term valuation
      method as near term investments in converting the 5G pipeline to revenue likely understate the
      longer-term profit potential and value of the business.

       






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      Kopin Corporation (KOPN: Buy, $2.00 PT)

      August 8, 2019– KOPN reported a 2Q:19 Non-GAAP loss of $0.03 on revenue of $9.1 million, which compared to our
      estimates for an $0.08 loss on $7.1 million of revenue. The company recognized $4.2 million of license
      and royalty revenue, of which approximately $3.5 million was generated from a transaction with
      RealWear.






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      Mitek Systems, Inc. (MITK: Buy, $20 PT)

      July 26, 2019–We believe that the company is undervalued compared to its comparable companies average. Accordingly, we are maintaining our BUY rating on the shares. The comparable companies group average multiple for 2019 and 2020 EV/Revenues is currently 12x and 9x, respectively while Mitek trades at 5x and 4x EV/Revenues on CY19 and CY20, respectively. We believe that Mitek should trade on par with the group average as Mitek is actually growing its revenues faster than the group’s average; we are maintaining our twelve-month price target of $20.






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      Model N Inc. (MODN: Buy, $25 PT from $23)

      August 7, 2019– Yesterday, after the close of trading, Model N reports its June quarter results. Revenues in
      the quarter were $35 million compared to our estimate of $34 million and compared to $35
      million in the previous quarter. Revenues were driven by solid growth in SaaS subscriptions,
      which were up 7% year over year. Adjusted EBITDA of $3 million was well ahead of our
      estimate of $2 million and up from $2 million in the previous quarter.






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      Mohawk Group Holdings Inc. (MHK: Buy, $14 PT)

      August 2, 2019–Yesterday, after the close of trading, Mohawk Group reported its June quarter results. Revenues in
      the quarter were $30 million compared to our expectation of $23 million and compared to $15 million
      in the year ago quarter, and $18 million in the previous quarter. Revenues were driven by growth in
      the environmental appliances space as seasonality seems to has come in earlier than we had
      expected. Adjusted EBITDA in the quarter was a loss of $4 million significantly better than our
      expectation of a loss of $7 million as higher revenues and gross margins coupled with lower expenses
      produced a significant outperformance.






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      Nano Dimension Ltd. (NNDM: Buy, $1.80 PT)

      February 4, 2019– On Friday Nano Dimension announced that it raised much needed cash through a public offering. The company raised at least $12 million and could raise as much as $36.6 million with the overallotment, the warrants, and rights that are attached to the shares are exercised.






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      OneSpan (OSPN: Buy, $23 PT)

      July 26, 2019–We maintain a BUY rating and $23 price target based on 3.0x EV/Sales (2020), a premium to the
      historical forward 1.9x, due to the revenue mix shift to software which we think typically draws a
      higher multiple.






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      Progress Software Corp. (PRGS: Buy, $50 PT)

      March 29, 2019– PRGS reported 1Q:F19 Non-GAAP EPS of $0.50 on revenue of $89.5 million, which compared to our estimates for $0.46 on $86.9 million revenue. Stronger OpenEdge license sales supported the outperformance. The implementation of ASC-606 caused significant volatility in the Data Connectivity segment, resulting in a year over year decline to $4.5 million from $6.0 million (with the 1Q:F18 figure reported in the prior revenue recognition standard).






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      Ribbon Communications (RBBN: Buy, $8.5PT)

      August 1, 2019– RBBN reported 2Q:19 results last night of $0.14 Non-GAAP EPS on $145.4 million of revenue,
      which compared to our estimate for $0.15 of Non-GAAP EPS on $153.8 million of Non-GAAP
      revenue. The company ended its practice of adding purchase accounting adjustments back
      to Non-GAAP revenue in 2Q:19, reducing reported Non-GAAP revenue by an estimated $1.5
      million and Non-GAAP EPS by about $0.01.






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      Resonant, Inc. (RESN: Buy, $6.30 PT)

      August 7, 2019– RESN reported 2Q:19 revenue of $63,000 and adjusted EBITDA of -$5.9 million, which
      compared to our estimates for $0.2 million revenue and a $5.5 million loss. At this stage of
      commercial development, this shortfall versus our estimate is not particularly meaningful, as
      progress against market development is a more useful indicator.






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      RumbleOn Inc. (RMBL: Buy, $9.50 PT)

      August 13, 2019– This morning, RumbleOn reported its June quarter results. Revenues in the quarter were
      $270 million compared to our estimate of $235 million and compared to $223 million in
      the previous quarter and a pro-forma $201 million in the year ago quarter. Adjusted
      EBITDA of a loss of $7 million was greater than our expectation of a loss of $4 million and
      up from the previous quarter’s loss of $5 million and our estimate of a pro-forma loss of
      $2 million in the year ago quarter.






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      ShotSpotter Inc. (SSTI: Neutral, $44 PT)

      August 7, 2019–  SSTI reported 2Q:19 GAAP EPS of $0.03 per share on revenue of $10.3 million, which
      compared to our estimates $0.01 on $10.8 million of revenue. The company added 25 net
      new miles to its gunshot detection network, which compares to 12 in 1Q:19, 61 in 2Q:18 and
      24 in 4Q:18. Operating expenses of $5.7 million compared to our $6.3 million estimate.






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      Sonim Corp. (SONM: Buy, $17 PT)

      July 25, 2019–  Second Quarter Revenue Outperformed Our Estimate, Emergence Of Adjusted
      EBITDA Shows Benefits Of Scale Up. With SONM trading around 1.2x EV/2019E revenue and 1.0x EV/2020E revenue,
      shares appear attractively valued compared to some peer groups, particularly given
      the revenue growth levels.






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      SharpSpring Inc. (SHSP: Buy, $18 PT, from $20 PT)

      August 7, 2019–  Yesterday, after the close of trading, SharpSpring reported its June quarter results.
      Revenues in the quarter were $5.5 million compared to our estimate of $5.6 million and
      compared to $5.3 million in the previous quarter and $4.4 million in the year ago quarter.
      Gross margins of 71% were essentially in line with our expectations and up from 66% in the
      year ago quarter and essentially unchanged sequentially. The company reported adjusted
      EBITDA of a loss of $1.7 million compared to our estimate of a loss of $2.3 million and a
      slight improvement from a loss of $1.8 million in the previous quarter though down from a
      loss of $1.5 million in the year ago quarter.






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      Super League Gaming (SLG: BUY, $15 PT)

      August 15, 2019–

      We continue to believe that Super League Gaming is well positioned to benefit from the growth of
      amateur e-sports. The company is currently the only publicly traded pure play way to participate in
      the e-sports industry. Our belief that the company will continue to grow its participant base and build
      out additional brand relationships and partners leads us to a positive outlook on the fundamentals.

      We believe that Super League Gaming shares, which currently trade at an 85% discount to our twelve-
      month price target of $15 (which is based on our DCF analysis with a discount rate of 30%) are an

      effective way to participate in the multi-year growth of e-sports and as a result we continue to rate
      the shares a BUY.






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      Xperi Corporation (XPER: Buy, $33 PT from $36)

      August 7, 2019– XPER reported 2Q:19 billings of $92.3 million and billings-based non-GAAP EPS of $0.68, compared to
      our estimates for $91.7 million and $0.44, respectively. Guidance was for $88-$92 million of billings.
      Operating expenses were below our estimates. Full year billings guidance of $395-$415 was unchanged.






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