In 1982, Joe Beyers led a team of inventors at Hewlett-Packard (HPQ) that developed and commercialized the world's first single chip 32-bit microprocessor. In the years that followed, he led mergers and acquisitions, technology partnerships, and corporate strategy programs for the company. More recently, he was featured on the cover of IAM Magazine alongside Steve Jobs, which reported him as being one of the top people who helped transform the intellectual property industry throughout the last decade. Having headed up Hewlett-Packard's global licensing department for just short of a decade, Beyers has now joined forces with – according to the company's website – an "A-Team" of professionals whose goal is to assist corporations in getting greater value from their intellectual property. The company that this "A-team" heads up is Inventergy, and it could be one of the leading performers in the intellectual property space over the coming 3 to 5 years. Here is an introduction to the company, and an argument as to why it could be a smart speculative allocation to any growth portfolio.
First, a quick look at the company. Established in 2012, Inventergy (INVT) is an IP investment and licensing company led by specialist Beyers and Wayne Sobon, AIPLA President-Elect and member of the USPTO Patent Public Advisory Committee. Its publicly stated goal is to build long-lasting strategic partnerships with Fortune 500 companies and technology leaders, and as mentioned in the previous paragraph, to help these companies draw value from the inventions and technology.
So where is the opportunity? As a recent third-party research report stated, protecting, defending and monetizing value from intellectual property is a critical component of operating in the global economy in the 21st-century. According to the same report, 80% of the value of the majority of companies is now intellectual property – having risen from approximately 20% over the last 30 years. Further, companies in the US miss out on more than $1 trillion by not extracting full value from their intellectual property assets.
How does Inventergy solve this problem? The company plays a simple role in the space, but one that is as yet unmet, and therefore offers an opportunity. It essentially licenses the IP assets of large organizations for use by other companies.
What about recent performance?
We have seen a number of positive announcements over the last quarter, the first of which came in February. On February 12, 2015, the company announced the closing of a $2 million license deal with a midtier telecommunications technology company that provides intellectual property multimedia subsystems (IMS) solutions. The agreement sees a five-year license provided to two of Inventergy's portfolios that the company purchased from Nokia and Huawei, and that include 56 patents families comprising more than 250 patents and applications.
Beyers had this to say about the deal:
"Inventergy is extremely pleased to announce this licensing agreement… We believe consensual license agreements like this provide mutual value, and furthermore validate the success of both our strategic business model and our management team, whose historical track record in prior roles produced billions of dollars in licensing revenues. We look forward to announcing additional revenue events."
Another key announcement came on February 27, 2015, with Inventergy announcing it had secured up to $3 million in license payment of advances from Fortress Investment Group. The securing of the funds succeeds an announcement made in October last year, reporting the consolation of an $11 million financing deal between Inventergy and Fortress, and serves to reaffirm the investment group's confidence in Inventergy's potential.
Again, to quote Beyers:
"This future payment advance agreement with Fortress, among other things, enables Inventergy to establish flexible payment terms with licensees, further improving total licensing payment opportunities, while providing Inventergy; additional operational cash resources to further drive key licensing initiatives. We are extremely pleased to have a company like Fortress backing us in our licensing efforts."
Finally, with the last round of funding on April 1, 2015, Inventergy secured $2.15 million in gross proceeds. The company plans to use the proceeds for working capital purposes in support of its intellectual property (IP) licensing strategies.
Beyers stated:
"We are extremely pleased by this round of funding that provides us additional resources to pursue the various deals in our current pipeline. This strengthens our ability to move those discussions along. We look forward to keeping our shareholders and prospective investors updated and are committed to becoming the leading industry standard in technology IP licensing."
Inventergy's share price has suffered over the last 24 months, and the company has a market capitalization of a little over $13 million at time of writing, but analysts expect an upside revaluation over the coming years driven by an improving financial situation. Revenues during 2014 amounted to $0.7 million, with expectations of $3.7 million during 2015 and $8.5 million during 2016. Gross margin is also expected to improve over the next two years, reaching 71.9% during 2015 and 76.5% during 2016.
To summarize, Inventergy is a young company in the intellectual property space, but one that has the potential to generate large amounts of added revenues for incumbent organizations through the currently unmet need for intellectual property monetization. Improving estimated revenues, coupled with a strong management team with a high amount of experience in the intellectual property sector points toward an upside revaluation in the company's market capitalization over the next 24 months.
