September 3, 2021 - NamSys makes software that reduces the cost of handling cash. The company pivoted from an old-school licensing software business to an enterprise SaaS business in 2013 and has grown revenue at ~23% CAGR since. NamSys was one of the first vendors to offer a superior alternative to legacy cash management software – often pen and paper – at a lower price point, enabling the company to penetrate the market and onboard major customers quickly. The continuing trend of banks outsourcing cash to Cash in Transit Operators (CITs) and retailers looking for cash management solutions to deal with the increasing cash cost per transaction will drive demand for NamSys products.
NamSys has grown its earnings power at over 30% for the past five years and consistently generated FCF on a minimum capital base (often on negative invested capital). The company grew sales 15% in 2020 despite perceived pandemic-related cash headwinds. Margins are strong with 70% gross and 45% EBIT. 99% of its revenue is recurring, and the company has close to 0% revenue churn. NamSys is trading at 15x 2020 FCF, a price which we believe more than fairly compensates for the risks associated with the company. We expect the company to double its earnings power in the next five years given the low penetration rate in the market and a largely unsaturated customer base. Today's prices offer additional free optionality with international expansion and recently launched partnership with their largest customer, Brink's.