Members, we came across an interesting behavioral investing news item - Spindle rebuilt their entire Board of Directors and management team. We wanted to break the news below.
Spindle (SPDL) shares have traded between $0.11 and $0.31 over the last year, before settling at its current price of $0.19 and trading at a nano-cap sized $13 million valuation. At its high, the stock topped the $3 mark. The company was known in the past for their proprietary Yowza offering, a leader in offering geo-located offers redeemable at retail stores. Spindle gained attention last year, seeing its shares spike when it was disclosed that former Blockbuster President, Michael Kelly, hadpurchased a 10% stake in Spindle – a stake he still holds today.
As of late, Spindle has introduced Catalyst Gateway, the company’s payment system that allows for any type of payment processing from in-store to commerce and even between virtual and mobile devices. While their new model is a time tested and proven, we are intrigued by recent additions to both the board and management team consisting of numerous industry veterans who have previously built and sold businesses in this exact space. In fact, many of the players were foundational in creating a company called Solveras Payment Solutions, acquired by TransFirst in 2011.
It’s clearly not by chance that Spindle appears to be looking more and more like a potential Solveras 2.0 and why wouldn’t it? Tony Van Brackle, Spindle’s largest shareholder and advisor was the founder of Solveras, while board member Brian Bates its Chief Executive Officer. The company’s recent management and board of director’s overhaul with experienced industry veterans, putting their money where their mouth is, has caught our attention and may be emblematic of a “putting the band back together” type opportunity for investors.
As an investor, an enormous emphasis must always be placed on the jockey. This cornerstone, which I have been detailing for some time, is even more relevant with MicroCap and NanoCap companies. Put plainly, MicroCap companies have a horizontal hierarchy instead of the vertical hierarchies seen in large companies. As such, management and the BOD’s are on the front lines of the company.
When investing in MicroCap companies, management is the driving force between success and failure. Management is the sole responsible party regarding relentless execution or value destruction. What has caught our attention is that Spindle’s overhaul began just 2-3 months ago and in that short time, it has been able to attract top tier talent.
Spindle’s reorganization began just over two months ago when the company appointed Michael J. Schwartz as its InterimCEO. Mr. Schwartz is a payment industry veteran with 27 years worth of experience. Prior to joining Spindle, Mr. Schwartz was COO for IP Commerce from 2009-2012 where he led a revenue ramp up of over 60x in a 30-month period.
More recently, Schwartz was CTO as International Group of Fiserv, a leading global provider of information management and electronic commerce systems. He graduated from Harvard University.
‘Michael J. Schwartz, Spindle Interim CEO commented, “I’m very excited at the opportunity to lead Spindle at what I believe to be a very opportunistic time. I’ve spent the majority of the last three decades, the majority of my professional career, in the payments space,” – Schwartz regarding his appointment, bolded for emphasis
Most telling is that Mr. Schwartz elected to have approximately 50% of his compensation in Spindle’s stock. This positive notion clearly demonstrates his alignment with shareholders moving forward.
Spindle recently appointed another industry payments veteran, John Hunnicutt as Chief Financial Officer of the company as well. With more than 18 years experience from corporate finance to accounting, Mr. Hunnicutt most recently served as Executive Vice President of Edo Interactive – a pioneer in card-linked offers. Most telling regarding his work at Edo Interactive is his review and management of all execution for global brands such as Coca-Cola, Discover, Citibank, Visa and Capital One.
In addition to providing key contributions in product development to managing all aspects of the company’s finances Mr. Hunnicutt successfully completed debt and equity investments in excess of $76M. Earlier in his career, Mr. Hunicutt served as CFO of Link2Gov a leader in the merchant acquiring business which was later acquired by Metavante.
“I’m excited at the opportunity to join Spindle at what I believe to be an opportunistic point in its evolution. I’m a big believer that the value of a company and the size of its opportunity is often measured by the quality of its management team and its employees. Knowing many of those involved in current management and the company’s board, I’m optimistic about our future. I look forward to working with Mike and the Company’s board of directors to achieve our collective goals,” said John Hunnicutt, newly named Spindle CFO.” – Mr. Hunnicutt on hisappointment, bolded for emphasis
In addition to rebuilding Spindle’s management team, the company reenergized their board of directors with some extremely experienced leaders.
Brian Bates, bringing 30 years of experience in the telecommunications industry and 25 years of experience in the payments industry, was appointed to Spindles BOD in early June. Prior to Spindle, Mr. Bates served as CEO of Solveras Payment solutions where he successfully led the strategic development of the company until the company was acquired by TransFirst in 2011.
Mr. Bates also served as President and COO for Transaction Network Services (TNS), a global payment provider, as well as serving as President and COO for Paylinx an online payment services provider.
“Bates stated, “Spindle has assembled the essential platform elements that I believe represent the future direction of payments. I believe with that with their unified platform, they have strategically positioned themselves for what could be significant growth opportunities. I‘m excited to join the Spindle Board of Directors and leverage my long time payment industry knowledge and resources to help create value for both the company and its shareholders.” – Bates on his Appointment, bolded for emphasis
Spindle also appointed Frank Knuettel II as Chairman of the Board of Directors. Interestingly, Mr. Knuettel is also the CFO of well known Marathon Patent Group (MARA). With an MBA from Wharton School at the University of Pennsylvania, Mr. Knuettel was most recently the Managing Director and CFO of Greyhound IP.
The Company’s largest shareholder and a highly respected industry figure, he currently serves on Spindle’s Advisory Board where he will help direct the rollout of a call center in Nashville, TN. Mr. VanBrackle has over 30 years of experience in the payments industry. Mr. VanBrackle is currently a managing member of Payment Ventures, LLC, an investment firm with a focus on mobile commerce and payments. He is also on the board for Phoenix Managed Networks, a provider of secure data transaction solutions.
Earlier in his career, Mr. VanBrackle served as chairman of the board for numerous industry leading businesses such as Smart Pay Solutions, Electronic Check Alliance Processing and even Solveras which he founded in 2000 and sold to TransFirst 11 years later.
Previously, VanBrackle served as chairman of the board for several industry-leading businesses, including Electronic Check Alliance Processing, Smart Pay Solutions, and Solveras, which he founded in 2000, and subsequently sold to TransFirst eleven years later. Brian Bates, a recent board appointee at Spindle, was CEO of Solveras before it was sold to TransFirst under Mr. VanBrackle. Mr. VanBrackle currently owns over 10% of Spindle – aligning his interests with shareholders. Board member Dr. Jack Scott too owns over 10%.
Spindle’s experienced new team will be aiming to aggressively grow the company’s Catalyst Gateway payment system. The system allows merchants to process and manage their payments via a secure global network – the ideal solution for e-commerce, recurring billing and fraud protection. The recent requirement for all merchants to be EMV compliant only exacerbates opportunity.
The focus of this article is on Spindle’s experienced management overhaul, as such we will be tracking their execution as these industry veterans were only recently appointed.
In the most recently reported second quarter, Spindle announced revenues increasing 19.5% Q/Q to $257k. With only $82K on the balance sheet, and operating expenses ($1.077M) last quarter, the company could look to raise money in the future. Recent financing activities have involved considerable purchases by insiders, not limited to board members Dr. Jack Scott, and Frank Knuettel, in addition to Tony Van Brackle who in just recent weeks invested over another $250,000. Naturally one would have to assume as the largest large shareholders, they are keenly aware of the adversely affecting or diluting their own ownership.
With the significant management changes recently, we will be tracking the company for recent execution and changes in the company’s cost and expense structures. Spindle does not have the cleanest income statement or balance sheet, but it is worth noting that these results were for the quarter ending June 30, 2016, before the new team and BOD has had time to impact the company. In light of recent transformational changes in the quality of those involved, this is definitely one of those cases where in time, past results may be shown to have not been indicative of future ones.
Normal MicroCap risks apply to Spindle including illiquidity, the risk of dilution and share price swings. Investors should be aware of all of the risks associated with MicroCap and NanoCap companies before making any investments. Investors should be aware and understand Spindle’s balance sheet, income statement and statement of cash flows before investing.
Spindle’s massive management and Board of Directors overhaul has caught our attention since a strong emphasis must be placed on those running a MicroCap company – the captains of the ship.
The company’s re-energized management team, and board of directors, is packed with payments and mobile industry veterans who have significant experience in their fields. These significant changes have caught our attention as we rarely see a 360-degree overhaul that includes veterans across the board with significant industry experience.
It is worth noting that these changes mainly all took place just a short 60-90 days ago, meaning the company is able to attract top-tier talent, and that the company’s experienced new team’s execution should begin to funnel through the company in terms of results. Furthermore, a company cannot attract top-tier talent without having some fundamental core strengths in its assets – hence if veterans are going to join a company they first vet the company’s offering so insure that they have a future there.
I would look for any addition core payments or marketing talent joining either the Board of Directors and/or the Management Team as a clear sign that this is one company that is about to turn the corner. Considering that many now involved previously built Solveras and sold it, one can only assume that they are working towards laying the groundwork for what they hope to be a similar result for Spindle. If you too believe that small stocks are a bet on the jockey, then Spindle could prove to be a very interesting opportunity.