Small-Cap Firms

A Behind-the-Scenes Firm That's Helping 34 Fortune 100 Companies Increase Profits
November 6, 2006

I'm sure you have heard of Citibank, Wal-Mart and Sony before. After all, these are businesses that are leaders of their particular industries, with solid brands, name recognition and loyal customer bases. But what if I told you there was one company that helped all of these businesses make money and keep their customers happy?

In fact, this $248 million company has delivered more than 23,000 of its software systems worldwide, and its customers include 34 Fortune 100 companies. And what if I told you this stock is completely overlooked by Wall Street, even though more and more orders for its products keep piling up?

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Invervoice (INTV: NASDAQ) makes software that automates and personalizes access to information. Its software includes useful features like automated password reset, survey automation and authenticator -- which is a voice authentication system for access to confidential information. Essentially, it offers an entire software suit for major corporate call centers around the world.

Intervoice products help some of the biggest companies in the world provide better customer service, because a quality voice automation system takes the hassle out of customer calls. No more sitting through touchtone messages when you call Sears looking for the automotive department. You simply say the name of the department you want and your call is directed.

And now, you have the opportunity to buy shares of Intervoice on the cheap. Let me explain...

In September, Intervoice reassessed the status of a large project that was in process prior to the filing of the company's quarterly report. Two changes came up after the reassessment:

1. The company's backlog of $41.6 million at August 31, 2006 was revised up $0.6 million.
2. The company's revised its second quarter earnings per share down a penny to $0.04.

Although this new information has affected revenues and costs for the quarter, Intervoice executives are still expecting third quarter revenues of $48 million to $53 million.

As I mentioned above, the company's backlog is growing. It seems that more and more companies are looking to implement Intervoice products. Further, the company's work in progress inventory was up to $7.4 million from $5.5 million the previous quarter. Business is growing.

This is where the Street made its short-sighted mistake -- and the reason you have the opportunity to buy shares of Intervoice that are down more than 16% from just a few weeks ago.

And more recently, the acquisition of Nuasis has set Intervoice back. Intervoice acquired Nuasis, a company that provides Internet-enabled customer contact software, for approximately $2.5 million in cash on September 1. The Nuasis customer contact center applications include Web-chat and e-mail response applications that Intervoice executives say will help compliment the company's portfolio of product offerings.

Intervoice hired many Nuasis employees and continued to serve Nuasis' customers after the acquisition. And while the added products Nuasis provide should ultimately compliment Intervoice's own technology, it will take a little time to properly integrate the operations.

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It is important to note that Intervoice not only makes money by selling its software solutions, but also by managing its systems for its clients -- which it records as recurring services on its income statement. And in its most recent quarter, Intervoice's recurring services sales of over $26 million even topped its $24 million in sales of its products.

This means that for every new customer Intervoice gets, it brings with it the promise of continued business, which can do nothing but help the company's bottom line.

This year has also been a transition for Intervoice because it is implementing a new company-wide enterprise resource planning (ERP) system. The new system affects all aspects of the business, including the way the company processes orders, ships products and bills customers. It's a restructuring of how efficiently the company runs, if you will. And the better a company runs, the more money it saves in administrative and operating costs.

I'm assuming that if the new ERP system goes as planned, investors can expect better integration of Nuasis and welcome another acquisition -- former competitor Edify Corp., which was purchased by the company in December 2005 -- into the Intervoice family. Of course, a more efficient work process could lead to improved profit margins. And when Intervoice begins keeping more of the money it makes, a rise in share price is sure to follow.

Intervoice products are sold in more than 75 countries, and international sales were 45% of total sales last fiscal year. International revenues were 45% in 2006, versus 41% in 2005 and 2004 -- this shows that the company is expanding its international presence.

In October, Intervoice announced it would be establishing sales and support staff in China with the help of its partnership with Alliance Digital. According to a company release, Intervoice has been selling its products in China since 2001 by partnering with Alliance Digital and IT Apps.

As China's economy develops and a focus on better customer service becomes more important, Intervoice will be there to win more customers.

And despite some bumps in the road over the past year due to the integration of new acquisitions and transitions in its products, Intervoice is poised to make a comeback. When third and fourth quarter results are announced, it will be too late for the rest of the investment world to get in on this deal...
 
Best,
Gunner
 
P.S.: I almost forgot to mention this: Some of Intervoice's top executives are buying shares of their own stock. In fact, two company directors and the chief operating officer have bought shares of Intervoice...with one spending more than $194,000 of his own money. The only reason an insider would throw down that kind of cash on his own company would be if he knew it was the best investment out there. Read on to learn how you can make some of the best bets on the Street using an exclusive insider buying system.

Greg Guenthner is a contributing editor for Small-Cap Strategy Report and has helped in developing the Million Dollar Portfolio... <click here for full bio>