TM Editors' Note: This article discusses a penny stock with a microminicap under $9M; such stocks are easily manipulated, do your own careful due diligence.

At SecretCaps, we’re long-term investors who find undiscovered, high potential MicroCaps well ahead of the crowd. Currently, we’ve been invested in Direct Insite for almost two years, and the company’s recent conference call has left investors, and us, very bullish.

With insiders owning ~33% of the company and adding 1.23M shares in the last twelve months, management is clearly aligned with shareholders.

Facilitating over $160B in transactions through their working capital management platform, Direct Insite’s legacy customers such as IBM and Siemens are funding the company’s 4th-generation of PAYBOX (accounts payable and accounts receivable suite). MicroCaps have a very difficult time raising money in the capital markets, as such one who is self funding their initiatives due to $7M+ in annual recurring legacy revenue is very attractive.

Direct’s clean balance sheet, $2M+ cash balance, profitable nature, low float, verified PAYBOX offering (legacy and 4th-gen), self-funding nature, non-promotional management and undiscovered nature are also key reasons which led us to initiate our position in the company.

Direct recently released earnings, and we have decided to dive into what we view as the most bullish earnings call since we became investors in the company.

A Bullish Conference Call:

1) The company signed their first Tier-1 Global bank, who white-labels and resells PAYBOX. One of the bank’s largest corporate enterprise customers, a leading consumer goods provider, utilizes PAYBOX.

2) This Tier-1 bank has a second customer set to use PAYBOX which appears should go online soon, this will drive revenue for the segment and viral exposure for the platform. (viral since businesses are interconnected as are banks)

“Yes their customer has moved forward as an implementation and there are multiple other instances at the application at the same time happening.” – Matthew Oakes CEO

3) The CEOs statements in the CC leads us to believe that the company potentially has a few deals they are ready to announce, whether they are drive from the company’s sales team or through the reselling of the global bank.

“I think Lowell and my team are doing a really great job of figuring out where we need to stand along with me I mean how we can invest our collectively all of our dollars to create positive result and nothing signals better than signing new clients and I’m excited to share that information when we can make them public but the fact that we have multiple clients across multiple channels that are new and it is the first time that I can say that in about a year and year and a half so I think the organization is excited I think a lot of our Directors and hopefully a lot of our shareholders and through this call will get a lot of excitement and I look forward to speaking to you at the end of Q2. Thank you very much everyone.” – Matthew Oakes, CEO (Bolded for emphasis)

4) The company expanded their direct sales team last year, and this appears to be boding well with the management’s outlook. Further, they are seeing the ACH market pickup which is a favorable trend for the company.

“Number one, ACH market is picking back up we have the direct sales team in place and I think you are — we are by yearend are going to be pleased with the results of the investment we made in sales and specifically in the target marketing into digital, aggressive digital strategy we put in place and how we are digging up leads and how we are converting them. I’m also very encouraged by what our channel partner and the financial services business is doing and we are supporting that every way possible and we are starting to see really good results from the Internet as well so that is encouraging.” – Matthew Oakes, CEO, (Bolded for emphasis)

5) The CEO again mentions multiple potential deals underway:

“It supports us to look at some alternative channels for sales I’m pleased to announce that you will hear shortly that we have signed multiple clients across multiple channels both direct and with our existing channel relationships and so some of that will be released before long both.” – Matthew Oakes, CEO

6) Albeit longer than we had expected, and the company, Direct’s channels sales are moving in the right direction now:

“So, I think our channel relationship is starting to warm up and move forward the way that we thought it would and I think the direct sales team now is really functioning at a higher level we are doing a lot of digging finding opportunities and were getting from the right metrics involved which should be from contact to demo to proposals to close and so I’ll be look forward to announcing some of that activity here in near-term” – Matthew Oakes, CEO

7) Direct did not have the audit experience they needed to bolster their AP offering. Their recent partnership with ERM solidifies the offering. Further, ERM has a large customer base which Direct can introduce PAYBOX to. The partnership is recent, but we are expecting a few deals from the relationship.

“ERM, Enterprise Risk Management who is a company down here in Florida that really does heavy audits for banks and for large companies, we see that’s critical to have that on the front end of the AP product and we’re working closely with them because they have a very large customer set so we can do introduce our AP automation product and potentially our PAYBOX bank product for integrated receivables product along with them into their existing clients. And we have the corporate revenue share agreement in place.” – Matthew Oakes, CEO

8) Like ERM, the company is looking into two additional partnership arrangements to drive growth, uptake and exposure:

“Third we are examining two other partnership arrangements by which we would have access to some of the core customers that we look to go after but coming at them from a different angle with a partner where we would package our services together and chase those opportunities. So, ERM partnership a couple of more probably announced here I would say in Q2 or Q3 “

Risks:

Investors are aware that the shake-up at HP (HPQ) over the past several months caused Direct to lose a customer they had through HP. This amounted to 12%-13% of the company’s revenue, and we do not expect the business to resign directly with DIRI. Although the company enacted cost-cutting measures which don’t affect their forward growth opportunities, we expect this revenue, and resulting EBITDA hit, to affect the company in Q2.

It is worth noting that this customer, like DIRI’s legacy offerings, is the first generation of PAYBOX. This legacy revenue is self-funding the company’s recent 4th-generation PAYBOX offering which is being offered to customers directly, and through the tier-1 global bank.

Could management be extremely optimistic considering they lost the HP customer? It's a possibility. Although they could have done damage control and been optimistic last CC and they did not go crazy with either. I believe there is a better chance that the above statements are positive, bullish and will precede deals to come.

See all risks included in the above linked research report, and be aware of all of the risks associated with MicroCaps.

Conclusion:

Call us bullish for diving into the company’s earnings call, but for a management team that has been historically non-promotional in virtually every sense (No IR since we’ve been here, and conservative on past conference calls), this earnings call has left us very bullish looking into Q2 and Q3.

Finding a self-funding, clean, undiscovered, high-opportunity technology MicroCap on the verge of a potentially bullish next two quarters are hard to come by, but its a key reason why we have a large stake in Direct Insite. With the risks noted, we are long shares of Direct Insite.