AnalytixInsight Inc. (“AnalytixInsight” or the “Company”) uses artificial intelligence (“AI”) to transform massive amounts of data (“big data”) into knowledge driven insights. The Company has three flagship products:
- Euclides Technologies is a Workforce Management (“WFM”) subsidiary utilizing AI in the field service industry to predict outcomes, scan big data proactively for alerts, and to generate meaningful insights for large corporations with mobile workforces.
- CapitalCube is a 100%-owned financial portal providing comprehensive company analysis including on-demand fundamental research reports, peer analysis and screening tools on over 50,000 global equities and North American ETFs. Refinitiv and The Wall Street Journal are customers.
- MarketWall is a 49%-owned FinTech subsidiary co-owned with Italian bank Intesa Sanpaolo that develops stock trading and research solutions as part of a fully integrated ecosystem of Smart Devices. InvestoPro is a 100% subsidiary of Marketwall that will be the digital full service discount brokerage arm of MarketWall.
We spoke with CEO Prakash Hariharan to learn more about AnalytixInsight, the Company’s opportunities, and its outlook.
Q: Prakash, tell us about AnalytixInsight’s solutions and the problems they solve?
A: At our core, we are an Artificial Intelligence and Machine Learning (“AI/ML”) company with a platform capable of over 100 billion daily computations, creating machine-generated insights and content. We apply these capabilities to the financial industry with CapitalCube and MarketWall, our joint venture with Intesa Sanpaolo (Italy’s largest bank). These solutions allow retail investors to benefit from the same sophisticated financial analysis available to professional institutional investors.
Q: Thanks Prakash. Investors are generally aware of your financial products solutions CapitalCube and MarketWall, so I wanted to take a slightly different tack and start with your Euclides acquisition. What is Euclides?
A: Our Euclides subsidiary leverages AI for workforce optimization. This sector is witnessing a rapid increase in data availability due to IoT connected devices and mobile devices for field workers, which can be used to drive AI-enabled insights.
Q: How does Euclides fit into your corporate strategy?
A: Our thesis has been that our core platform is horizontally adaptable to different industries, so after product success in our initial financial services vertical, the Euclides acquisition allowed us to move into a new market vertical. This approach removes the risk of being dependent upon a single industry to generate revenues. It wasn’t a risky leap; we evaluated several verticals to determine which presented the best opportunity to diversify and had the most potential for growth and workforce management was the vertical that we selected. We have been hard at work in this segment over the course of the past year or so, and we are excited that the team’s hard work in this space will soon provide positive results for our company. We are looking forward to launch our version of the Field Services Module that will be a unique feature incorporating data analytics and machine learning as a part of the offering. This industry is growing rapidly as enterprises are increasingly looking to adopt cloud-based platforms for deliveries, scheduling, and workflow optimisation (“WFO”). In a post-Covid world, this platform is expected to create significant value for its end customers.
Q: What were the factors that made Euclides attractive for workforce management?
A: The workforce management industry uses strategies known as workforce optimization to leverage data and automation to help employees work “smarter” and for businesses to operate more efficiently. The idea is to bring costs, scheduling, employee, and customer satisfaction levels into alignment. With the introduction of IoT sensors and devices and mobility tools for workers, enterprises are now collecting big data sets but are not utilizing real-time data to its full potential to benefit their businesses. Euclides is led by a team with decades of deep experience in the development and implementation of WFM for large global corporations. The team has a proven track-record of expert services and successful implementations, as well as a large client base with worldwide customers representing over 100,000 field service personnel across multiple industries, ranging from power and utilities to big box retailers that deploy field personnel.
Q: As we discussed, the investment community is well aware of your capital markets product focus, but could you help refresh our understanding of the initial focus on disrupting capital markets with your AI/ML solutions?
A: My background is with buy-side capital markets, and our Vice President of Corporate Development Scott Urquhart came from the brokerage business. We both experienced first-hand countless, massive data sets with volumes of insights waiting to be unlocked. At the same time, MiFID II regulations in Europe required the separation of trading fees from research costs to better protect investors. Research has always been a cost center, and these regulations drove research analysts away from the small- and micro-cap issuers. This presents a problem in Europe; the discount broker business is new in that region, but regulators require them to provide investors with research to make informed decisions. AnalytixInsight saw the opportunity to leverage our AI/ML expertise to use big data to fill the research void for European brokerages and others worldwide. We also clearly noticed that in the world of FinTech and wealth management there was a clear trend towards a low fee tech platform and our offerings fit in perfectly as a cost differentiator.
Q: Research seems to be a shrinking industry, in general.
A: That’s true across the globe. And in Europe, MiFID II has created difficulty for brokers to deliver the equity research that is essential to their operations – especially for small- and mid-cap issuers. Furthermore, like North American investors, Europeans are demanding more for less from their brokers – more information, lower costs, more self serve, lower barriers to decision making. Operating a discount broker service in Europe is extremely difficult unless you adopt technology, particularly AI/ML that can analyse big data to extract and present valuable investor content.
Q: You’ve addressed these industry dynamics with CapitalCube, your flagship product. Tell us about it.
A: CapitalCube provides machine-created financial content on most all global stocks, including underserviced small and mid-cap stocks. We transform raw financial data into simple narrative reports that are valuable for both novice and experienced investors. We compare a company to its industry peers to measure its strengths and weaknesses, which is an investment approach that I used successfully as a portfolio manager. If you can find the strongest company within a basket of companies, then that can create the formula for a winning trade. We also provide analysis on North American ETFs and we have developed a robo-advisor that we are preparing to commercialize.
Q: As investors know, it doesn’t matter how well an AI/ML solution works; if bad data is used, then bad results are to be expected. You told us about the big data sources for Euclides; where does CapitalCube source its data?
A: CapitalCube has an AI-driven research distribution agreement with Refinitiv. For those investors not familiar with Refinitiv, Refinitiv is a global provider of financial market data and infrastructure that is jointly owned by the private equity funds managed by Blackstone Group Inc. (55%) and Thomson Reuters (45%). Refinitiv is the former Financial & Risk business of Thomson Reuters, and we are proud to be their content partner. Refinitiv is actively “investing in content coverage, AI and analytics”, which is where our agreement with them comes into the picture. CapitalCube transforms raw financial data into simple narrative reports on 50,000 global stocks. We have also developed a robo-advisor offering.
Q: How did your relationship with Refinitiv begin?
A: Our relationship started with awareness by Refinitiv of the computational capabilities of our platform and our ability to take raw data and turn it into meaningful and actionable insights. We are now distributing our reports on their trading terminals that are used by their 40,000 institutions worldwide. Currently we are publishing reports on approximately 3,000 companies and growing. When you think about that number, it would require many analysts to achieve the same goal. We automate this process using machine-created content, and we have the scale capacity to do it for 50,000 publicly traded companies worldwide.
Q: Who are some customers, and how does CapitalCube get paid?
A: CapitalCube’s customers include institutions such as Refinitiv and The Wall Street Journal. CapitalCube is well beyond a concept or idea. It’s a functioning platform that derives revenues from subscription fees, licensing fees, and development work.
Q: Tell us about MarketWall, AnalytixInsight’s third solution.
A: MarketWall is our stock trading and financial apps subsidiary that we established in Milan, Italy, and we own 49% of the company. MarketWall receives over three million monthly views across numerous digital channels from its financial portal MarketWall.com, and it also has a partnership with Samsung in Europe where its apps are pre-loaded on certain Samsung devices. MarketWall is preparing an online financial brokerage, which will provide AI driven smart-device apps and financial platforms focused on financial education content, stock-trading, news, and research.
Q: What is MarketWall’s relationship with Intesa Sanpaolo?
A: In 2015, we signed Intesa Sanpaolo [MILAN:ISP] to a multi-year licensing agreement in exchange for a 33% stake in MarketWall. MarketWall successfully developed and rolled out the mobile stock trading app Investo as part of the bank’s mobile banking app constellation which is used by six million mobile customers. MarketWall has now also made an application to become a European online discount financial broker through its new subsidiary branded ‘InvestoPro’, which recently appointed a seven-member board of directors, including three representatives by Intesa Sanpaolo. As I said earlier, the discount broker business is a fairly new concept in Europe, and InvestoPro will become to Intesa Sanpaolo what iTrade is to Scotiabank or WellsTrade is to Wells Fargo.
Q: Why did you give a 33% equity stake to Intesa Sanpaolo?
A: Intesa Sanpaolo is a Tier 1 European bank with 11.8 million customers and about 3,700 branches throughout Italy, commanding at least 12% market share where it operates. We wanted them as a strategic partner, and their adoption of our solutions validates our capabilities and opens the door for many conversations with other leading global financial institutions.
Q: How did Intesa Sanpaolo pay for their equity in MarketWall?
A: We signed them to a multi-year licensing agreement that generates about $10 million in revenues over a 5-year period for MarketWall. This gave MarketWall the foundation of a revenue stream while the company was growing, and it has now become profitable. MarketWall is now generating revenues from additional sources and we expect that growth to continue.
Q: Why doesn’t AnalytixInsight consolidate MarketWall’s business into the parent’s financial statements?
A: When we established the joint venture with Intesa Sanpaolo, we knew MarketWall could grow larger than the parent company (AnalytixInsight) and we would therefore have to deconsolidate this asset at some point during its growth. We decided to do that early in its life cycle. We now own 49%, which means we no longer consolidate MarketWall’s revenues. From a financial perspective and our accounting treatment, this is now a hidden asset on our balance sheet. We record it at our book value of around $2 million, but we think its true value is an order of magnitude higher.
Q: How is Morningstar involved with MarketWall?
A: MarketWall has built a trading and research platform ‘GlobalMarket’ in partnership with Morningstar (Europe) that allows professional users to read Morningstar research and trade stocks in one common enterprise digital platform. This product is marketed and sold by Morningstar and has already been installed by a leading bank in Western Europe for their approximately 4,000 professional users. It’s another example of how MarketWall is developing cutting edge FinTech solutions for leading financial institutions.
Q: Of AnalytixInsight’s three solutions, can you talk about where you think investors will first see catalysts?
A: As I mentioned earlier, we expect to have positive news pertaining to our Euclides offering relatively soon as demand for cloud-based Workforce Management and Field Service Platforms continues to grow. There will be a growth driver in this offering from AnalytixInsight and this is an exciting opportunity for us to leverage our capabilities. We expect these catalysts to directly and meaningfully grow AnalytixInsight’s reported revenue. In addition, as MarketWall launches its European online digital brokerage, we will be able to better demonstrate to our shareholders the proper valuation of this important initiative. MarketWall is currently a private company and we are considering spinout alternatives such as an IPO, which would demonstrate an appropriate valuation of our 49% holding of this asset. These represent important catalysts for creating value for our shareholders.
Q: What’s next for expanding your AI solutions?
A: First, we are going to put greater focus on our WFM opportunities. There are so many big data sets across so many industries that would benefit from our expertise and solutions. The healthcare and sports markets also look very promising, and we may choose to expand into those segments either organically or via M&A to gain a jumpstart into those markets.
Q: Thanks Prakash, could you help us understand your balance sheet and capital structure, and how they help set you up to grow shareholder value? We’d also appreciate your perspective on your oversubscribed C$1.68 million financing that you closed last week.
A: Thank you. With this financing, we have about $2 million of cash on our balance sheet, which based on our historical cash burn, and before taking any Euclides growth into account, gives us 18 months of runway. We have no long term debt, and approximately 80 million shares outstanding. We expect new WFM revenues and potential catalysts in our financial services segments well before then and are well positioned from a capital perspective to execute on the business and growth objectives.
Q: Thank you Prakash. Any closing comments?
A: I’d like to highlight the trend shifts that are occurring in the capital markets industry – namely, the march toward low trading commissions and the growing use of AI/ML for data analysis. We are very well positioned in these trends, which is driving brokers and banks to look at our discount brokerage offerings and our AI/ML capabilities for stock and ETF content analysis. Workforce Optimization is also our next large market to diversify our revenues, and we have a strong presence there already. And finally, I’d like investors to know that our management team’s interests are aligned with investor interests as we are committed shareholders in the Company.
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