ComTech Analyst Briefing Note Eka Overview Though a relatively new entrant into Commodity Trading and Risk Management (CTRM) markets, Eka has found considerable success in selling products to a global base of users across multiple categories, including agriculturals, softs, metals, consumer products and most recently, energy. Founded in 2004, its’ initial successes were primarily in the Asia-Pacific markets; however, with success in servicing a growing roster of global-scale clients, its’ market reach now extends to include Europe, Africa, and North America. In 2008, Eka established its’ Americas headquarters in Norwalk CT and has continued to add executive, product management, sales and delivery staff in that location. The company maintains their primary software development center in Bangalore and has development centers in Canada, the US and Australia. Prior to 2013, revenue growth had been organic with the company successfully acquiring a number of blue chip customers including Cargill, Louis Dreyfus, Noble, Tata and Graincorp. In 2013, the company undertook an aggressive strategy to develop a comprehensive solution for the Commodity Management (CM) markets, supplying software products to address the needs of the world’s largest commodity merchants, processors and traders. In line with this strategy, Eka acquired EnCompass Technologies of Calgary in early 2013 to bolster their energy commodity capabilities; and later in the year acquired MatrixGroup, an Australian-based provider of mining and bulk commodity handling software. In order to fund additional acquisition activity and support rapid development of new functional capabilities in support of Eka’s “Smart Commodity Management” initiative, the company accepted a strategic investment from Silver Lake Kraftwerk in October 2013. Terms of the investment were not disclosed however, it is believed that the total investment was between $30-$40 million, providing the company with a substantial war chest with which to pursue additional acquisitions.
Recent Acquisitions EnCompass Technologies, acquired in April 2013, provides the company with strengthened capabilities in gas, power, and crude, and energy risk management. The company’s North American based clients include EDF and Twin Eagle, giving Eka a new and significant presence in North American energy markets. Eka has undertaken an aggressive plan to integrate the EnCompass products into the underlying Eka technical architecture. The EnCompass acquisition provides Eka a solid model for servicing North American opportunities in power generation and natural gas production, trading and marketing. The product’s crude capabilities are limited, though additional development is currently underway in cooperation with clients and should show significantly enhanced functionality during the first half of 2014. As the EnCompass products were developed for the US and Canada markets, their fitness for serving European gas and power opportunities will be limited without additional development efforts.
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January 2014
At a Glance Company Background Founded: CEO: President and COO: Offices:
Employees: Website:
2004 Manav Garg Rick Nelson Norwalk CT, US Bangalore India Richmond UK Calgary CAN Adelaide AUS Singapore 400 (Est.) Ekaplus.com
Products Eka.Agriculture Eka.Metals Eka.Energy Eka.Analytics Eka.Risk Eka.Commodity Planning & Procurement Eka.Bulk Handling Eka.Site Automation Eka.Anti Collision Eka.3D Stockpile Manager Eka.Commodity Site Manager
Market Profile (ComTech Est) Customers by Geography North America South America Europe Africa AsiaPac including Aust.
20% -% 15% 10% 55%
Customers by Market Segment3 Ag Producers Ag Processors Ag Traders Energy Producers Energy Traders Metal Producers
20% 25% 20% 8% 7% 20%
Financial Results Eka is a privately held company and does not disclose financials though the company has provided the following statement “Eka’s 2013 organic revenue growth of 33% and EBITDA growth of 96%” 1
MatrixGroup is an Australia-based provider of software and consulting services for operators of bulk product terminals and related facilities. The company’s products ensure safe and efficient operation of complex facilities and the machines involved in stacking and reclaiming of bulk materials including ores, grains and coal. Its’ clients are primarily located in Australia and the AsiaPacific region. Matrix has proven to be a leader in its’ market – in fact it appears to occupy a unique position as the only packaged software solution currently available for servicing the needs of terminal equipment operators in the areas of machine anti-collision and operational optimization, as these systems are otherwise approached as custom developed solutions by other vendors/consultants. There are several integration points between the Matrix and current Eka software products, and these may provide some leverage in selling new licenses to clients that may not currently utilize both product sets. However, ComTech believes the greater value in the combination of Matrix and Eka software products lays in providing Eka with an advantage in marketing and in deploying a larger-scale CM solution for the bulk products/ags/mining market segments.
Financial Results Eka is privately held and does not publically disclose financial information. However, management has indicated that the company has been profitable for most of its existence and has grown, on average, approximately 35% per year over the last 5 years. Eka has said that in the most recently completed financial reporting year (ending March 31, 2013), the company has seen 33% annual growth in revenues and 96% growth in EBITDA. Based upon the company’s forecast for FY 2014, revenues are expected to grow 154% and EBITDA to increase 147%, including the impact of acquisitions. Organically, the company expects 2014 revenue growth to be 35% and EBITDA to increase 45%.
Product Set and Technology Base Eka has taken full advantage of a modern technology stack and architecture allowing it to offer its solutions in a traditional on-premise model as well as via the cloud as hosted or true SaaS. Eka is one of a minority of CTRM vendors that offers the possibility of a multi-tenanted SaaS environment with data partitioning for each customer, though we understand its current cloud clients are all single-tenanted hosted deployments. The technology also allows for a flexible and full-featured user interface that makes use of analytics, graphics and drill-down functions and features to enhance usability; Eka dashboards are relatively easily built and deployed by educated users of the software. Given Eka’s modular design, it is able to construct pre-configured solutions for specific purposes or market niches, offering the ability to add additional modules as the customer requires them. Eka’s products include: Eka.Agriculture – An end-to-end Agri-Commodity solution to facilitate trade, operations and risk management from the farm to the marketplace. Eka.Metals – A solution for managing physical trading, position, P&L, derivatives, risk, logistics and finance across base metals, Ferro alloys, steel and scrap. Eka.Energy - A multi-commodity energy trading and risk management (ETRM) system covering trade capture through confirmation, operations, settlement and risk management. Eka.Analytics – Predictive and user-controlled analytic tools to view, analyze and simulate KPIs for Commodity Markets. Eka.Risk - For commodity companies to define, measure and control organization wide commodity risk. Eka.Commodity Planning & Procurement - For manufacturers to capture, analyze and manage demand, budgets, forecasts, coverage, procurement & hedging. Eka.Site Automation - A dynamic bulk site management and control tool, incorporating high level process planning, scheduling, task execution and product tracking. Eka.Anti Collision - 3D modeling of mobile machines and structures providing precise position to prevent collisions. Eka.3D Stockpile Manager – 3D model of stockyard, including quality, for better stacking and reclaiming decisions. Eka.Commodity Site Manager – Physical operations management of bulk commodity handling sites including stock, cargo receipt, shipment, and billing. The Eka.Agriculture and Eka.Metals solutions are rather comprehensive and competitive products. We do view Eka.Energy as something of a work in progress because of the acquisition of EnCompass and the work that still needs to be done to integrate and expand the product in crude. Eka.Analytics and Eka.Risk are also both relatively new solutions. Eka.Risk is an enterprise risk solution that purports to be agnostic to the underlying CTRM solutions and would compete more with products from the specialty risk product vendors. Eka.Analytics represents Eka’s move toward offering a more robust analytic and decision support environment across the board but particularly in commodity management. The other named products are the MatrixGroup product set that is in the process of being re-branded.
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Company Strategy Commodity management (CM) is a term coined in 2008 to describe the use of “traditional” CTRM software products as the core of a broader solution set that addresses the commodity procurement, transportation and logistics, processing, marketing and hedging requirements of a wide variety of commercial enterprises. These companies, including food processors, CPG’s, metal processors and fabricators, energy merchants and mining operations, have increasingly recognized the inherent risks associated with their commodity procurement and transformation processes, identifying not only market and price risks, but also the risks associated with operationally and financially exposed multi-threaded supply chains. Utilizing CM solutions, these companies can gain an enterprise wide view of operational constraints and options for maximizing value along the supply/production chain; and actively manage and mitigate financial risks associated with foreign currencies, interest rates and credit. In order to provide the requisite functionality to address the needs of CM, these solutions require not only robust and rich trading and risk management functionality, but they must also provide: the ability to manage complex, multi-model transportation networks capture and management of the complex quality characteristics of multiple commodities such as ags, softs, metals, concentrates, natural gas, power, oil and oil products and any number of other commodities utilized as feed stocks in production processes capture and analysis of enterprise-scale risk exposures, and a complex array of key performance indicators necessary to effectively manage and optimize a global scale operation. Recognizing the growing acceptance of CM solutions, particularly in the agricultural and food markets, Eka has developed a fully capable CM solution that can address the breadth of requirements in the markets they have identified. Additionally, Eka management believes, based on their conversations with industry participants, that the markets’ expectations of CM have moved past the initial capture and management of commodity exposures along the entirety of the supply chain (from source to market). This recently formed market expectation and requirement is that CM solutions must move past transaction management into providing a decision support environment, founded in predictive and user-controlled analytics and enriched with improved and real-time visualizations of key performance indicators and relevant market data and information. The provision of a technology environment that enables this information aggregation also facilitates the deployment of optimization tools that can aggregate vast amounts of information and data, and provide a near real-time view of operational or Source: Eka financial options that reduce risk and improve operational efficiencies. ComTech has reviewed many of Eka’s products and believes it is progressing well along the path to achieving this vision of the next generation of CM, or CM 2.0 or Smart CM, though Eka will need to continue to develop additional capabilities and/or acquire existing components. The Eka.Analytics solution is the current basis for this effort.
Outlook and Analysis While the global markets for CTRM products have been soft for about the last 18 months, and many vendors in the space have seen year-over-year declines in revenue, Eka has continued to grow and at a rate that places them in the upper echelons of their peer group in the vendor market. This above market performance is due, in part, to their origins and market gravity in the agricultural segment of the Asia Pacific region, one of the few bright spots in the current CTRM markets. Leveraging this advantage, the company has embarked upon an aggressive growth strategy, expanding their functional coverage via internal development and measured acquisitions, allowing the company to better compete not only in the traditional single or multi-commodity trading and risk management opportunities that arise in around the globe, but further positioning the company to address the lucrative CM markets. ComTech believes that advanced analytics will be an important component of the next generation of CM. Eka is well positioned to execute on its vision of CM 2.0 or “Smart Commodity Management.” The company is well funded and has an experienced leadership team in place. Given the genesis of the company in the agricultural markets and recent acquisition of EnCompass, Eka would appear to be best positioned to acquire and successfully service new CM 2.0 customers in the agricultural trading, metals and mining, consumer package goods (CPG), food processors and North American energy markets.
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Opportunities Early leading vendors in CM market have not been able to sustain momentum, providing an opening for a new vendor, such as Eka, to displace Eka is well positioned to define and potentially lead the next generation of CM/Smart Commodity Management Growing adoption of CM by leading global scale CPGs, food processors, and agricultural traders Growing adoption of the SaaS and hosted CTRM solutions market
Risks Inability to identify and/or consummate acquisitions to complete roadmap for CM 2.0 Inability to sufficiently integrate developed or acquired components into a full CM architecture Sustained CTRM/CM market weakness limiting market sales of new products
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About ComTech Analyst Briefing Notes Commodity Technology Advisory (ComTech) is the leading analyst organization covering the Energy and Commodity Trading and Risk Management (E/CTRM) technology markets. We provide invaluable insights, backed by primary research and years of experience, into the issues and trends affecting both the users and providers of the applications and services that are crucial for success in markets constantly roiled by globalization, regulation and innovation. ComTech Analyst Briefing Notes are intended only to provide an overview of a technology, vendor or product of interest in the Commodity Trading and Risk Management market space. These Notes are not an endorsement of any product or vendor and should be viewed only as an additional source of information or data relating to the covered topic. Disclosures: At the time of this writing, Eka is a customer of Commodity Technology Advisory and the company’s management cooperated in the preparation of this ComTech Analyst Briefing Note.
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