Softgate acquisition makes TIO Networks a payments leader, says Paradigm

The latest acquisition by TIO Networks (TIO Networks Stock Quote, Chart, News: TSXV:TNC) transforms it into a payments leader, says Paradigm Capital analyst Kevin Krishnaratne.

On Monday, TIO announced it had closed the acquisition of New Jersey-based consumer retail bill payment solutions provider Softgate Systems for approximately (U.S.) $31-million.

In a press release announcing the acquisition last July, TIO boss Hamed Shahbazi talked about the symmetry between the two companies.

“We’re very excited to welcome Softgate as well as its valued management, employees, partners and clients to the Tio family,” he said. “Tio and Softgate have been commercial partners for more than eight years, and we have been very impressed with how the company has evolved and built a well-diversified national network of walk-in locations. This is a significant step for Tio and will be a launching point to bring our services to a much larger segment of the United States. Tio and Softgate was always a natural combination based on our cultural alignment and our years of commercial collaboration.”

Krishnaratne notes that the combined entities of TIO and Softgate have trailing twelve-month revenue of more than $105-million and has processed 80-million transactions worth more than (U.S) $9-billion. He says with money transmitter licenses in all fifty states, the company is now a leading provider of payment processing and receivables management to utility, wireless, and cable bill issuers across North America.

“TIO is a uniquely positioned FinTech company with a deep understanding of the financially underserved market, which is large, growing, and ripe for consolidation,” says the analyst. “Management has done a superb job scaling the company through accretive M&A and driving cost efficiencies to create a leader in the U.S. walk-up bill payments space. We believe that TIO is on the path to continued growth, not only by expanding its payment processing business, but also through the addition of new services for the underbanked, unbanked, and unhappily banked consumer, both in North America and internationally.”

In a research update to clients yesterday, Krishnaratne maintained his “Buy” rating and one-year price target of $2.50 on TIO Networks, implying a return of 32 per cent at the time of publication.

Disclosure: Cantech Letter Editor Nick Waddell owns shares of TIO Networks.

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