Industry: Information Technology
Listing Date: July 23, 2003
Financial performance summary and key ratios 1,2,3,4
After a series of company restructuring, which included venturing into diversified businesses by transitioning to telecommunications, media and information technology, NOW Corporation (“NOW” or “the Group”) is presently one of the premier companies that collaborates with top corporations in setting-up their business productivity solutions
Roster of growing clients, to name a few, includes:5
• financial and banking institutions
• major power generation company
• Food Companies
• Health and insurance provider
• Real estate and property developers
• Media, Broadcasting and advertising companies
• Government agencies and international organizations
For the last 3 years, NOW’s revenue was driven by the following:6
Its operating segments are further organized and managed separately according to the nature of the services offered as follows:
• IT Manpower and Resources Augmentation – provides deployment of IT professionals to clients
• Software Licenses and Services – provides high value products and services to clients
• Broadband services – provides high-speed broadband service to clients
Below is the breakdown of NOW’s total revenue for the year 20167
The slight decrease of NOW’s total revenue from 2015 to 2016 and the shift of the company’s revenue mix could be attributed to:
• The is augmenting its business service line through closing partnership/securing contracts with:8
✓ GHT and Newsnet, wherein to provide a technology consultancy service for the period of ten (10) years with an annual fee of Php 450,000 each.
✓ GHT, Newsnet and Now Telecom, whereas the Group will provide project management services, design and planning services and installation services covering up to 10 major network hubs for a total contract price of Php 45 million each.
A total of six (6) hubs were completed in 2016 with revenue recognized of Php 15million each for GHT and Newsnet.
✓ Php 7.5million service revenue recognized in 2016 for the technical service related to Rohill
• In 2016, two (2) customers accounted almost 30% of total revenue from infrastructure build-up and technical services. These revenues were reported under “Software licenses and services” segment. No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total revenue in 2015 and 2014.9
NOW’s has the following corporate structure: 10,11,12
• All the subsidiaries were incorporated in the Philippines except for J-Span IT, which was incorporated in Japan.
• To acquire 19% ownership of Now telecom, in April 2006 NOW Co. share-swapped to its 5 controlling shareholders. The transaction made the shareholders of Now telecom the majority shareholders on NOW.
• Softweb incurred losses from the year 2014 to 3rdQ of 2017. As of December 2016, NOW’s share in losses of Softweb had already exceeded its cost of investment (Php 6 million). Thus, no further loss recognition shall be made.
• Majority of NOW’s operations complement, including research and development are outsourced.
✓ The Company’s administrative and management functions, including key management personnel, were previously handled by personnel of Knowledge Professionals Service Cooperative (KPSC).
In 31st of January 2017, KPSC and NOW mutually agreed to terminate the service agreement following the change in the business operations of the Group (Operationalization of i-Professional Network NOW’s 74.7% owned subsidiary)
✓ When NOW’s franchise agreement expired, and its renewal was not yet approved. The company provided its value-added services through its partnership with Newsnet which franchise will expire on 2021
✓ Through its partnership with Softlayer (an IBM Co.), NOW was able to resell IBM products and solutions
The Company’s management team are as follows:
Table of Ownership13
Except on PCD and Velarde Inc., the other top shareholders of NOW are also the controlling stockholders of Now Telecom in which collectively they hold 51.71% of the company. The directors and officers of the company have no security ownership in the capital stock of the company other than the qualifying shares recorded in the names of the directors but beneficially owned by Velarde, GHI and Foodcamp.
Table of directors and executive officers 14,15
Highlights of NOW’s BOD and executive officers professional and business experience are:
– Three (3) of its members has international education or certification
– Four (4) has post graduate degree
– Six (6) are lawyers
– Four (4) had previously hold a government position
– None of the members was involved in any legal or criminal proceedings for the last 5 years
NOW’s directors also hold (held) significant positions in other companies and government offices. Summary of such is in the table below:
Though Lucas C. Carpio Jr. never holds a government position, it worthy to note that:
– he is married to former Court of Appeals (CA) justice Agnes Carpio who retired in December 2016.
– brother of Ombudsman Conchita Carpio Morales
– cousin of Supreme Court Senior Associate Justice Antonio Carpio
– father of Sara Duterte’s husband and a lawyer itself
For the past three (3) years, NOW had not declared any dividends for it had not defined its dividend policy at the moment.
• In November 2016 Special Stockholder’s Meeting, the BOD approved the listing of 60 million Redeemable, Convertible, Non-Participating, and Non-Voting Preferred Shares with or without Detachable Warrants with a par value of One Peso (Php1.00) per share.17
Details of the offering was follows:18
✓ Primary offer of up to Php500 million consisting of 5million shares at Php100/share, with an oversubscription option up to Php500 million for an aggregate issue size of up to Php1 billion.
✓ The offer shares features include redeemable, convertible, cumulative, non-participating, non-voting peso denominated preferred shares with detachable subscription warrants.
✓ The holders of the offer shares may convert all the holder’s outstanding shareholdings to common shares of the company at a conversion price of Php20 between 3rd and 4th anniversaries.
✓ Dividend policy for the preferred stock offering is set at 6.9% to 7.6%
✓ The maximum of 20 million shares with full exercise of oversubscription underlying the detachable warrants are currently not listed in PSE. The company does not guarantee that the detachable warrants will be listed in the PSE.
✓ The company estimates that net proceeds of the offer after deducting applicable underwriting fees, commissions and expenses will be approximately Php470 million without the oversubscription and Php955 million with oversubscription offer.
✓ NOW intends to use 76% (Php380 million) and 24% (Php120 million) of the offer proceeds to Expansion of Fiber-in-the-Air broadband network and support to its day-to-day operations consecutively.
✓ Unless warrants will be exercise, there is no dilutive effect on the common shares
• On September 2017, NOW Corp. received a Notice to proceed from the Supreme Court of the Philippines for the installation of Judiciary Email System. The contract price of the said project is Php57,528,888 which cover the installation of a private cloud-based, on-premise email and collaboration system that will set up an initial 7,000 email accounts for the judiciary.19
• The Company plans to spend around Php30 million to Php40 million in the next two (2) years for capital expenditures in connection with the launch of its new products and services.19
• Now Telecom legislative franchise extended until 2043 (Republic Act No. 10972)
✓ Inclusive of the 25-year franchise extension approval, section 15 of the said document states that the company shall offer at least 30% of its common shares to the public within 5 years from the renewal its franchise. Currently, NOW has 19.35% free float level20
1. NOW SEC Form 17-Q for the 1st quarter pages 3-12
2. NOW SEC Form 17-Q for the 2nd quarter pages 3-12
3. NOW SEC Form 17-Q for the 3rd quarter pages 3-12
4. NOW 2016 annual report pages 47-52
5. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 page 92, https://goo.gl/nAh4fd
6. NOW 2016 annual report pages 48
7. NOW SEC Form 17-Q for the 3rd quarter page 50
8. NOW SEC Form 17-Q for the 3rd quarter page 35
9. NOW SEC Form 17-Q for the 3rd quarter page 51
10. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 page 65 and 94
11. NOW SEC Form 17-Q for the 3rd quarter pages 15, 31 and 35
12. NOW 2016 annual report pages 8
13. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 page 125
14. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 page 119
15. NOW annual governance report page 6-7
16. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 page 56
17. NOW annual governance report page 7
18. NOW Corp. Follow-on Offering (FOO) prospectus dated March 2, 2018 pages 22-32 and 58-60
19. NOW SEC Form 17-Q for the 3rd quarter pages 52 and 53
20. Republic Act No. 10972 page 7, https://goo.gl/gc7gHn