2717 Partners Sends Letter to Logility Board Calling for a Review of Strategic Alternatives
2717 Partners, a significant shareholder of Logility Supply Chain Solutions (NASDAQ: LGTY), has sent a letter to the company's Board calling for exploration of strategic alternatives, including a potential sale. The letter highlights Logility's persistent underperformance compared to peers, with negative returns of -0.8%, -55.4%, and -81.5% over 1-, 2-, and 3-year horizons.
The investor criticizes Logility's operational efficiency, noting that less than 10% of the sales force hit quota in FY2024. Despite positive aspects like ~36% CAGR subscription revenue growth from FY2018 to FY2024 and being ranked as a Leader in Gartner's Magic Quadrant, 2717 Partners believes the company would perform better as a private entity, suggesting potential Adjusted EBITDA margins of 30-40% under private ownership.
2717 Partners, un importante azionista di Logility Supply Chain Solutions (NASDAQ: LGTY), ha inviato una lettera al Consiglio dell'azienda per chiedere di esplorare alternative strategiche, inclusa una potenziale vendita. La lettera evidenzia la persistente sottoperformance di Logility rispetto ai concorrenti, con ritorni negativi del -0,8%, -55,4% e -81,5% su orizzonti di 1, 2 e 3 anni.
L'investitore critica l'efficienza operativa di Logility, notando che meno del 10% della forza vendita ha raggiunto gli obiettivi nel FY2024. Nonostante aspetti positivi come una crescita della fatturazione degli abbonamenti del ~36% CAGR dal FY2018 al FY2024 e il riconoscimento come Leader nel Magic Quadrant di Gartner, 2717 Partners crede che l'azienda potrebbe avere prestazioni migliori come entità privata, suggerendo potenziali margini di EBITDA rettificato del 30-40% sotto la proprietà privata.
2717 Partners, un importante accionista de Logility Supply Chain Solutions (NASDAQ: LGTY), ha enviado una carta a la Junta de la empresa solicitando la exploración de alternativas estratégicas, incluyendo una posible venta. La carta destaca el rendimiento persistentemente inferior de Logility en comparación con sus pares, con retornos negativos de -0.8%, -55.4% y -81.5% en horizontes de 1, 2 y 3 años.
El inversor critica la eficiencia operativa de Logility, señalando que menos del 10% de la fuerza de ventas alcanzó su cuota en el FY2024. A pesar de aspectos positivos como un crecimiento del 36% CAGR en ingresos por suscripción desde FY2018 hasta FY2024 y ser clasificados como Líder en el Magic Quadrant de Gartner, 2717 Partners cree que la empresa tendría un mejor desempeño como entidad privada, sugiriendo márgenes de EBITDA ajustado del 30-40% bajo propiedad privada.
2717 Partners는 Logility Supply Chain Solutions (NASDAQ: LGTY)의 주요 주주로서 회사 이사회에 전략적 대안 탐색을 요청하는 편지를 보냈습니다. 여기에는 잠재적 매각이 포함됩니다. 이 편지는 Logility가 동종 업계에 비해 지속적으로 저조한 성과를 보였다고 강조하며, 1년, 2년, 3년 동안 각각 -0.8%, -55.4%, -81.5%의 부정적인 수익률을 기록했습니다.
투자자는 Logility의 운영 효율성을 비판하며 FY2024 동안 영업사원의 10% 미만만이 할당량을 달성했다고 언급했습니다. FY2018부터 FY2024까지 약 36% CAGR의 구독 수익 성장을 포함한 긍정적인 측면에도 불구하고 Gartner의 매직 쿼드런트에서 리더로 평가된 2717 Partners는 회사가 개인 기업으로서 더 나은 성과를 낼 것이라고 믿으며, 개인 소유 하에서 30-40%의 조정된 EBITDA 마진을 제안합니다.
2717 Partners, un actionnaire majeur de Logility Supply Chain Solutions (NASDAQ: LGTY), a adressé une lettre au Conseil d'administration de l'entreprise demandant d'explorer des alternatives stratégiques, y compris une vente potentielle. La lettre met en lumière la sous-performance persistante de Logility par rapport à ses pairs, avec des retours négatifs de -0,8 %, -55,4 % et -81,5 % sur des horizons de 1, 2 et 3 ans.
L'investisseur critique l'efficacité opérationnelle de Logility, notant que moins de 10 % de la force de vente a atteint ses objectifs au cours de l'exercice 2024. Malgré des aspects positifs tels qu'une croissance des revenus d'abonnement d'environ 36 % CAGR de FY2018 à FY2024 et étant classé comme Leader dans le Magic Quadrant de Gartner, 2717 Partners estime que l'entreprise performerait mieux en tant qu'entité privée, suggérant des marges d'EBITDA ajustées de 30 à 40 % sous propriété privée.
2717 Partners, ein bedeutender Aktionär von Logility Supply Chain Solutions (NASDAQ: LGTY), hat einen Brief an den Vorstand des Unternehmens gesendet und zur Erforschung strategischer Alternativen, einschließlich eines möglichen Verkaufs, aufgerufen. Der Brief hebt die anhaltend schwache Leistung von Logility im Vergleich zu den Mitbewerbern hervor, mit negativen Renditen von -0,8 %, -55,4 % und -81,5 % über 1-, 2- und 3-Jahres-Horizonte.
Der Investor kritisiert die operationale Effizienz von Logility und merkt an, dass weniger als 10 % der Vertriebsmitarbeiter im Geschäftsjahr 2024 die Quote erreicht haben. Trotz positiver Aspekte wie einem ~36% CAGR-Wachstum der Abonnementumsätze von FY2018 bis FY2024 und der Einstufung als Leader im Gartner Magic Quadrant glaubt 2717 Partners, dass das Unternehmen als privates Unternehmen besser abschneiden würde und schlägt potenzielle bereinigte EBITDA-Margen von 30-40 % unter privater Eigentümerschaft vor.
- 36% CAGR subscription revenue growth from FY2018 to FY2024
- Leader position in Gartner's Magic Quadrant for supply chain planning solutions
- High customer ratings on Capterra
- Strong recurring revenue model
- Stock underperformance: -0.8%, -55.4%, -81.5% over 1-, 2-, and 3-year periods
- Less than 10% of sales force hit quota in FY2024
- Weak Adjusted EBITDA margins compared to industry standards
- Higher operating expenses across all categories versus peer averages
- Lowest sales and marketing efficiency in supply chain management software sector
Insights
Believes Logility’s Persistent Underperformance Demonstrates that Logility is Underappreciated by the Public Markets
Believes a Take-Private Transaction Would Immediately Unlock Value for Shareholders, Closing the Gap Between Logility’s Current Valuation and its Intrinsic Value
The full text of the letter follows:
December 9, 2024
Logility Supply Chain Solutions, Inc.
470 East Paces Ferry Road, NE
Attn: Board of Directors
Members of the Board,
2717 Partners, LP (“2717”) is an actively engaged shareholder that seeks to leverage our deep private equity and sector expertise to help small-cap technology company management teams and boards apply a private equity value-creation playbook in the public markets. We aim to partner with the companies in which we invest to maximize their value for the benefit of all stakeholders. We are writing to the Board of Directors (the “Board”) of Logility Supply Chain Solutions, Inc. (“Logility” or the “Company”) with the hope of working constructively with you to do just that.
As a significant shareholder of Logility, we have strong conviction in the Company. Indeed, Logility was one of the first investments 2717 executed following our launch. We invested in the Company because we believed Logility had tremendous upside potential that we could help management and the Board unlock. Further, management had made several strategic decisions over the prior two years that we hoped would be a net positive and consistent with a long-term value creation plan, including removing the controlling shareholder structure, pursuing a divestment of the corporate headquarters, divesting The Proven Method, re-branding, expanding and investing in system integrator (”SI”) relationships, and pursuing tuck-in M&A.
Unfortunately, however, these decisions have not instilled confidence in the public markets. Instead, there remains a gap between Logility’s current valuation and its intrinsic value. The Company has continued to underperform relative to its proxy peers1 (-
The market has spoken. As fiduciaries to Logility shareholders – including pension funds, college savings plans, and 401(k)s of hard-working Americans – the Board must immediately form a special committee of independent directors and hire an investment bank to explore strategic alternatives, including a sale of Logility, to maximize the value of shareholders’ investments.
Logility is not suited for the public markets
We believe every company should have the right owners and leaders for the appropriate stage in its lifecycle. It is clear that the public markets are not the proper owners of Logility at this time. After over 50 years of controlling ownership under founder James Edenfield, public shareholders were only recently given true “ownership” of the business in August 2024, when the controlling Class B shares were eliminated.
During the Company’s Q2 fiscal year 2025 earnings, the first as a non-controlled company, management reaffirmed guidance for the two North Star metrics for the business, recurring revenue and Adjusted EBITDA. From our perspective, the only potential negative commentary from the earnings call was the forecasted reduction in professional services revenue due to the shift from in-house migration projects to third-party SIs. Any software investor knows this transition is a net positive and long-term value-creation lever for the business. Despite this, Logility’s shares opened down approximately
Shareholders are frustrated with Logility’s continued unimpressive total revenue growth trend, particularly in light of the Company’s weak Adjusted EBITDA margins and poor capital allocation decisions. Logility spends a higher percentage of revenue across all operating expense categories compared to peer averages, and the Company’s sales and marketing efficiency is the lowest in supply chain management software. Our diligence also indicates that less than
We believe that if the status quo persists and Logility continues to operate in the public markets, the Company will be unable to achieve its long-term goals for all stakeholders.
Logility should find a new home in the private markets
We believe Logility has many value-creation levers and attractive attributes that appeal to private equity. The Company’s recurring revenue model and ongoing customer migration initiatives provide strong visibility into future cloud expansion with a track record of success, as reflected in the ~
Under private ownership, Logility would benefit from a concentrated shareholder base with both sector specific expertise and a track-record of value-creation for companies at this stage in their lifecycle. The Company is at the point where it needs to shift focus from growth to profitability, and a private equity owner would have an aligned incentive structure and improved governance around capital allocation decisions to accomplish this. We believe this outcome would not only be in the best interests of Logility shareholders, but also all Logility stakeholders.
We have talked to many private equity firms and strategic buyers about Logility, and the Company has attracted more interest from our network than any other software asset. We believe that Logility should operate at
As of December 6, 2024, Logility is trading at
The path forward
We believe the Board and management have been given enough time to realize success for the Company and its stakeholders—now, it is time for change. We call on the Board to form a special committee of independent directors and to retain an investment bank to explore strategic alternatives, including a sale of Logility.
We hope that the Board sees our perspective and is open to engaging with us on this topic.
Regards,
2717 Partners, LP
Edward Robson
Partner & Chief Investment Officer
Note: TSR calculated as of 12/6/2024
- Proxy peers include Agilysys, Aspen Technology, Asure Software, Descartes Systems Group, E2open, eGain, Kinaxis, Manhattan Associates, PROS Holdings, and SPS Commerce (Model N has been acquired).
- Comparable companies include Descartes Systems Group, Kinaxis, Manhattan Associates, SPS Commerce, and Tecsys.
About 2717 Partners, LP
2717 Partners, LP is an actively engaged investor that applies a private equity value-creation playbook in the public markets. The firm primarily invests in small-cap technology companies and seeks to work constructively with management teams and boards to unlock value for shareholders.
Disclaimer
This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. This press release does not recommend the purchase or sale of a security. There is no assurance or guarantee with respect to the prices at which any securities of Logility Supply Chain Solutions, Inc. ("Logility" or the "Company") will trade, and such securities may not trade at prices that may be implied herein. In addition, this press release and the discussions and opinions herein are for general information only and are not intended to provide or be investment advice. This press release contains forward-looking statements. Forward-looking statements are statements that are not historical facts and may include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects," "anticipates," "believes," "intends," "estimates," "plans," "will be" and similar expressions. Although 2717 Partners, LP ("2717 Partners") believes that the expectations reflected in forward-looking statements contained herein are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties—many of which are difficult to predict and are generally beyond the control of 2717 Partners or Logility—that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. In addition, the foregoing considerations and any other publicly stated risks and uncertainties should be read in conjunction with the risks and cautionary statements discussed or identified in the Company's public filings with the
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Media Contact
Amanda Shpiner
Gasthalter & Co.
212-257-4170
Investor Contact
Nick Graziano
2717 Partners, LP
917-887-9494
Source: 2717 Partners, LP
FAQ
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