A growth acquisition could be a good catalyst, but ENGH’s particular niche in the tech sector has been less robust than the broader tech sector. We think a takeover/privatization may be possible as we feel management could be just as frustrated as public shareholders. Overall, this name has been fairly disappointing amid a tech boom in recent years, and as a result of its lagging performance and execution, we are dropping coverage on the name.

KXS’s share price has been under pressure recently along with other software names due to negative sentiment toward software-as-a-subscription (SaaS) businesses, which investors believe could potentially be disrupted by Artificial Intelligence (AI). We think the concern shows little merit and, so far, KXS’s results have not been affected by AI. KXS continues to be a great long-term winner in the niche market of supply chain software. Though KXS is not a hyper-growth name like it used to be, the company still manages to consistently achieve double-digit growth on topline and annual recurring revenue. The company is also right-sizing stock-based compensation to a reasonable level. KXS’s business model is highly cash-generative with limited needs for capital expenditure, and the company maintains a solid financial position. KXS has been more aggressive with share buybacks recently to take advantage of the weak share price. We think the risk/reward here is quite attractive for investors with a time horizon of three to five years. We are maintaining our rating at ‘B+’.

A brief update on select companies from the 5i Research coverage list. This report serves as the official rating update on the companies referenced herein. New ratings, if applicable, will be reflected in the Summary report at month-end.