Mid-Cap Marvel (Part 2): ATOSS Software
Hi there,
Welcome to Part 2 of our deep dive into this hidden Mid-Cap gem. In Part 1 (Mid-Cap Marvel: High Margins and Exceptional ROIC), we explored how the company generates revenue, breaking down its journey from startup to industry leader by dissecting its operational segments.
In Part 2, we’ll evaluate the management team, which holds a solid 21.6% stake, indicating strong alignment with shareholders. We’ll also dive into the financials, which have shown impressive double-digit growth, analyze this fragmented industry, and assess the company’s competitive moat. Finally, we’ll share our valuation estimate and let you know if we’re buying now or holding off for a better price.
Last week, we kept the company’s name under wraps. Today, we’re excited to reveal it: ATOSS Software, a niche provider of workforce management solutions specializing in time and attendance, workforce scheduling, and resource planning. If you’re a free subscriber, you’ll get a preview of the ‘Management’ section. To go deeper into the financials and support our research, join our community for just $0.41 per day—two analysts doing the work for you at a fraction of the cost.
Let’s dive in!
1. Management
a. Culture
To better assess ATOSS’s company culture, we initially used Glassdoor as a reference. However, the limited number of reviews there didn’t provide sufficient data for a reliable conclusion.
Source: Glassdoor
Shifting to Kununu (a German platform similar to Glassdoor), we found that ATOSS’s cultural ratings are around average (with the IT industry average at 4.0) and backed by a high percentage of employees recommending the company. ATOSS was also named a Top Kununu Company for the third year in a row, an award achieved by only 5% of employers. This, along with ATOSS’s Top Employer designation for the fourth consecutive year from the Top Employer Institute, gives us confidence in its cultural standing.
Source: Kununu
Additionally, ATOSS’s turnover rate has improved, dropping from 13% in 2022 to 12%, aligning with a healthy 90% retention rate.
b. Leadership
The Management Board at ATOSS is led by CEO and Founder Andreas Obereder, along with CFO Christof Leiber, who has been with the company for 25 years, and CTO for Product Management, Pritim Kumar Krishnamoorthy, who joined in 2020 and was appointed to the Board in July 2021. Pritim, a seasoned leader with nearly 20 years of experience at SAP, brought valuable expertise to ATOSS.
The remaining six management team members also bring extensive experience, with many serving over a decade at ATOSS, aside from the recently hired Chief People Officer, Thomas Wohlesser. Together, this seasoned team has been instrumental in driving ATOSS’s growth from a €20 million revenue company in 2006 to over €150 million in 2023.
c. Compensation
As we analyze a European company, note that its pay structure is relatively straightforward, with about 50% dedicated to short-term compensation. In 2023, the CFO’s fixed pay was 56%, while the CTO’s was 44%, whereas the CEO’s was notably higher at 85%. Over recent years, after adjusting for a €2.2 million one-time bonus awarded to the CFO in recognition of 24 years of shareholder value creation, the short-term component was 54% in 2022 and 51% in 2023.
The variable component (25%-50%) is divided as follows: short-term incentives (10-40%) based on revenue and EBIT, adjusted by strategic, non-financial, and ESG targets; multi-year incentives (10-40%) tied to qualitative goals; and restricted stock units (10-40%), with a five-year vesting period settled in cash. Overall, the compensation structure appears average, though the CEO’s pay ratio of 11:1 sits on the higher end relative to Adyen’s 7:1.
Source: Remuneration report 2023
d. Ownership
As outlined in Part 1’s ‘new chapter,’ AOB Invest GmbH, owned by Andreas F.J. Obereder (CEO and Founder), saw its shareholding decrease from around 50% in 2023 to 21.59%, while close family members collectively hold about 1%, per the 2023 annual report. Although insider ownership is down from last year, the stake remains significant, reflecting strong alignment with shareholders. Combined with a four-year commitment from the two largest shareholders, Andreas Obereder and General Atlantic, we believe management’s interests are closely aligned with those of shareholders, showing substantial ‘skin in the game’.