I spoke with a relative of mine, who is a top management executive in the airline industry. Here's what stood out from the discussion:
)- Kale guys are the market leaders in revenue accounting solutions. No-brainer for a top airline. Competitors are not even close. Pricey solutions though. So might go with a startup if we are launching a new airlines, but will probably switch once we get scale, to Kale.
)- Since they are the market leaders, they must have close to 70% market share in the revenue accounting space. Not much room for growth in that space, but can grow with the airline industry as a whole.
)- Months of Nov - Jan has the most traffic and sales.
)- He mentioned Sabre had the best reservation system and would choose that over Kale any day. He was fine with having multiple vendors and does not buy the premise of integration solutions personally. He wants well tested modules. He also mentioned that Sabre and others (Sita) had revenue accounting modules but Kale's is the best.
)- The biggest point of surprise at this juncture for me and him, was why the net profits doubled for the past 2 years, and the likelihood for it to continue. Since the revenue accounting modules have reached market penetration, which new module is all the rage now? If we know this, then I can work backwards and figure out the odds for future growth.Any idea anyone?
My personal guess from reading the Annual reports is -- Finesse MBS. It seems like an add-on to revenue accounting, specifically to manage receivables and payables. Will dig more..
If anyone knows the source of the exponential growth - would be great to understand. It is really clear that the downside from here is limited. There is strong dividend support to the stock, and the possibility of exponential growth is tempting.
Disclosure: Buying as much as I can.