The Good:

• Back to cash flow positive after the previous negative quarter, with management indicating that continued improvement is expected over H2.
• Expenses remaining reasonably flat.

Not So Good:  

• Freemium users are growing rapidly but paid subscriptions are going backwards. Ansarada is currently struggling to convert additional paid users to their platform. I’m not sure if this is an issue with users finding value in the product or just that there is enough of the platform available for free to meet users needs. The decrease in subscriptions indicates that currently my thesis for the company is broken. I was expecting continued moderate growth and if they are struggling at this point, I am not certain that growth can be maintained over a longer period.
• The business is clearly impacted by wider market weakness and M&A cyclicality, with revenue growth impacted over the last several quarters.



• The addition of new metrics to improve reported outcomes. Reporting on ARR is a useful measure, and it’s good to see that it has improved 45% YoY, but previous paid subscribers and ARPA was the chosen performance metric.
• Ongoing issues with reported metrics. Once again Ansarada is changing figures retrospectively as they have incorrectly classified subscriber types. I flagged this as a potential issue awhile back.

What To Watch:

• I will continue to watch the company, and a key indicator that there may be an improvement in conditions is when there is a shift from freemium to paid subscriptions along with continued growth of the non deal customers

Announcement 28-07-22

The Good:

• Reported active customers continued to grow to 5251 with 2851 subscribers. Increased growth of overall users to the platform even if they are inactive or freemium still increases exposure and provides potential conversions to active subscribers.
• Slight revenue increase of 6.6% over the previous quarter, however still down on Q2 revenues. Just inline with my forecasts, however, these may need to be adjusted down to allow an increased safety factor in my assumptions.

• Approx $1.5m in free cash flow.
• GRC makes up 15% of revenue vs 11% prior quarter

Not So Good:  

• Subscriber growth is still much slower than active customer growth.
• ARPA flat for the quarter.
• “Subdued M&A market affecting volume”. The current overall macro conditions in the markets are unlikely to change significantly in the near term. The significant drop off in tech multiples may pave the way for increased activity, however with capital markets changing M&A activity is likely to remain “subdued”

What To Watch:

• Can AND maintain growth outside of record M&A tailwinds? Continued lumpy quarterly revenues will likely shine a light on a potential exposure to market cycles and be another warning sign going forward. The growth in GRC revenue mix will be another indicator.
• Still sitting on $22.4m in cash. As the business continues to improve its FCF, investing activities will continue to be offset by operating cash leaving the pool of capital for other uses.
• Investor slides say increased scale in offshore markets. The full year results will need to be looked at in terms of markets split to identify how much international growth has contributed.

The Good:

• Reported active customers are up to 4535 from 3559 in Q2 which was a key point to watch from the last quarter. Which is a QoQ growth of 27%. But. If you look at the footnotes at the end of the report this number includes the freemium users which previously haven’t been reported. Subtracting these out, the active customers is at 3778, which is closer to 6% QoQ growth, which is still a reasonable number and an improvement on the previous quarter.
• Free Cash Flow positive for the quarter (marginally) and strong cash position remaining at $21m
• ARPA up to $1661 from $1408 (up ~18% QoQ). As this metric keeps improving its an indicator that there is uptake in the wider range of products / improved pricing.

Not So Good:  

• Mixing reporting metrics and cherry picking of data to provide improved numbers is a mark against management for me and a definite warning sign going forward.
• Subscriber number growth is much slower than active customer growth sitting around 2% QoQ.
• Revenue down 9% QoQ. Attributed to seasonality. Not a major warning sign taken in an isolated instance but needs to be marked to check back against management comments.

What To Watch:

• The reduced quarterly revenue was attributed to seasonality in payments, so this will need to improve in Q4 or that will be another warning sign that the thesis is broken.
• Continued customer growth and conversions. Monitor freemium as % of total user growth (Currently sitting at ~70%)
• Revenue on track for close to $50m for FY22
• Announcements / Business commentary around addition of new product features - Modularisation of products, AI Search, additional GRC modules.

An interesting announcement from Ansarada today partnering with Microsoft to be included as part of their StartUps platform / offering.

Announcement

https://startups.microsoft.com/

As stated in the announcement, I don't think they will generate much revenue initially directly from the companies who are using the StartUps bundle, but being selected and endorsed by a company such as Microsoft is significant.

It may also add extra international exposure for Ansarada who generate a majority of their revenue from Australia as can be seen in the H1 results. Gaining international market share is key for Ansarada's growth going forward. This along with an increase in customer growth which has slowed over the previous quarters will be important metrics to continue to monitor.

One thing to keep in mind going forward is if the company start reporting customer growth from this channel in the total numbers even though this is a free offering.

From H1 Report.

From Q2 Report

Update released 27th Jan.

The Good:

• Revenue growth of 30% QoQ up to $13.2m with only marginal operation cost increases has led to a solid boost to positive cash flow for AND. This was offset this quarter with the TriLineGRC purchase
• Increased Average Revenue Per Account by 24% QoQ up to $1408. This is unlikely to have a similar increase next quarter but progressive growth will signal uptake of a wider range of AND product suite.
• AND finished the quarter with a strong cash balance of $21m. Now AND is consistently operationally cash flow positive, this can be used for ongoing product R&D or potential M&A.

The Bad:

• No growth in customer numbers (0%) or subscribers (1%) over the prior quarter and customer growth has been slowing for the last several quarters.

What To Watch:

• Continue to monitor customer / subscriber numbers for signs of growth stagnation. In the update there was a mention of providing freemium options of software to allow more customer trials, in turn leading to more conversions along with increased digital advertising.
• Continued development of software offering and modularisation for “land and expand strategy”. If AND isn’t talking about the evolution of the product and  needs to start relying acquisitions to drive growth, investment needs to be re-evaluated

Impacts To Price Forecast:

Adjustment required to the following inputs

• Increase FY forecast revenue
• Reduce P/S multiple based on overall market
• Use a DCF based on free cash flow assumptions / adjustments

A bit late to this one but AND released their quarterly update on 21^st of October which was generally positive but not overly exciting.

There was continued growth in customers and Average Revenue Per Account was up ~6% to $1,118 for the quarter. Revenue also grew 13% to $10.2m, which is a record quarter and puts AND on track for my previous FY22 forecast rev of $39.7m. (Refer to valuation straw)

Looking forward the TriLine acquisition will be completed this quarter will contribute to further revenue growth in Q2 (~$400k). I think an expansion of ARPA will be a reasonable proxy to indicate uptake of existing customers using the increased offering from the TriLine integration

At the end of the quarter AND had $23m in the bank and was cashflow positive, which means there are likely other acquisitions in the not-too-distant future to continue to expand on the product suite and assist in growth. (AI analysis was mentioned as a targeted feature for development in FY22)

Although they was positive cashflow, an item to watch next quarter is whether there is an ongoing trend of expense growth outpacing cash receipts growth, as cashflow from operations was down both QoQ and YoY.

All in all some ok growth and Ansarada is demonstrating that they are continuing to develop their offering, however coming off several years of flat revenues it will be good to be able to observe a continual trend in growth post IPO merger.

Disclosure: Held

I have started a bit more of a detailed look into Ansarada’s competition and rankings amongst its peers as a way of monitoring the company going forward as it continues to grow and try to win more market share. First thing to note is that it’s a crowded sandpit they are playing in. A search on capterra for Virtual Data Room returns 94 results.

Some positive news is that in a search across several different ratings sites Ansarada generally came back within the top ten and has a lot of positive customer reviews. In terms of ratings there is generally little separation among the top players, except for the fact that iDeals is consistently nominated as the number 1 product. 

As there is little separation, several factors that will be key in Ansarada continuing growth and need to be monitored:

• Advertising Spend and online prominence

• Ongoing addition of features and refinement of product.

• Subscription Cost

Another way to track how Ansarada is performing in the market is to track ongoing changes in the metrics measured by software review site G2:

G2 Satisfaction Score - 55

Ease of Use - 90%

Meets Requirements - 93%

Ease of Doing Business - 93%

Ease of Setup - 91%

Quality of Support - 90%

Ease of Admin - 89%

Next step will be to explore why iDeals is top of all the charts and how Ansarada compares directly.

Disclosure: Held

Ansarada (AND) continued the FY21 trend of increased customer acquisitions in Q4. Active customers have grown to 3453 which represents 28% growth when compared to Q4FY20 and also show strong signs of growth when measured across other metrics. The company has been very focused on this area with a significant increase in the spend on advertising and marketing with ~42% of FY21 spend in Q4, however this strategy appears to be paying off, with a reported CaC payback of 4.5 months.

Reported financials were also positive. Even though FY21 revenue remained flat compared to FY20 at $33.4 million, EBITDA has had a growth of 78% to $5.9 million. AND has also maintained the Average Revenue Per Account (ARPA) at $1043 and gross margins of 96% which put the company in a good position starting FY22. This is demonstrated by the reported deferred revenue of $13.2 million for FY22 and using the current active customer numbers and ARPA indicates a current revenue of ~$36 million.

Looking forward AND has indicated that they will continue to develop the platform offering which will potentially be able to drive an increase in ARPA. Cash flow was positive $2.5 million for the quarter and the company has a cash balance of $22.6 million and no debt which also positions the company well for continued growth via strategic acquisitions.

 Ansarada is continuing to demonstrate ongoing customer growth across the platform which was a key part of my thesis for the company. Given there are several other large players in the M&A Software space, other key items to watch going forward will be advertising spend, growth of ARPA in line with addition of new platform features and growth in international markets.

Disclosure: Held