08-Feb-2021: Sequoia Financial Group: Bigtincan Holdings Limited (BTH): ClearSlide acquisition doubles BTH customer base and TAM
Analyst: Wayne Sanderson – Head of Research, wayne.sanderson@sequoia.com.au, +61 400 434 548
- Recommendation: Accumulate (from Buy)
- Risk Rating: High
- 12-mth Target Price (AUD): $1.32 (was $1.38)
- Share Price (AUD): $1.15 ($1.07 on 12-Feb-2021)
- 12-mth Price Range: $0.26 - $1.60
- Forecast 12-mth Capital Growth: 14.8%
- Forecast 12-mth Dividend Yield: 0.0%
- 12-mth Total Shareholder Return: 14.8%
- Market cap ($m): 473.8
- Net debt/(net cash) ($m)(Jun 21e): (54.9) (net cash)
- Enterprise Value ($m): 418.9
- Gearing (Net Debt/ Equity): N/a – Net Cash
- Shares on Issue (m): 412.0
- Options / Perf rights on Issue (m): 10.7
- Sector: Software
- Average Daily Value Traded ($): $2,377,000
- ASX 300 Weight: n/a
Bigtincan Holdings Limited (BTH) was founded in Sydney in 2011 and has become a recognised global leader with its “Bigtincan Hub” sales enablement software. The platform uses machine learning and artificial intelligence (AI) to provide sales collateral, training and coaching to sales and customer service reps in the field to increase their selling effectiveness. It enables reps to securely access all types of content (files, documents, PDFs, PowerPoint presentations, e-mail, video etc.) from a single data source and to automate work processes and documentation across any mobile device or fixed network.
BTH has ~16 offices across the USA, Europe & Middle East, Australia and Asia with its global sales and marketing headquarters in Boston, and corporate administration in Sydney.
It has long-standing strategic alliances with Apple, Salesforce.com, AT&T and a total of 29 partners / resellers.
BTH has >300,000 users across >400 deployments in over 52 countries and 35 languages. Recent new customer wins include DXC Technology, Sephora, Anheuser Busch and Nike.
Two acquisitions and a $35m placement at $1.05/shr
On 23/12/20 BTH announced the acquisition of ClearSlide, a similar but complementary sales enablement software business for US$16.25m cash (A$22.6m). This was BTH’s largest acquisition to date. With > 500 enterprise customers, ClearSlide doubles BTH’s customer base and provides strong opportunities for cross-selling / upselling each firm’s products. It also removes a potential competitor and increases BTH’s TAM (Total addressable market) to US$6.0 billion. Acquisition multiple reasonable at ~3.1x ARR of A$7.2m (or 3.8x including further $5.0m planned investment).
On 15/1/21 BTH announced the acquisition of VoiceVibes for US$2.0m (A$2.6m), an AI-powered sales coaching app which can review the quality of Sales staff’s phone calls across ~20 metrics (vibes) with ~90% accuracy. BTH should be able to cross-sell this effectively to its existing customer base.
Placement and initial losses in acquisitions are dilutive shortterm, but BTH is building a strong leadership position in a large under-penetrated e-commerce growth market.
ARR (Annualised Recurring Revenue) now $48.4m at end December including ClearSlide (v $32.4m) +49% on pcp.
Forecasts and Recommendation
Our revenue forecasts increase by 0.1%, 5.7% and 5.9% for FY21e, FY22e and FY23e, (also including lower US$ forecasts). However we also increase estimated costs resulting in a downgrade to Ebitda of -$1.1m, -$2.6m, and - $3.5m.
Our revised valuation range is $0.78 (DCF) to $1.77 (US SaaS peer group revenue multiples, discounted heavily) with a Composite Valuation of $1.32 (was $1.38) per share. This implies 14.3% upside from the current price.
Recommendation: Accumulate (was Buy) on this exciting emerging global SaaS company. With strong tailwinds post Covid, $65m of net cash, and strong product innovations coming, we think that BTH has never been in better shape.
What has changed?
- On 23 December 2020 BTH announced the acquisition of ClearSlide Inc, a similar, but complementary Sales Engagement software platform company based in San Francisco, for US$16.25 (A$22.6m) in cash. Acquisition revenue multiple stated to be 3.1x US$5.5m estimated sustainable ARR (annual recurring revenue)(AUD equivalent $7.1m ARR). In addition BTH estimates a further A$5.0m of integration costs will be invested in the business, making a total acquisition cost / investment by BTH of A$27.6m (3.8x ARR).
- The acquisition was funded by an A$35.0m institutional placement at $1.05 per share, despite BTH having $67m of cash at end September. 33.333m new shares issued on 6 January 2021 (8.8% increase in shares on issue).
- Revenue guidance was unchanged from the August result at A$41-44m (v A$31.0m in FY20) despite the acquisition of ClearSlide and also Agnitio announced 14 October. If ClearSlide’s 6 month revenue contribution for FY21 is A$3.5m and Agnitio’s 8.5 month revenue contribution is ~A$1.6m, this implies a revenue downgrade of around $5.1m (-12% on the guidance mid-point). We estimate this is entirely due to the currency headwind as the AUD has strengthened from US$0.69 at 30/6/20 to US$0.76 now, +10%.
- On 15/1/21 BTH announced the acquisition of VoiceVibes, a Baltimore Maryland based company and leader in voice analytics, for US$2.0m (A$2.6m). This comprises US$1.26m cash, US$100k deferred for 12-months subject to set-off against warranty claims, and US$0.6m in BTH shares (750,220 shares at $1.098). Revenue in FY21 is not expected to be material. We review this in more detail on following pages.
- December quarterly report & Appendix 4C cash flow report. Mixed. We review this in detail on pages 6-7.
- We revise our 12-month price target to $1.32 per share (previously $1.38), -4% due to dilution from the placement, adverse FX and higher cost assumptions. Our price target implies 14.8% upside from the current $1.15 share price. Accordingly our Recommendation is now Accumulate (from Buy).
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