RightCrowd:
Market leader in the emerging physical security and compliance solutions space that manage the access and presence of people. Global provider with most customers in the US. Huge addressable market.
The problem & solution:
- In the past, for electronic physical access security systems to be individualised, data on individuals had to be manually entered into the system. Say for example, an employee isn’t compliant with OH&S safety training. You would manually enter this into the security system to disallow access for that person to enter a job site, until they became compliant, then change it manually to allow access. If you work for a large company or a job site/building with employees of many different companies, plus visitors like clients and subcontractors, this is inefficient and leaves room for error exposing risk to people and assets. RightCrowd automates this process by integrating with the organisation’s ERP.
- Many other applications, and they also provide contact tracing solutions which could potentially become more common for companies “returning to work” as we see that even significantly vaccinated countries are still copping it from covid. Solutions like this would save wiping out big chunks of a workforce through contact exposure.
- Recently launched RightCowd IQ cybersecurity platform
Products/services:
- Visitor management
- Workforce access management
- Contract tracing wearables
- Presence control
- Cybersecurity
- (see website for more detail - https://www.rightcrowd.com)
Company Background:
- Founded in 2004 by the CEO
- Long period of R&D
- IPO in 2017
- Acquisition of “Ticto” in 2018 – wearable security smart badges (https://ticto.squarespace.com/ticto-app). Bought in development phase hence burned through cash. Slowed down path to company profitability. Basically, a digital ID badge that increases security, has social distancing and contact tracing functionalities.
- The company holds it cards close to its chest. Doesn’t disclose large clients despite having 5x Fortune 500 clients on the books. One of those is Microsoft though (https://www.rightcrowd.com/2021/08/11/press-release-microsoft-rightcrowd-finalists-for-2021-u-s-outstanding-security-partnership-award/)
- Very Illiquid stock. CEO owns 25%, ticto founders have 25% and >80% of shares held by top 20 shareholders. Maven bought a cool 8% earlier this year. Ellerston capital own 7% and keen to accumulate (https://reachmarkets.com.au/the-insider-meet-the-fund-manager-david-keelan-alexandra-clarke/). Doesn’t trade some days.
- I like the understated nature of management
- See other straw on management
Tailwinds:
- The big tailwind is clearly the pandemic. Even moreso is the reopening of countries and “return to work” because the risk of infection and transmission is higher compared to when we’re in lockdown. Continual risk of covid viral variants as time goes on.
- Ongoing threat of terrorism and civil unrest, both internal and external, particularly in the US
- Cyber security is a hot space after some recent high profile cyber-attacks. Google the Waikato Hospital cyber-attack in NZ for an interesting one. “RightCrowd IQ” has been deployed at a major Australian Financial institution and is in the process of broader commercialisation.
- I also think a lot of this technology is a natural progression of upgrading security as we live in an increasingly automated world.
Competition:
- Can only find 3 other competitors in the physical security and compliance solutions space
- The software takes a long time to develop – large barrier to entry
- Very large market can likely comfortably service all current competitors
- Apparently the Ticto wearables are the only ones of its kind
- There are some big players in the cyber security space, again it’s a very large and growing market. RCW has the ability to upsell through other suite of products
Financials:
- Market cap $78m
- Share Price $0.32
- EV $68m
- Revenue $15.5m in FY21 and growing ~40% yoy since IPO
- 70% of this comes from North American Market
- ARR grew >100% in FY21 to $8.1m, now 50% revenue
- Aims to maintain 40% CAGR to reach $30m revenue in FY23
- Capital raise $12.5mil earlier this year expected to fund through to profitability in FY23 (https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02356840-2A1288807?access_token=83ff96335c2d45a094df02a206a39ff4)
- Debt ~$0.6m
- Cash ~$10m
- Very low churn
Risks:
- Execution
- lack of adoption of technology
- cash burn in R&D
- loss of large clients, although historically low churn
- competition, although large market few players, and high barrier to entry
Overall
- Market leaders in new/emerging tech niche.
- The technology seems like a natural progression in this space to help companies protect staff and physical assets. Imagining myself as a senior in a big company, I can see why these products would be attractive, particularly at the present time.
- Management are aiming for continued ~40% revenue growth and continue ARR growth, with very low churn this should be possible. If this type of technology genuinely takes off this could very well balloon out and adoption by Fortune 500 companies is encouraging.
- Cash burn should slow up soon and head towards profitability in FY23.
- Covid, terrorism, and general security paranoia tailwinds.
- With low-key management and little-traded, tightly held illiquid stock, this company could go about its business and accumulate value with little fanfare, potentially flying under the radar. A lot of potential blue sky ahead, but not without risk.
- Share price as low as it’s been all calendar year.
(Note: I am an amateur trying to learn the ropes so take everything with a grain of salt. Any feedback/criticism always welcome)
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