As @PeregrineCapital pointed out, BTI's February Update is all about SiteMinder, which is their largest holding in the portfolio. BTI are still quite bullish given the significant portion it makes up of their NTA and for me, any sell downs from the BTI team would be worth paying attention to. (Even though they probably should to move capital into other unlisted ventures).

The update breaks down Short, Medium and Long term prospects for the company, but implies there is value at current levels.

I'm yet to do my review of Q2/H1 but will revisit this when I do.

Q1FY24

The Good

• Q1 revenue of $46.8m which annualise to $187.2m. This would be a 23% increase on FY23 and keeps management’s 30% YoY growth targets in range. 
• ARR increased 10.7% QoQ to $191.6m which is just shy of my previous forecast target

The Not So Good

• Operational cash flow positive not quite achieved this quarter as per my previous target. “Underlying” cashflow has been reported positive when adjusting for “non-recurring” costs of ~ $800k. There have been cost adjustments in most of Site Minders announcements, which brings into question how “non-recurring” these are.

• Operational expenditure is largely levelled out, except for staff costs which continues to grow. Q1 did include an annual cash incentive of $2.4m, so this should come down slightly in Q2. Staff costs do remain as a watch point as they are the most significant expense for site minder.

• Cash down to $45m. There is still $31.3m of unused financing facilities, however it would be much more positive for the company if they can reach their FCF targets before having to draw on these.

What Status

What To Watch

• Introduction of Dynamic Revenue Plus and Channels plus mid 2024 as detailed by @jcmlengs post. Investor day announcement here 
• Business metrics not reported for the quarter. Look for improvements across these in H1, particularly net subscriber additions as these were reported to have accelerated in Q1.
• FCF should be just shy of breakeven in Q2.
• Levels of investing expenditure to implement the new smart platform developments. Currently is ~$6m per quarter. Increases to the investing spend could potentially hinder the FCF targets. However ongoing development of the platform is required to drive growth in spend for the existing user base.
• Decrease in staff costs for Q2.

Siteminder trading update. Business continues to progress

Went through the SDR Investor Day Presentation slide pack released yesterday 16 Oct 2023:

https://www.asx.com.au/markets/company/SDR

It was well worth spending the 25-30 mins working through the 78 slides to get a flavour of the 2 Smart Patform offerings targetted to be released in FY24 and the opportunity ahead to upsell within existing customers, over and above the signing up of new hotels.

Having had some past exposure to cruise ship revenue management and reservation systems, the offerings make complete sense to me. It solves some big problems, especially for smaller hotels that do not have extensive distribution and revenue management capabilities.

Very keen to see how the SDR customer base takes up these new offerings and the resultant financial impact in the coming Q's.

SUMMARY

• Strong uptake of SDR offerings across the 4 Global Hotel Industry segments
• Significant TAM remaining to chase
• Rolling out “Smart Platform” - sophisticated revenue management capability which converges distribution, intelligence and revenue optimisation to maximise hotel revenues
• 2 new offerings under Smart Platform:
• Dynamic Revenue Plus - real-time recommendation engine to help identify optimal commercial actions a hotelier can take in response to external events, intelligence etc. Address challenges in the lack of revenue management capability in small hotels
• 5 use cases showcased (slides 35-48)
• Channels Plus - capability to automatically connect distribution channels and hotel properties as they sign up to the program out of the box, eliminating today’s friction in many connections, agreements, connectivity configurations (slides 56-62)
• Commercial potential to deliver >10x ROI to hotels at 1% monetisation of FY23 GBV (Value of bookings processed by SDR)
• Previous guidance was reiterated - (1) target 30% organic revenue growth in the medium term (2) underlying EBITDA profitable and underlying free cash flow positive for H2FY24.

Discl: Held IRL and in SM.

Full Year and 4th Quarter Updates. (A bit late but finishing off the list)

The Good

• ARR increased 15% QoQ to $173.1m. Previously ARR growth had been slowing. Based on this number being “recurring” (even though an increased portion is based on transactions) this puts a floor on a FY24 revenue estimate and would indicate ~14% growth on the FY23 result. This is short of management’s long held 30% target.

• Operational cash burn continues to improve which has led to an improved FCF positive target for H2FY24 from the end of FY24.

• All business metrics continue to improve.

• Additional subscribers adder per half continues to grow. The gross margins are much better for this part of the business (84.1% vs 35.7% for transactions), so this is an important area for the business to continue to perform in.

• Growth has picked up across all regions.

The Not So Good

• Cash reserves down to $51.3m. This will continue to take a hit until FCF positive can be reached.

Watch Status (Trying a new method to be able to better compare ongoing sentiment)

What To Watch

• Ongoing growth in ARR to bring revenue closer to the 30% growth target. ($196m)
• For FCF positive to occur in H2, can likely expect that operational cash flow should be positive in Q1FY24. (Adjusted cash flow was neutral) Not expecting any significant changes in operating expenses.

• Impacts of overall economic headwinds on continued transaction revenues from travel. If spend decreases, growth will need to continue to come from ongoing property additions.

SDR's FY23 results had no surprises as most of it was revealed during the earlier 4Q Appendix 4C Release. However, these charts in the pack stood out for me as it provided a bit more "colour" on the performance.

It was a strong result and it is executing/delivering on the trajectory Sankar said it would. Will be interesting to see how much this holds up in the next 2Q's as global economies decelerate further, eating into discretionary travel demand.

Discl: Held IRL and in SM.

• Growth was strong across all regions in terms of revenue and property additions

• Strong subscriber Net Additions, again across all regions, and strong uptake of transaction-based products

• LTV/CAC metric was missing in the 4C announcement - moved to 4.1x for FY23, but improved to 4.8x 2HFY23, HoH moves appear to be accelerating, as Sankar said it would
• LTV was up 9.7% to a record $23,212
• CAC improved 14% from $6,386 in FY22 to $5,469 in FY23, driven by operating leverage. CAC for H2FY23 was $4,890

• Both Sales & Marketing and Product Development cost as a % of revenue are trending down rather decisively

SDR Director buy from Dean Stoecker - around $50k worth

The Good

• ARR growth resuming, up ~5% QoQ. This does need to pick up to meet the targeted 30% annual growth rate

The Not So Good

• Cash receipts down when compared to the prior quarter, which is impacting overall cash flows. “Underlying” cash flow is meant to be an improvement over the past 5 quarters, but there is still a long way to go for the cash flow neutral by Q4FY24.

• $57m in cash / term deposits. With over $11m in cash burn for the quarter, this means that there is barely enough cash available to reach the breakeven target without having to access additional financing.
• $23m in quarterly expenses for staff. This is a pretty high figure for a cloud software company.

What To Watch

• Based on underlying cash flow, can hope to see operational cash burn less than $3m for Q4.
• Growth in Net Subscriber Additions - reported to have increased in Q3.
• Forward booking has been strong for the Northern Hemisphere summer
• GuestJoy to be relaunched in English in February and other languages in Q4 (Carried Over)

@Strawman any chance of getting Sankar Narayan back for another update?

• SVB collapse

The ASX companies exposed to the SVB crisis

Life360 and SiteMinder are among the locally listed companies to have banked with failed VC lender Silicon Valley Bank.

some local fall out

Siteminder Half Yearly Report

Consistent growth rate and has not missed a beat since IPO and subsequent tech sell off. Long growth runway and obvious large TAM. Continue to impress and I continue to add in RL PF.

Siteminder Quarterly report - impressive revenue growth numbers continuing (fastest in 5 years)

I’ve also been watching SiteMinder. This observation is a bit from left field, but it may have an impact on SDR in the short/med term.

Within 2 days, I heard 2 podcast references to hotels operating at low capacity, due to lack of staff availability and the subsequent flow on of price increases for accommodation to ensure operators are profitable.

My initial thought is that this is a headwind for SDR as there are less rooms to clip the ticket on.  Alternatively, it could be a positive as operators need to ensure they fill rooms to a predetermined capacity to make a profit/break even. I don’t have a strong view either way, just another data point to consider.

Sources below:

Ref 1: “Imagine that China moves away from zero COVID. I'm not saying they will, I'm saying imagine, then all of a sudden, the demand for all sorts of basic materials, the demand for luxury goods. I'll give you just an example. I just went around Europe visiting clients and the hotel rooms that used to cost me 200 euros now costs 400 euros, and you can't get room service at night because they don't have enough staff anymore. What happens when the Chinese tourists come back? That probably goes from 400 euros to 600 euros.”

Excerpt from podcast, (my emphasis in bold) Louis-Vincent Gave: The Xi Pivot vs. The Powell Pivot October 20th, 2022

https://macrovoices.podbean.com/e/macrovoices-346-louis-vincent-gave-the-xi-pivot-vs-the-powell-pivot/

Ref 2: On The Call yesterday, Adam and Jun Bei discuss business travel, with hotels running low occupancy due to staffing issues and increasing prices to compensate. They note that business travel is strong but expect it to taper going forward re the higher costs to travel.  

https://www.ausbiz.com.au/media/the-call-friday-21-october-?videoId=24901

Adam Dawes & Jun Bei Liu At 20.30

As a side note, the macrovoices podcast is interesting. It refers to a potential Xi pivot.  That is, when China loosens covid restrictions, there may be a “flood” of liquidity that will be released from pent up Chinese demand.

Also on my watch list. Liking the model, the management, and the post-covid story. For no particular reason I'd like the comfort of buying this below 5x EV:ARR. Profitability still aways off so might happen ($2.64 by my numbers). If it doesn't no skin lost and there are others out there with more growth and lower multiples.

A solid result from Siteminder. @west has posted the key details, but the company has delivered exactly what they said at their IPO and in line with what CEO Sankar Narayan said we spoke to him in early June.

...and yet shares are down 33% since then!

Yes, they're burning through the cash, but they have +$100m in 'liquidity' ($25m in cash, $50m in term deposits, and a $30m loan facility). Moreover, it's more about what they are spending the cash on and what return they are getting on that -- and investors can't really pretend to have seen any nasty surprises.

Of course, the macro situation has changed a lot, as has general market sentiment. And they are directly related to travel.

Fair to point out too that shares are still on 5x ARR, so certainly some growth priced in.

Still, this is all about a huge market opportunity, high margins and a capacity (it is hoped) to scale effectively.

I don't own, but on my watchlist.

Hope you found the discussion with Sankar Narayan valuable.

He struck me as a straight shooter with a clear focus on what matters, and as someone who is thinking years into the future.

You can catch the recording on the Meetings page, but a few things that stood out for me:

• There's a very large market opportunity, with 1 million small to medium hotel chains globally (ex China)
• They are the largest player and 3x the size of their nearest competitor
• Sankar is wary of acquisitions and mainly focused on organic growth
• They have a LTV/CAC of 3-4, which allows for very attractive unit economics and helps explain the investment expenditure. This is exactly what happened at Xero when he was the CFO, and it builds a very attractive cash flow stream as the business scales.
• Macro conditions are uncertain, but he's not focused on predicting it. They have however done a lot of scenario analysis and have thought through a wide variety of possibilities. All that being said, if Covid couldnt knock them over, it's hard to see how an economic slowdown could be any worse. Moreover, the re-opening dynamics are more likely the dominant factor over any macro headwinds.
• They are cash flow negative by choice and well supported by a very strong balance sheet. That is, as with covid, they can easily pull back on Capex and remain viable if needed.
• New modules, recently released, provide significant upsell potential. 32% of customers use only one product.
• They have some serious investors aside from Bailador, including Blackrock.

All told, it looks to me like a well run business that has not only survived a near existential threat, but emerged far stronger on the other side. Management is capable, aligned and thinking long term. The business is very sticky, and should scale well as revenues grow, and is unlikely to need any outside capital for the foreseeable future.

All that being said, despite the drop in the share price, shares are still on something like 10x ARR. Yes, it's growing well with attractive economics, but it feels like a lot in the current market.

CEO Sankar Narayan – joined SiteMinder in January 2019. Previous roles before SiteMinder include CFO and COO at Xero (ASX: XRO), CFO at Virgin Australia, Fairfax media and Foxtel.

Podcast link below from last year interview with Sankar Narayan.

https://podcasts.apple.com/au/podcast/joining-the-dots-w-sankar-narayan-ceo-siteminder/id1486108522?i=1000496409280

Founders

SiteMinder was co-founded by Michael Ford and Michael Rogers in 2006.

Michael Ford is currently a Non- Executive Director with SiteMinder with approx 12,453,770 or 4.62% shares on issue.

https://podcasts.apple.com/nl/podcast/s03e05-mike-ford-siteminder/id1490231090?i=1000458624547

Michael Rogers is currently SiteMinders Chief Technology Officer with approx. 2,300,353 Share or 0.85% of shares on issue.