Discl: Held IRL 5.72% and in SM

Had a quick look at the SDR FY25 AGM material. It was a good opportunity to sit back and reflect on the journey thus far (super-pleased) and where this is all heading (north-ward bound!).

The one significantly misunderstood aspect of SDR is that it is NOT a channel distribution manager but a central revenue platform manager. Very pleased that during the FY25 results and the recent Investor Day, management has used more decisive and precise language to articulate this sharp pivot in positioning - this continued in the CEO address, highlighted below.

KEY THEMES FROM ADDRESSES

The SiteMinder team is delivering: “We are delivering for our investors, achieving a strong financial performance headlined by accelerating growth, improving unit economics, and critically, profitability, with both underlying EBITDA and free cash flow positive for the financial year”

On AI:

“We are not just participating in this shift; we are defining the future of our industry”

On FY25: 

“It was a year defined not just by our strong financial achievements, but by the successful execution of our Smart Platform strategic plan”

“FY25 was a year where the travel industry faced volatile and challenging trading conditions buffeted by geopolitical conflicts and policy pivots. Against this backdrop, SiteMinder managed to deliver robust growth and momentum .... This acceleration is a powerful endorsement of the resilience of the business, our strategic product initiatives and the growing value hoteliers find in our platform”

“Our enhanced operating model provides the healthy, self-sustaining bedrock for our continued expansion, ensuring that our growth is fully funded by our own success”

On the Smart Platform: 

“By successfully executing the Smart Platform strategy, SiteMinder is leading efforts to address critical challenges facing hoteliers, and redefining how the hotel industry manages revenue and guest acquisition

“We are moving beyond the role of a channel manager to become their central revenue platform - the unified interface where revenue decisions are made, executed, and automated.

On the opportunity ahead:

Our current annual recurring revenue unlocks approximately 0.3% of the $85b of gross booking value we facilitate. This is a very small fraction of the value we create for our hoteliers. However, when we estimate the potential value unlock at full product attach - meaning customers adopting the full suite of Smart Platform tools - that figure rises to over 1.5%. This is a significant revenue opportunity simply by deepening our relationship and value delivery to our current customers. This is an organic, high-margin, and a greater share of wallet from additional product adoption.

Outlook and Trading Update:

“ ... the positive momentum from the end of FY25 has continued, with ARR growth (on a constant currency and organic basis) tracking in like with the rate achieved in FY25 (27.2%) - reinforcing the stability and resilience of demand across our platform”

Only picked up 2 new slides, worth pointing out:

Good summary of the momentum in play across the SDR business

And the opportunity ahead - the Smart Platform rollout is really only just beginning.

Chart Review

The share price made another all-time high today, peaking at $7.96. While I think the market is taking notice and becoming increasingly bullish, the price does feel somewhat exhausted for now after the post FY25 results re-rating. I do not expect it to do too much other than bounce around at this levels and retrace a bit - not a bad thing to take some froth out of the price ahead of the 1HFY26 results.

Discl: Held IRL and in SM

Very pleased to see SDR make a new all-time-high price of $7.85 today, surpassing its previous all-time-high price of $7.77, which was achieved on the day it listed on 9 Nov 2021. It has never seen this level until today, 3 years 11 months-ish later.

The price did not have sufficient momentum to close above $7.77, settling at $7.72 instead.

It sure has been a bit of a journey ...

Since the FY25 results pop, the re-rating has been rather orderly and textbook-like. Probably due for a bit of consolidation and thus expect the price to move sideways a bit, quite possibly down to ~$6.60-ish, which would be very healthy for the price thereafter.

Business-wise, SDR is only at the start of the Smart Platform journey, so will be letting this run for quite some time ...

Discl: Held IRL and in SM

Had a good look at the SDR Investor Day Presentation from 23 Sept 2025. It really annoys the hell out of me that as a retail investor, I can’t seem to participate in any of these SDR sessions ...

It is a large pack of slides intended to give investors a deeper understanding of the Smart Platform capabilities, the problems they solve etc. Having had some previous Reservations and Hotel IT systems and operations background, these capabilities make a lot of sense and is very exciting to see.

SUMMARY

There are 6 key themes that emerge from this very software-functionality driven slide pack:

1. There is a sharp pivot to positioning SiteMinder as a “Revenue Management Platform for Hotels” - this really makes sense to more sharply differentiate SDR’s capabilities and value add, and allow SDR to pull away from being categorised as a “hotel distribution system” - it should now be clearer that global distribution is only 1 of many SDR’s capabilities
2. Introduction of the concept of a “Revenue Flight Deck” - an integrated experiencing unifying intelligence, revenue management and distribution
3. Better clarity on the problems that each Smart Platform capability is intended to solve and the value this brings to hoteliers
4. The huge volume of very hotel-related data that SDR has and continues to collect, the “SiteMinder iQ” Data Lake that stores and manages this data and how the data is then leveraged to improve internal operating efficiencies and the embedded in the SDR products to enable better dynamic predictive/forecasting capabilities for hoteliers.
5. With the Smart Platform, SDR is adding transaction revenue at subscription-like margins.
6. Unit economics are getting stronger - Lifetime Value is rising, Cost of Acquiring Customers is falling as there is minimal incremental cost to upsell

MY TAKEAWAYS

The harder pivot towards Revenue Management is long overdue. To badge SDR as yet another global hotel distribution platform is to misunderstand SDR’s value add to the hotel industry across the continuum of hotel size

I get the very clear sense that SDR is now in scaling mode with very attractive economies of scale ripe to kick in given the already large base of customers, a significant portion, if not all, who can absolutely benefit from the Smart Platform capabilities

The real SDR journey is now truly beginning ...

SUMMARY OF SMART PLATFORM PRODUCTS

DATA AND AI

Nothing fancy with the SDR Data/AI strategy - it makes sense. SDR has significant data capability, which is is looking to directly monetise:

• $85b+ of Global Booking Value
• 130m+ reservations per annum
• 50k hotels in 150 countries
• 2 year forward rate plans, with full property booking insight

AI is then used on data accumulating in the Data SiteMinder iQ Data Lake to (1) drive efficiencies across operational functions (2) embedded in SDR’s products to drive additional customer value - both adding to the velocity of the flywheels of efficiency and value.

Next generation hotel clustering techniques - the practice of grouping properties most comparable to your own to shape commercial strategies

Leverage AI to deliver statistically rigorous forecasting tools for hoteliers - enable better demand forecasting

GO-TO-MARKET

This brings out the typical lifecycle of the customer, the scaling opportunity ahead with the Smart Platform products and the economies of scale benefits - there is a lot to like with this.

Discl: Held IRL and in SM

Bailador took some nice profit with the sale of ~3.46m SDR shares, ~25% of its holdings of SDR

Post the sale, BTI still holds 75% of its SDR holdings

Market seems to have absorbed the sale very nicely with the share price moving sideways and staying above both the 7.20 support line and the medium term uptrend line, despite the heavier-than-normal volumes - a really encouraging sign of continued price strength.

Nice to see a sharp, detailed, get-stuffed, response from SDR to the Speeding Ticket it received.

Since the re-rating, the price has consolidated in a nice textbook flag pattern, with the all time-high intersecting with the long term uptrend line at ~7.03 up ahead. Expecting the price to go sideways between ~6.40 to 7.03-ish for a while.

Discl: Held IRL and in SM

Discl: Held IRL and in SM

SDR Things To Focus On

Pre-reviewing the results, I listed these 6 questions to answer, followed by the answers:

1. Is revenue growing - dollars, ARR, ARPU? Absolutely - a decent noticeable acceleration in 2HFY2025
2. Are the Smart Platform products contributing to growth? Hell yeah .... ! Big Tick
3. Was there progress on LTV/CAC? Yes, improvement of 0.8x to 6.2x, driven by rising Customer Lifetime Value (LTV) vs flat Customer Acquisition Cost (CAC)
4. Was there progress on Rule of 40? Yes, 3.9% increase to 21.3%
5. Was there progress in the path to profitability? Absolutely - 2 consecutive Half’s of Positive Underlying EBITDA, EBITDA 2H jumped HoH (1H: $207; 2H $6,704) resulting in SDR’s achieving the target of full year Underlying EBITDA positive in FY25 $7,052 - Big Tick
6. Was there progress to positive FCF? Yes, Net Cash from Operations up sharply YoY from $14.4m to 23.6m, Cash Burn fell YoY from ($10.8m) to ($7.6m), cash balance $33.4m, need to peel FCF report more

TLDR SUMMARY

• Cracker of a result all round 
• My 1H commentary was “Thesis is very much intact. 2HFY25 should be more interesting as rollout of the 3 Smart Products will be in full swing and the impact of accelerating revenue should be more pronounced.” - this has now played out very nicely
• Smart Platform products are now contributing to revenue and revenue acceleration from 2HFY25
• Strong continued momentum on all operating metrics - ARR, New Property Additions, No of Properties on the Platform, Transaction Product Uptake, ARPU
• Market concerns around slowing travel discretionary spend does not appear to have materialised - revenue growth was strong in all regions
• Translated into strong Revenue Growth across both Subscription and Transaction Revenue
• Margins have improved: Subscription 86.4% (FY24: 85.1%) and Transactions 33.7%, (FY24: 33.7%), Overall gross margin has fallen to 66.3% (FY24: 66.5%) as expected, due to the shifting revenue mix of 62% Subscription: 38% Transaction (FY24: 64%:36%) - very healthy
• Translated into a jump in EBITDA in 2H, and the first full year of Positive EBITDA and Underlying EBITDA
• And improved Free Cash Flow

Chart Review

Market has responded positively, but there is long-term resistance at ~7.03, which goes back to post IPO days of Dec 2021 as well as the long-term upward trend line, both converging at around the same levels, which has limited the pop.

Expecting the price to now bounce sideways around the ~6.40 to 6.50 levels, while the analysts re-crunch the numbers.

Action

None - already fully allocated

This is a long-term high-conviction hold as the thesis is only just starting to play out and need to give management time to build the growth momentum in the next 1-2 years.

--------------------------------------------

Attaching my detailed commentary for anyone interested in the detail:

Financial and Operating Metrics

• ARR has accelerated - sharp jump in 2H, ARR Growth Organic now 27.2% (1HFY25: 22%), driving Revenue Growth 19.2% (1HFY25: 17/2%)
• Significant jumps in Transaction Revenue ARR Growth and Transaction Revenue growth - SDR’s focus to monetise transactions flowing through the platform are now paying off
• Transaction ARR growth of 48.3% YoY Organic is running significantly ahead of revenue growth as the scaling of the Smart Platform initiatives kicked in towards the end of FY25

Strong continued momentum in (1) New Property Additions (2) No of Properties on the Platform and (3) Transaction Product Uptake

Continued focus on penetrating larger hotel properties - this was not SDR’s original customer base, but is now becoming significantly more important as SDR monetises Gross Booking Value on the platform.

Which drives continued ARPU increase momentum:

And translating into continued HoH Revenue and Annualised Recurring Revenue growth, respectively

Rate of revenue growth in 2HFY25 has noticeably increased - a 14.8% jump HoH vs fully year increase of 17.7%.

Revenue growth has driven profitability with 2 consecutive Half’s of Positive Underlying EBITDA, resulting in SDR’s achieving the target of full year Underlying EBITDA positive in FY25.

3.9% improvement in the Rule of 40

0.8x improvement in LTV/CAC, driven mostly by Customer Lifetime Value increases, with Customer Acquisition Costs remaining quite flat.

Regional Performance

Revenue growth was strong across all regions - debunking market concerns about slowdowns in travel-related spend, a discretionary expenditure, as cost of living pressures kicked in during FY25

• All regions grew in excess of 20% Organic in 2HFY25
• APAC and EMEA accelerated HoH reflecting resilient travel trends (perhaps the pivot away from the US as a travel destination) and contributions from the Smart Platform initiative
• America’s sustained HoH momentum - contributions from the Smart Platform initiatives offset the moderation in general travel conditions - the Trump effect?

This resilience augurs well for FY26 as the global interest rate cycle moves more firmly towards an easing bias in FY26.

Smart Platform

This is a really good slide which emphasises a point which I think the market still has not got clearly - SDR is not a global room distribution platform alone - it is much more than that.

SDR’s Smart Platform has deeply embedded capability in (1) Revenue Management - previously the domain of large hotels with dedicated headcount to directly manage revenue and (2) Guest Experience ON TOP OF (3) the more traditional “Guest Acquisition” capabilities - a very nice term for the Booking Engine, Global Distribution, Channels Plus capabilities

The monetisation engines would reside primarily in the Guest Acquisition and Guest Experience areas

Late FY24 into all of FY25 was about building out the Smart Platform capabilities and then deploying them to SDR’s customer base - evidence from 2HFY25 is that meaningful revenue is now coming through from these recently deployed capabilities - this was what the market needed to see to believe.

Cash Flow Position

Cash flow performance looks good at face value but need to peel this a bit more, especially the adjustments

• From the cash flow statement:
• Net Cash from Operating Activities was significantly up YoY - FY25 was $23.6m vs FY24 $14.4m
• Net Decrease in Cash fell to FY25 ($7.6m) from FY24 ($10.8m)
• Cash Balance is $33.4m, vs FY24 $40.2m
• No concerns on cash

OUTLOOK

More of the same FY25 in FY26

No change to the general medium-term 30% revenue growth target

Just doing what they said they would.....

I like the dislocation in ARR vs Revenue, 2026 could be break out...

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02984182-2A1616627&v=4a466cc3f899e00730cfbfcd5ab8940c41f474b6

Interesting, although I do not fully agree with the point around "room night demand heavily driving revenue". That "hotel room distribution" boxing of SDR's revenue is, in my view, an overly narrow one. The revenue base has platform subscription revenue, revenue management capabilities via the Smart Platform, payments-driven revenue etc.

Sentiment on SDR clearly has been hit by the caution around travel discretionary spend.

Very eager to see how SDR has gone this half amidst that caution, hopefully offset by the increasing impact of the Smart Platform products being rolled out and the ARR that that should drive.

Discl: Held IRL and in SM

The SDR price has recovered nicely and is now sitting above the long-term 200 SMA, clearing 3 resistance areas along the way ...

Per Macquarie - this is in regards to the travel industry for CTD/FLT. Most of this seems positive read through in terms of conditions. Hopefully offsets weakness in the US from Trump.

Volumes better than feared. Since peak tariff uncertainty in Mar/Apr, the market has been concerned about overall volumes and activity in the US. US volumes appear to be holding up better than feared, with 2QCY24 TSA data down only -0.9% YoY. Subdued inbound leisure volumes will likely be a headwind, with inbound volumes from Canada/Mexico down 13%/7% in June. Across other regions volumes are solid, outside the timing of Easter shifting some travel to April.

• Airfare deflation still a headwind. Although the pace of airfare deflation has slowed, it remains a headwind and is likely most severe in the US (domestic fares down -3% in May). US airlines have been rationalising capacity to reflect the demand outlook. Combined with softer traffic, this has driven an increase in airfare deflation. In ANZ, we expect domestic airfares to grow at inflation and international to deflate mid-single digits. Continued international deflation is a drag on TMC's commissions and overrides, but appears to be stimulating volumes.

• Hotels and accomodation. Recent industry calls with European operators indicated industry conditions remain strong. Although conflict in the Middle East has caused some disruption, it appears to be isolated to specific countries, and concentrated around major news events. 

Wanted to revisit SiteMinder and do a deep dive into what it's all about - here's what I came up with.

What’s SiteMinder All About?

SiteMinder is a cloud software company that helps hotels get booked online. Think of it as the “invisible middleman” that connects a hotel’s room availability to all the big booking sites - Booking.com, Expedia, Agoda, etc. It also helps hotels build their own websites, accept direct bookings, optimise pricing, and now even manage payments.

They’ve got ~44,500 hotel customers globally and power around 125 million bookings a year - about $80 billion worth of hotel revenue.

How They Make Money

Mainly through two revenue streams:

• Subscriptions: Monthly/annual fees for their core tools (channel manager, booking engine, etc.)
• Transactions: Fees from booking volume, payment processing, and extras like price optimisation tools.

In FY24:

• Revenue: $190.7m (+26% YoY)
• ARR (recurring revenue): $209m
• EBITDA: +$0.9m (first time in the green)
• Gross margin: 66.7% overall (85% on subscriptions)
• Cash burn: Down to –$6.4m for FY24, positive cash flow in H2 (huge turnaround)

Their unit economics are great: LTV/CAC is 5.4× and churn is super low (~1% monthly).

What’s the Big Opportunity?

SiteMinder is going after millions of small-to-midsize hotels still running clunky old systems. The travel tech space is hot, and they’re evolving fast - launching things like:

• Channels Plus: Advanced OTA integration (including new giants like Meituan in China)
• Dynamic Revenue Plus: AI-backed pricing tools for hotels
• Payments and metasearch upgrades: More “sticky” services to boost hotel revenue

They’re moving beyond a simple tool into an all-in-one “revenue platform” for accommodation providers. Think Xero, but for hotels.

Pros

• Big market & first-mover scale - global customer base, millions of bookings a year
• Recurring revenue engine - sticky SaaS with high-margin subscriptions
• Improving financials - nearly breakeven on EBITDA and free cash flow
• Strong retention & ARPU growth - customers spend more over time
• Global diversification - growing across APAC, EMEA, and Americas

Cons

• Still unprofitable on net income - FY24 loss was ~$25m
• Travel sector sensitivity - downturns hit bookings & transaction revenue
• Valuation is high - trading at ~7–8× revenue, so expectations are baked in
• Competitive space - others like Cloudbeds, OTAs themselves, or PMS vendors could fight for share

Final Take

SiteMinder’s looking like a well-run SaaS business on the verge of real scale. It’s got that “Xero-in-2012” feel - smart product, global footprint, and strong growth with improving margins. If they keep executing, grow those higher-margin upsells, and stay cashflow positive, there’s long-term upside.

Not a bargain-bin stock, but one with a solid strategy and a moat that’s quietly deepening.

Given the sizeable lots, this looks like Australian Ethical Investment has upped its stake in SDR by 1.27% between 3 Apr and 6 May, to now hold 6.31%. Can’t hurt!

Discl: Held IRL and in SM

The following few SDR slides from the Macquarie Conference caught my eye:

Firstly, the Trading Update. Acceleration of the ARR sounds promising ..

This was a simple slide, but helps clarify where SDR plays between the Hotel and the Global Travel Distribution Channels

Lastly, 2 slides on its resillience. Presumably this is in response to market concerns that discretionary travel could be hit when the proverbial hits the fan once tariffs kick in, talk of recession etc.

One of my key thesis drivers when I first looked at SDR was that it more than survived Covid when the travel industry was as decimated as could be - my thinking than, and still remains, is that if it can survive Covid, it should be able to survive anything thereafter ...

The FY25 SDR results will be extremely interesting as it will reveal the traction from the rollout of Smart Platform products vs global concerns on recession, cutback of discretionary spend and how that impacts revenue and growth ...

Discl: Held IRL and in SM

Welcome to the SDR register, KKR .... a nice confidence booster which can't hurt.

Price has recovered nicely in line with the broader market. But will be interested to see how SDR travels through end-May/early June when tariff realities full bite and the Yanks reassess further discretionary spend like travel ...

Discl: Held IRL and in SM

My thoughts: https://arichlife.com.au/siteminder-asx-sdr-1h-fy25-half-year-results-analysis/

Nice to see 2 Directors buying on-market into SDR's freefall. Looks like a staged action though - the volume is "coincidentally" around 10,000 shares. Probably small coin for them, but still 1 zero more than spare cash that I have. Definitely happier with them buying than selling!

From today's chart, looks like the selling has abated somewhat today, closing at $4.90, which was around where I thought it would find support. Whether it holds or not will be revealed in the next few days. But it is entering into my buy zone quite nicely now ...

Discl: Held IRL and in SM

SiteMinder's results seemed pretty good to me.

Revenue up 17.2% and ARR growing 22.0%, but the market reaction suggests expectations may have been higher? This pace of growth is well below their medium-term target of 30% organic annual revenue growth.

Also, while they're making strong progress with their "Smart Platform" strategy, short-term incentives have weighed on subscription revenue growth (up just 11.8%). It's really just a marketing expense, and hopefully justified given the high customer retention and stickiness of the product.

There is also the fact that prior to today shares were trading at 8.3x ARR -- which aint cheap by any traditional standard, and assumes strong and lasting growth. So they really needed to knock it out of the park with these results to justify a further expansion of sales multiples.

Another assessment from Morningstar, with a bit more detail into their assumptions of SaaS metrics.

Stock Pitch: SiteMinder

An underestimated future category leader.

Roy van Keulen

Market struggles to see a clear path to profitability

The company’s lack of profitability as a listed company, despite an unusually supportive backdrop in recent years, is weighing on the shares.

Our Take

SiteMinder (ASX:SDR) is coming off a heavy investment cycle and has launched more substantively new products than any other company within our Australian technology coverage. The products are unique in the market, and we expect them to be highly appealing as they allow hotels to attract significant incremental demand, with limited incremental expense or effort. We believe these products will differentiate the company’s offering and allow it to pull away from competitors. We think this is likely to result in strong secular growth that will outweigh any cyclical softness in travel spending.

We see a clear path to profitability

• SiteMinder has invested to develop several new products: Channels Plus for demand aggregation, Dynamic Revenue Plus for pricing optimization, and Smart Distribution for inventory management.
• These products are unique in the market, driving differentiation and growth. Current R&D spending therefore doesn’t reflect baseline spending as it is not needed to stay up to date with competitors. Although we expect ongoing investment in absolute terms, we expect it to moderate as a share of revenue.
• We see SiteMinder’s new products as highly appealing to customers as they unlock incremental demand at little incremental expense or effort. They do this by putting the hotel inventory in front of more eyeballs, allowing them to access a larger pool of demand. These products should provide a new growth engine once launched in fiscal 2025.
• We expect SiteMinder’s new, unique products will improve conversion of prospects and deliver higher average revenue per user, or ARPU, thereby lowering customer acquisition costs, or CAC, per customer and increasing value per customer.
• We expect the new products to drive more business for hotels, which improves hotel unit economics and lowers business failure rates, thereby increasing the lifetime of these higher-value customers.

MARKET CONCERNS

Falling travel demand would reaccelerate losses and cash burn

A normalization of travel spending, or a travel recession, directly flows through to lower revenue. This is as transaction revenue primarily consists of payments revenue, which is a fixed percentage of booking value flowing through the platform.

Falling travel demand will also lead to higher business failure rates, and therefore churn, among SiteMinder’s small- and medium-size hotelier customers. This is a headwind for subscription revenue.

INVESTMENT THESIS

SiteMinder is a SaaS company, not a consumer cyclical company …

We think margins will be much more resilient than the market gives this company credit for. Operating deleverage from a potential downturn in travel demand is less severe than the company’s 70/30 revenue mix would suggest or example, if transactions were to decline by 10% with a 10% decline in travel demand, such as in a severe recession, this would only result in a 2% decline in gross profit for the group. This excludes any impact on subscription revenue, which we expect to be more stable.

Research and development spending is currently elevated

SiteMinder has launched significant new, unique products

• Channels Plus: Allows hotels to connect to dozens of second-tier online travel agencies, or OTAs, with a single connection. This unlocks significant new demand for hotels with minimal incremental cost or effort on the part of the hotel.
• Dynamic Revenue Plus: Allows hotels to automatically adjust room rates to optimize for conversion and yield, which boosts profitability.
• Smart Distribution: Allows first-tier OTAs to add more, and higher quality, inventory to their platforms.
• All three products are unique in the market and benefit from SiteMinder’s unique assets, such as its relations with OTAs, its large customer base, and its proprietary data assets.

SiteMinder is out-innovating other channel managers by a factor of 5

• SiteMinder is the only Tier 1 channel manager in the world, with around twice as many customers and twice as much revenue as Tier 2 channel managers, its closest competitors.
• SiteMinder’s scale allows it to fractionalize costs over a larger customer base, especially fixed costs for integrations with OTAs and existing products. We expect SiteMinder has at least 5 times the resources available for product innovation. Given the industry is early in its digitization journey, we expect high returns on these investments. We see scope for many more processes to be digitized and automated, like OTA marketing campaign management or loyalty programs.

R&D investment has produced compelling new products …

• Hotels operate in a competitive industry with low barriers to entry, resulting in low margins and high business failure rates. This means SiteMinder, and competitors, constantly need to replenish their customer base. It also means hotels should be highly receptive to solutions that help improve their odds of survival, such as SiteMinder’s new products.
• Connecting to OTAs is costly, resulting in hotels typically only connecting to a handful of OTAs.Channels Plus allows hotels to access around 15% of incremental gross booking value, or GBV, with minimal effort. This will mostly fall through to hotel profits given the high fixed costs within hotel businesses. For new SiteMinder customers, Channels Plus is enabled automatically, which should help adoption for SiteMinder and hotels.
• Using SiteMinder’s proprietary data assets, we expect Dynamic Revenue Plus will eventually enable hotels to improve the yield on their rooms by around 15%. This additional revenue is highly profitable for the hotels, given their high fixed costs, and represents a valuable revenue stream for SiteMinder to monetize.

Exhibit 1: New products will drive secular growth …

Sources: Company filings, Morningstar Equity Research. Data as of Nov. 30, 2024.

… Leading to secular growth and improving sales and marketing efficiency

• We expect SiteMinder’s new products to drive immediate benefits from higher conversion thus lowering customer acquisition costs, or CAC.
• In the medium term, as a larger share of SiteMinder’s customers start using the new products, we expect higher ARPU. We also expect lower customer churn due to decreased business failure rates because the products make hotels more profitable. Both help significantly lift lifetime customer value, or LTV.
• Lower CAC, higher value per customer, and longer average customer lifetimes are likely to make SiteMinder’s sales and marketing efficiency world-leading relative to peers. As a corollary, it means sales and marketing as a share of revenue can come down significantly.

Exhibit 2: … And boost sales and marketing efficiency

Sources: Company filings, Morningstar Equity Research. Data as of Nov. 30, 2024.

New products to drive growth and a clear path to profitability

As SiteMinder comes off its heavy research and development investment cycle, we expect the company to start generating strong returns from its investments into new products. We expect this to result in strong and efficient revenue growth, as new products improve conversion and retention, allowing for sales and marketing to come down as a share of revenue. We expect R&D investment to remain relatively fixed. We expect any cyclical downturn to have only a limited impact, given the long secular growth trajectory.

Intelligent investor weighs on SDR bear case

Research Wrap

Little Aussie Tech stocks are having a moment. SiteMinder, an unprofitable business that helps hotels navigate the complex world of online travel agents, has a higher price-to-sales ratio than Booking.com, Expedia and Airbnb, all of which are profitable.

Even worse, the company is—perfectly legally—minimising its losses by taking some of its payroll off the income statement, which in the trade is called ‘capitalising R&D’. Strange but true: accounting standards mean companies now get to decide whether developer salaries in a software business are a cost or an asset ($).

Other than the growth, where is the Rule of 40 in this chart?

This is more expensive than, dare I say, Gentrack? I remember screening this before and the Price to sales of SDR is "through the roof"

I’m on the sidelines now after a decent run.

Balidor then Leslie Szekeley sales, and more recently Paul Wilson as well. Too much movement for me to be comfortable.

Seems clear that BTI wanted to emphasise that this is just a small adjustment, but which takes their stake below the substantial shareholder threshold. I appreciated the Nothing-To-See-Here tone of the announcement ! The $20m value was somewhat surprising as it seemed rather small.

Discl: SDR Held IRL and in SM

-------------

Bailador has today announced it has completed a $20.0m cash realisation of a small portion of its investment in SiteMinder, while retaining 82% of its holding. The realisation was via a trade at an average price of $6.65 per share, 5.2% above Bailador’s previous carrying value of SiteMinder.

The valuation of this realisation represents an effective IRR of 37.9% and multiple of investment cost of 27.8x on Bailador’s investment in SiteMinder.

Following the realisation, Bailador will hold 4.9% of shares in SiteMinder, below the threshold for substantial holder declarations. As a result, on settlement of the transaction on 1 November 2024, Bailador will lodge a notice with the ASX ceasing to be a substantial holder of SiteMinder.

This realisation provides some rebalancing of Bailador’s investment portfolio, with SiteMinder remaining the largest holding by some margin. It represents a relatively modest realisation of Bailador’s SiteMinder investment, while providing cash availability for additional portfolio investments. 

Summarised the CEO's Speech and Preso from this mornings FY2024 AGM as I digest and internalise the information. The more I read about the Smart Platform Strategy, the clearer it is becoming.

I highlighted in bold italics, insights that either I had not picked up before or further crystallises the strategy, all positive!

Discl: Held IRL and in SM

SUMMARY

No new news, but more clarity on the Smart Platform Strategy, the components, progress and revenue impact

No change in guidance for FY2025 but 1QFY2025 looks to be tracking nicely on both subscriber additions, transaction product adoption and Smart Platform development progress

SiteMinder also expects to be underlying EBITDA profitable and underlying free cash flow positive in FY25

SMART PLATFORM STRATEGY

The centrepiece of our plan to build on our strong momentum is the Smart Platform strategy. Announced last year, the strategy is about making the strengths of our platform work better together so we can help our hotelier customers and partners generate more revenue.

The three pillars of the Smart Platform strategy work together to deliver more revenues for hoteliers and our partners.

The key initiatives of the strategy are focused on answering three questions:

Q1. SiteMinder has a large and valuable repository of data unrivalled in size, depth and geographical coverage. How do we make this data accessible and useful to our hoteliers? 

Q2. How do we translate that data into actionable recommendations across not just pricing but other commercial levers as well?

Q3. How do we help hoteliers execute those recommendations with minimal effort?

This is about creating a unified revenue management experience, something that doesn’t exist in the industry today but operators are crying out for.

SMART PLATFORM STRATEGY PROGRESS

The team has made great progress on delivering the Smart Platform strategy with all three pillars – Dynamic Revenue Plus, Channels Plus and the Smart Distribution Program – either in pilot or having commenced their launch.

Dynamic Revenue Plus

We were pleased to launch Dynamic Revenue Plus in Australia and New Zealand last month.

Dynamic Revenue Plus provides our hotelier customers with proprietary insights and execution tools to optimise key commercial decisions and drive more revenue. The launch has received very positive feedback from our hotelier customers and industry partners.

Dynamic Revenue Plus will level-up early next year with the integration of pricing recommendations from IDeaS ahead of its global launch in March 2025. IDeaS is the industry’s most trusted revenue management system, and we are pleased to have deepened our partnership with them.

This is very exciting but it is just the start of the journey for Dynamic Revenue Plus. 

Advanced capabilities are under development that will combine the latest in artificial intelligence with SiteMinder’s deep and comprehensive data assets, to deliver even greater revenue gains for our hotelier customers. I look forward to sharing more details of these capabilities in due course.

Channels Plus

Second pillar of our Smart Platform strategy and is focused on making it easier than ever for our hotelier customers to distribute their inventory. 

In less than five minutes, they can sell their inventory to 30 participating distribution partners. Achieving the same outcome without Channels Plus would take weeks, if not months, and is practically impossible for most hoteliers to sustain.

Today we have more than 1,000 hoteliers and 30 distribution partners signed up for Channels Plus.

We’ve received strong interest from our customers and have received strong support from some of the world’s leading booking platforms. 

From January 2025, Channels Plus will be a default inclusion for all new customers on the SiteMinder platform.

Smart Distribution Program

The third pillar of our Smart Platform strategy is the Smart Distribution Program. 

The Smart Distribution Program will drive unprecedented collaboration between our hotelier customers and distribution partners to deliver win-win-win outcomes through enhanced connectivity, optimised set-ups and technology investments. The program commenced during the September quarter just passed.

IMPACT ON REVENUE

For SiteMinder the Smart Platform strategy represents more than just incremental revenue. 

The strategy transforms our revenue model from one that is just hotelier-oriented and largely based on fixed fees, into one that touches other parts of the travel ecosystem and is increasingly focused on activity based fees. This will allow us to better participate in the success of our hotelier customers and partners.

The three pillars will meaningfully contribute to revenue at different times over the next few years.

The Smart Distribution Program will come first, and its contributions will be compounded by Channels Plus and Dynamic Revenue Plus. Together they will help us achieve our guidance for 30% organic annual growth in the medium-term.

TRADING UPDATE

While we are doing a lot of work to position the company for the future, we have not lost sight of the now and present.

The company has continued to perform well in the first quarter of the 2025 financial year:

• Net property additions are tracking ahead of last year with continued focus on larger properties which present attractive long-term revenue opportunities for the company.
• The adoption of transaction products continues to grow across incoming and existing customers.
• On the Smart Platform, we are progressing as planned with the commencement of the Smart Distribution Program. 
• Channels Plus is on track for its full commercial launch in January 2025
• Dnamic Revenue Plus is progressing through its staged launch program with positive early industry feedback.

Our guidance is unchanged. We continue to target organic revenue growth of 30% in the medium-term, aided by contributions from the Smart Platform. 

SiteMinder also expects to be underlying EBITDA profitable and underlying free cash flow positive in FY25, and make continued progress on the Rule of 40

With Dynamic Revenue Plus one of Siteminders three pillars of future growth, a lot is riding on the success of this new product line which was launched in Aus in September. As a shareholder I think it’s great, as a consumer, not so much.

It appears the Labor government has a similar opinion with Dynamic pricing models coming into their cross hairs for cost of living relief measures.

https://www.theguardian.com/australia-news/2024/oct/16/dynamic-pricing-ban-australia-tickets-event-fees-albanese-government

Australia is only a small portion of Siteminders overall market, however it does highlight susceptibility of the current strategy to government regulation.

I know people are keen on SITEMINDER but with every hot tip share spike there are shorters around the corner. Short interest spiked with recent price increase.

Anyone aware of who bought so aggressively?

SUMMARY

A very good all round operational result - very hard to find fault with it as the business appears to have fired on all CURRENT cylinders.

Smart Platform new capabilities are being progressively rolled out in 1HFY25 - sets the foundation for a good step up in revenue in 2HFY2025.

Focus is now increasing on larger hotel properties vs SDR’s earlier focus on small hotel properties - this opens up the TAM, is a good sign of growing product/platform confidence and will support future revenue momentum given the higher Gross Booking Value of larger hotels

Am very bullish as things are falling into place very nicely.

Thesis of SDR being the dominant platform in small and medium-sized hotels is very much intact and in play with the existing capabilities, and with the promise of more from the imminent Smart Platform capability rollout.

Market does not seem to have recognised this and prices have fallen to my top up zone of ~$4.90

Topped up today at $4.92 IRL and in SM, with dry powder kept on standby to further top up around $4.60, if prices fall to those levels.

Disc: Held IRL and in SM, High Conviction holding

Financials (all amounts and %’s are YoY comparisons)

Total revenue up 26.0% to $190.7m - while this is shy of SDR’s “medium term” goal of ~30% annual organic growth, it has grown at a fast clip and is before new Smart Platform capabilities are released.

• Subscription revenue up 18.8% to $122.4m, driven by a 13.8% increase in properties of 5,400 to 44,500 properties
• Transaction revenues up 41.2% to $68.3m, driven by strong Transaction Product Uptake which increased 41.2% to 26,300 products
• ARR is up 20.7% to $209.0m
• Revenue mix is shifting slowly in favour of Transaction Revenue, from 68% Subscription:32% Transaction to 64%:36%
• Revenue was earned more or less evenly across all 3 regions of APAC, EMEA, North America

Margins have been sustained:

• Reported margin - 66.7%
• Underlying subscription GM improved from 83.2% to 85.1%
• Underlying transaction GM moderated from 34.8% to 32.0% due to product mix, temporary expansion into new segments and acquisition channels - no concerns on this

Underlying EBITDA turned positive from FY23 ($21.9m) to FY24 $0.9m, importantly, this occurred in 2HFY24, reflecting the benefits of operating leverage and cost discipline

LTV/CAC continues to improve on a steep trajectory - 31.7% improvement from 4.1x to 5.4x

• Customer Lifetime Value improved 8.3% from $22,312 to to $24,130
• Customer Acquisition Cost (CAC) improved by 18.2% from $5,469 to $4,472

Rule of 40 performance improved 230%, from 5 to 17, reaching 21 in 2H

Operating leverage is kicking in as revenue increases - this is very evident in falling product Development Cost despite the intense focus on developing and deploying the new Smart Platform capabilities in the back half of FY2023.

Balance Sheet

Underlying FCF improved from ($34.0m to ($6.4m)

• FCF as a % of revenue improved from (22.5%) to (3.4%)
• FCF positive was achieved in 2HFY24, generating $2.3m or 2.4% of revenue

$72.3m in available funds, which includes $30.0m of undrawn debt facilities

3-Pillar Smart Platform Strategy

Clear evidence that the SDR platforms are being actively used

The industry is coming onboard, including the big Global Distributors

New capabilities appear on track for rollout in 1HFY25 - expect revenue to get a good leg up in 2HFY25 as a result

My notes on SDR's Appendix 4C and Trading Update today. I really like how things are panning out not only for FY24, but also what is ahead for FY25 ...

Disc: Held IRL and in SM

TAKEAWAYS

• Operating leverage and cost management is evident from the 4C, which should translate into improved EBITDA
• 2H Revenue of $99.0m, has increased $7.3m or ~8% from 1H revenue of $91.7m
• 2H Operational Costs of $86.6m has fallen $7.3m, ~7.7% from 1H costs of $93.9m
• Good solid growth across all metrics, but suspect it will fall short of 30% annual organic revenue growth in FY2024 - this 30% growth was positioned as a “medium-term” objective, so not achieving this in FY2024 should not be an issue so long as SDR demonstrates tangible YoY growth, which the 4C and Trading Update suggest, it has
• FY2024 into 1HFY2025 is the period where significant capability is being piloted, built/improved, ready for rollout throughout FY25 - Dynamic Revenue Plus, Channels Plus, Payment Solutions, Metasearch Manager, and the newly announced Smart Distribution Program - the rollout of these capabilities broadens SDR’s monetisation opportunities and hence, underpins the medium-term 30% organic growth target guidance
• The FY24 growth is thus all the more impressive as it does not include any revenue from any of these new capabilities
• Assuming the new capabilities are rolled out in FY25 as planned (and indications thus far that they are on track), FY25 revenue growth could be very interesting ...

Summary of the Updates on Key Metrics

SMART PLATFORM STRATEGY

Dynamic Revenue Plus

• Equips hoteliers with the ability to assess and react to changes in demand quickly and accurately - commenced pilot in Australia and NZ. 
• Phased development is progressing as planned with the ANZ release on schedule for Q1FY25
• Entered into agreement with IDeaS to provide price recommendations for the product - 35-year track record in hospitality pricing, industry’s most trusted revenue management software - combines IDeaS pricing engine with SDR’s distribution execution capability and deep global and local intelligence to reset how hoteliers execute revenue management

Channels Plus

• Allows hoteliers to expand their distribution to multiple channels with ease and control
• General release remains on track for Q2FY25
• Pilot commenced in April, attracted interest from 25 distribution partners

Smart Distribution Program - Newly Announced

• 3rd pillar to accelerate and expand the revenue potential of SDR’s Smart Platform
• Designed to accelerate and expand the revenue potential of the Company’s Platform
• Secured support and commitment from key global distribution partners to jointly improve the distribution configurations of hoteliers through the Smart Platform to capitalise on significant opportunities to maximise revenue performance

TRANSACTION PRODUCT INITIATIVES

Payment Solution

• Extended into SIN and HKG, additional markets will go-live in FY25
• Work on introducing physical payment terminals, well progressed, pilot scheduled to commence in Q2FY25, followed by staged rollout from Q3FY25

Metaseach Manager

• SDR’s metasearch solution for the enterprise segment
• Entered pilot with strong interest from hotel groups looking to better manage their meta search campaigns

GUIDANCE

• Still targeting 30% organic annual revenue growth in the medium term, aided by contributions from the Smart Platform
• No change to financial guidance
• Underlying EBITDA profitable
• Underlying FCF positive for H2FY24

Morningstar imitating with a $10 price target.

Same points made:

• $40M of cash and move to CF positive in FY25.
• Expect metrics to adopt that of a platform as the channel manager industry consolidates - SDR being the leader at double other market shares at 5% - natural winner (some risk this does not happen). SDR then becomes natural choice lowering customer acquisition costs.
• Attraction to hotels to use SDR due to operating leverage from incremental guests despite dominance of Booking.com and Expedia.

Good to know Aust Super is accumulating SDR, adding another 1%.

The Good

• Increase in positive operating cash flow to $4.9m for the quarter. FCF is still not quite positive due to investing cash outflows of $5.3m. Siteminder is trending well to meet their FCF target by the end of FY24.

• Operating expenses remain flat, so going forward, most of the top line growth should be going to the bottom line.

• $39.5m in cash available as the business reaches FCF positive. Cash balance should improve going forward offering a solid operational buffer for future R&D spend.
• 14 agreements signed on for Channel Plus which indicates there is a demand for the new product. Currently this is running in pilot for Q4FY24 so unlikely there will be any significant contribution from Channels Plus until H2FY25.

The Not So Good

• ARR is up YoY and the previous quarter but still down on Q1. It’s a similar story with quarterly revenue, which has been largely flat for FY24 and still down on Q1. For the company to be close to the targeted growth rate of 30% much of this will need to come over the next 2 quarters.

What To Watch

• Channel Plus and Dynamic Revenue Plus release as per target in Q1FY25
• Siteminder Pay Terminals rollout in H1FY23
• Updates on Little Hotelier Autopay and contributions to increase in transaction revenue.

Watch Status

• Unchanged. Slower growth QoQ but business developing opportunities for FY25 and beyond.

Valuation Status

• No Change

Board

Inside Ownership                   Ordinary Shares    %SDR Issued          Net Value at $5.40

Pat O’Sullivan                          65,976                         0.02%              $356K

Sankar Narayan                      7,147,691                    2.58%              $38.598m

Jenny Macdonald                    54,525                         0.02%              $294K

Paul Wilson                             16,760,807                  6.05%              $90.508m

Les Szekely                              15,549,072                  5.61%              $83.965m

Kim Anderson                         24,500                         0.01%              $132K

Dean A. Stoecker                    20,000                         0.01%              $108K

Total                                        39,622,571                  14.3%              $213.962m 

Recent Board Buying

Kim Anderson

·      28 November 2023

5,000 shares at $4.58 ($22,949.81)

·      2 November 2023

4,500 shares at $4.265 ($19,192.50)

Board Bios

Pat O’Sullivan - Independent, Non-Executive Chairman

Pat was appointed independent non-executive Chairman of the Company in October 2021.

Pat has extensive experience as a Director of both listed and unlisted entities. Pat is currently the non-executive Chair of both carsales.com Limited (ASX:CAR) and TechnologyOne. He was previously a non-executive Director of APN Outdoor (ASX: APO), iSentia (ASX:ISD), Marley Spoon (ASX:MMM), iSelect (ASX:ISU) and iiNet (ASX: IIN). 

Pat has over 30 years’ commercial and business management experience, including holding various senior financial and operational roles in Ireland, the US, Australia and New Zealand across a number of industries including traditional and online media, telecommunications, fast moving consumer goods and professional accounting. He was the Chief Financial Officer of Optus from 2001 to 2006 and was the Chief Operating Officer and Finance Director of Nine Entertainment Co Pty Limited from 2006 until 2012.

Pat is a member of the Institute of Chartered Accountants in Ireland and Australia. He is a graduate of the Harvard Business School’s Advanced Management Program.

Sankar Narayan -Chief Executive Officer and Managing Director

For more than 20 years, Sankar Narayan has delivered change management, operational rigour and business growth across the travel, technology, media and telecommunications sectors, with particular expertise in company transformations and business strategy to achieve strong shareholder outcomes. Following several senior management roles at ​Virgin Australia, ​Fairfax Media and Foxtel, and having also worked at Vodafone Australia, Boston Consulting Group and Schlumberger prior, in 2015 Sankar joined Xero where he went on to serve in the dual capacity of Chief Operating and Financial Officer.

Today, Sankar leads SiteMinder’s internationalised software and multilingual teams across 20 locations globally, and which see more than 80% of revenue sourced from outside the company’s home market of Australasia.

Sankar holds a Masters in Business Administration with Honours from the Booth School of Business at the University of Chicago and a Masters in Electrical Engineering from the State University of New York. He is a Certified Practising Accountant and a Fellow of CPA (Australia), and has been a regular contributor to Forbes.com on the crucial topics of strategy, disruption and managing high growth businesses.

Jenny Macdonald - Non-Executive Director, Audit and Risk Committee Chair

Jenny was appointed as an independent non-executive Director of the Company in October 2021.

Jenny has a background in financial and general management roles across a range of industry sectors including fast moving consumer goods, resources, travel and digital media. She has a proven track record in developing and implementing strategy with a focus on risk management, growth and value creation. Jenny was previously Chief Financial Officer and Interim Chief Executive Officer at Helloworld Travel and Chief Financial Officer and General Manager International at REA Group.

Jenny is currently non-executive director of Redbubble (ASX:RBL) and Australian Pharmaceutical Industries (ASX:API), and is Chair of Healius Limited (ASX:HLS).

Jenny is a member of the Institute of Chartered Accountants ANZ, has a Masters of Entrepreneurship and Innovation from Swinburne University and is Graduate member of the Australian Institute of Company Directors.

Paul Wilson - Non-Executive Director

Paul was appointed a non-executive director of the Company in 2012. Paul held the role of SiteMinder Chair from 2012 to 2018, and was previously Chair of the People and Culture Committee. He is a member of the Audit and Risk Committee.

Paul is a co-founder and Managing Partner of ASX-listed Bailador Technology Investments (ASX:BTI) (which is a substantial shareholder of SiteMinder). Paul’s business background includes positions with leading Australian private equity house CHAMP Private Equity in Sydney and New York, with MetLife in London, media and technology focussed investment group, Illyria and with Ernst & Young.

Paul’s other non-executive director roles include ASX-listed Vita Group (ASX:VTG) and Straker Translations (ASX:STG), as well as private companies InstantScripts and the Rajasthan Royals IPL cricket franchise.

Paul has a Bachelor of Business, from Queensland University of Technology and is a Fellow of the Financial Services Institute of Australia, a Member of the Institute of Chartered Accountants of Australia and a Member of the Australian Institute of Company Directors.

Les Szekely - Non-Executive Director

Les was appointed a non-executive director of the Company in 2012. He was the first angel investor in SiteMinder.

Les was a tax consulting partner with Horwaths Chartered Accountants for 20 years, until the company merged with Deloitte, when he became a Director of Taxation in Deloitte Growth Solutions.

Since leaving Deloitte in 2008, Les has dedicated his time to angel and venture capital investing. He is the Chairman of Grand Prix Capital, Equity Venture Partners and Microequities Asset Management Group Limited (ASX: MAM). These businesses are engaged in venture investment at the angel, venture capital and early listed stages, respectively. Les is also is a director of several venture backed growth companies.

Les holds a Bachelor of Law and Arts from the University of New South Wales, a Master of Laws from the University of Sydney.

Kim Anderson -Non-executive Director, People & Culture Chair

Kim was appointed a non-executive director of the company in April 2022. She is the Chair of the People and Culture Committee. 

Kim brings more than 30 years’ board and executive expertise to SiteMinder from a range of media and e-commerce companies. Kim is the former CEO and founder of Reading Room Inc (bookstr.com), CEO of Southern Star Entertainment, and has held senior executive positions at PBL and Ninemsn. 

She is currently a non-executive director of Carsales (ASX:CAR), Marley Spoon AG (ASX:MMM), Invocare Ltd (ASX:IVC) and Infomedia (ASX:IFM). She serves as Chair of the Remuneration, People and Culture Committee on all her boards.

Dean A. Stoecker - Non-Executive Director

Dean Stoecker is an American entrepreneur and businessman, who co-founded software giant Alteryx (NYSE:AYX) in 1997, a company specialising in automating analytics, which today plays a key role in making data-driven tools accessible at all levels of the world’s leading organisations. 

Currently Alteryx’s Executive Chairman, Dean was previously the company’s Chief Executive Officer. Prior to this, Dean was Director-Enterprise Solutions at Integration Technologies, Principal at Donnelley Marketing Information Services and Vice President of Sales at Strategic Mapping. 

Dean holds a bachelor’s degree from the University of Colorado, and a Masters of Business Administration (MBA) from Pepperdine University. He lives in Colorado Springs, Colorado.

Following the post on SDR's 1HFY24 results earlier, here is the summary of the SDR 3QFY24 Appendix 4C. More of the same from 1HFY24 ...

Very excited with progress on the 2 new capabilities currently in pilot release ahead of 1QFY25 release as this will propel SDR's next phase of growth, in parallel to the ongoing growth in the current base products.

Discl: Held IRL and in SM

KEY POINTS FROM THE ANNOUNCEMENT

• Revenue increase driven by SDR’s metasearch offering, Demand Plus, driven by accelerated adoption and strong booking activity
• Net subscriber addition momentum continued from 1HFY24, focused on larger properties (vs the target market of small, independent hotels)
• Continued improvement in FCF - underlying FCF was ($0.2m), now only (0.4% of revenue) - accelerating throughout FY24 thus far - continuing benefits of sustained strong organic growth and operating leverage
• Liquidity remains strong at $72.2m
• No change to FY24 guidance - (1) organic revenue growth of 30% in medium term (2) underlying EBITDA profitable in 2HFY24 (3) underlying FCF positive in 2HFY2024.
• On track for mid-CY2024 release of 2 Smart Platform products
• Channels Plus:
• Signed up Trip.com Group to participate in the Channels Plus Program
• Channel Plus continues to gain traction - 14 distribution partners have signed up
• Channel Plus pilot commenced 29 April 2024, limited to 1,000 hotels, has drawn strong registered expression of interest from existing customers
• Dynamic Revenue Plus:
• Mobile App launched in March well received by users

Belatedly worked through SDR's 1HFY24 results and last week's 3QFY24 Appendix 4C after leaving it aside for about 6M.

The FY2024 slides is an easy read and tells the story very clearly SDR 1HFY24 Preso

Added notes taken during the 1HFY2024 call and a summary of the P&L and KPI's across the halfs, so that I can more clearly see the trend across half's rather than pcp.

SUMMARY

• This is a company that is firing on all cyclinders today, with new capabilities in pilot release now, which will drive the next wave of growth from FY2025
• Positive momentum and operational KPI’s all steadily trending in the right direction and improved on the pre-Covid 2019 trajectory - subscriber growth, across all regions
• Scale and leverage is clearly showing as revenue grows - unit economics continue to improve, LTV/CAC continues to grow, Sales and Product Development expense as a % of revenue continues to fall
• Underlying cash flow positive in 1HFY24 - on track to target of cashflow positive in 2HFY24
• Driving industry change via Smart Platform - the integration of Distribution, Intelligence and Revenue Optimisation, as the hotel industry is far behind airlines in yield management
• Smart Platform will provide the next step increase in SDR’s growth - good progress made in 1st 2 capabilities of Demand Plus and Channels Plus - due for release in 2HFY2024, will full impact to be felt in FY2025 - increases the moat
• Smart Platform will also see more transactional monetising opportunity for SDR by taking a clip of the gross booking value that goes through the SDR platform
• SDR is rapidly growing its base market with a huge TAM to go and in parallel, rapidly building new capabilities that will drive improvements in hotelier revenue via improvements in yield management

KEY POINTS FROM 1HFY24 INVESTOR CALL

• Comparison CY2023 against Pre-Covid CY2019 a better indication of performance as CY2022 was Covid-distorted - unable to sustain acceleration rates when compared to a distorted 2022, but underlying growth from CY2019 is ongoing
• APAC and Aust - higher growth pace, expect Asia to grow scale
• Subscription growth momentum - good pipeline and additions in 2M in CY2024, no slowdown
• Transactions held up better than most majors:
• GDS - big beneficiary of return of leisure travel post Covid
• Pay - on par with average growth rates
• Demand Plus - strong ability to drive activity and share of Gross Booking Value - strong in Jan/Feb
• LTV/CAC is 5.3x - higher than pre-Covid, LTV has expanded and CAC continues to moderate
• Channel Plus Partners - signed on Agoda and Hopper
• Agoda is either top 5th or 6th of global channels, strong in Asia and is very big
• Channels Plus takes away friction from inventory management
• Both sides have monetising opportunity - SDR, Hotels, Online Travel Agent
• SDR is one of the largest supplier of inventory to the majors
• Channels Plus creates new distribution channels, is not part of Demand Plus - complementary, not cannabilistic
• Channels Plus - hotel has 1 pipe which opens many distribution channels - removes inventory management friction
• Pilot in mid-CY24, impact will be seen in FY2025
• Revenue growth is driving leverage and scale
• Positive Underlying Cash Flow in Q1 and Q2
• Not looking at M&A

Discl: Held IRL and in SM

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.

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.

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

• 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

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.

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.