Had a quick revisit of this one after the full year FY23 results this morning.

The contract renewal with McDonald's in Aug 2022 was one hell of a renewal. McDonald's is >90% of Plexure's revenue, and it has more than doubled since the renewal. I certainly didn't realise it was that big at the time.

If I normalise all their numbers, they're running at around NZ$10.5m/annum EBIT or around 20x EV/EBIT. Looks interesting - just unsure where the organic growth will be coming from in future years since everything else outside the contract renewal looks pretty flat.

Something you don't see every often - the company has really ramped down the amount of intangibles (mainly software dev) being capitalising. As a result amortisation was $9m higher than what was actually spent on capex, and NPAT is not shown in its most favourable light.

Normally companies like to dress up the bottom line numbers, and this is very much a dressing down. Which is very interesting.

Thoughts on the Plexure FY22 Results Update

Plexure released an update on their FY22 results today. Below are some high level thoughts after a quick read through.

For reference, Plexure was profitable and had positive free cash flow (when adjusted for non-recurring items) in 2019 and 2020. An aggressive and failed pursuit of growth in 2021 saw a significant increase in expenses such as wages & staff costs and contractor expenses; resulting in a $6.8M loss and cash outflow of $5.6M. This excludes costs associated with dual listing on the ASX (previously only NZX listed). Plexure merged with TASK ~6 months ago and as with any merger you would hope synergies would benefit the newly combined company. This doesn’t appear to be the case.

Group revenue up $3M

A modest 12% increase would reinforce the variant perception that at least for the time being this is no longer a high-growth company. Going even deeper, the more attractive platform division (Plexure) saw a 10% fall in revenue.

Plexure platform saw a 28% increase in customer activity & a 44% increase in end-to-end users

Plexure state this level of platform usage results in higher costs and that revenue increased have not matched pace with these costs and point to legacy contracts with McDonald’s. What they are referring to is the fact that older McDonald’s contracts are on a fixed price vs newer contracts which are more attractively variably priced. In other words, on a fixed contract Plexure gets paid regardless of the number of users and on a variable Plexure gets paid more as transactions increase.

This could make sense as Covid may have acted as a tailwind pushing more customers to use the app. As someone who frequents multiple McDonald’s for a daily coffee this checks out as numerous locations are pushing use of the app at their drive thrus more recently.

Salary and wage costs were reduced 40% saving $8M on an annualised basis

With a $17.6M Wage & Staff Costs expense in 2021 and $11.1m in 2020, an $8M reduction would suggest some synergies with the TASK merger.

Net loss after tax for the full year was $24.1M

Even taking into account the one-off and non-cash costs they list, this seems high. It’s only been 6 months but you would hope the bottom line would improve following a merger. On the other side, it’s likely their $6.8M loss (excluding listing costs) in 2021 did not reflect a full years increase in staffing costs (up $6.5M from the previous year). Regardless, there is still a significant gap (~$5.6M) between the one-off expenses they list, totalling $11.7M, and this years $24M loss vs the previous years $6.8M.

Plexure’s division revenue fell 10% yoy. Curiously, the company has not shown TASK’s 2021 revenue numbers (below).

To me this is a yellow flag. What are they trying to hide regarding the TASK division? Unfortunately, I wasn’t able to attend the investors call or I would have brought this up.

Excluding costs associated with the acquisition of TASK, Plexure saw a cash outflow from operating and investing activities of ~$19M. Compare this to $5.6M outflow in 2021 and pre-merger.

So far any significant synergies from the merger with TASK aren’t apparent. Of concern are massive increases in cash outflow and net loss and a fall in revenue from the Plexure division. Inversely, there was a modest savings in staff costs. Of additional concern is lack of clarity from management regarding the TASK divisions previous year revenue numbers. It may be too early to judge the merger but for the time being, the market doesn’t view it favourably (below).

A variant perception on the Bull side could provide a strong buying opportunity based on the current share price. One such perception could be management’s expectation that McDonald’s revenue will make up less than 50% of group revenue. If this gets below 40%, Plexure can pursue contracts with other QSRs. I’m not sold on this and apparently neither is the market.

While briefly one of my highest conviction holdings, I believe this reinforces the fact I was wrong. Plexure no longer has the growth prospects investors such as myself were hoping for and this has been reflected in the share price.

Plexure Group Postmortem

Plexure group was a top holding for me in terms of conviction. Despite my belief in the company and corresponding position size, I would end up losing 46% by the time I sold. They say you learn more from your loses than you do your wins. While I may be financially poorer as a result of this investment, I am a better investor because of it.

What I did wrong

Position sizing

Lack of understanding of competition

Articulation of Bear Case was inadequate

What I did right

I sold when my thesis broke avoiding further loses

What I learned

Position Sizing & Patience

I have a lot of quotes on my wall. Some of these preach the importance patience, to build a position over time and to wait and let management prove themselves before buying more (credit to Ian Cassel). I should have paid more attention to them. One in particular would prove to be especially relevant:

“These losses would have been lessor if I had built my position over the course of 6 months, rather than a few weeks…. Only build positions over time as you do more research & if you’ve followed a company closely for at least 6 months, but preferably more.” ~Unknown

Instead I built too large of a position over too short a time. I focussed too much on quotes such as:

“Be humble enough to know when you’re wrong and arrogant enough to know when you’re right and double down.”

“When you know bet big.”

“When you have tremendous conviction you have to go for the jugular. It takes courage to be a pig.” ~Druckenmiller

Much of this falls under hubris (below).

Humility

The market doesn’t under price growth companies and certainly not to the extent my DCF was implying. I should have argued the Bear Case much harder, why my valuation was wrong and inverted questions. Instead of arguing why 95% of revenue coming from McDonald’s wasn’t a bad thing I should have spent more time arguing why it was. As part of McDonald’s equity stake, Plexure was unable to pursue 10, mostly unnamed, QSRs as long as McDonald’s made up more than 40% of their revenue. I thought they could overcome this which ended up being a moot point (see below).

Competition

I thought a lack of competitors meant no competition but ignored the fact large companies can build products/tech in house. Embarrassingly this never occurred to me until I listened to Dave Sather, Sean Stannard-Stockton and Felix Narhi on the Latticework Investing Podcast (link below). The Starbucks app was described and it sounded just like what Plexure offered. It wasn’t made by one of Plexure’s competitors, there were none, it appears to be made by Starbucks themselves. Would Starbucks have been interested in employing Plexure to build this for them? Possibly, but the noncompete made this impossible.

This highlights the importance of differentiating between the serviceable obtainable market (SOM) and the total addressable market (TAM).

Additionally, if the market had such high margins and attractive metrics why wasn’t it attracting competition? A high ROIC attracts competition and Plexure lacked a moat to keep them at bay. I should have realised this.

Many of these can be grouped under not understanding and articulating the bear case well enough. We’re told we need a variant perception on a company; an insight the market is missing. Joe Magyer states: “If you don’t have a clear variant perception about a business either you don’t know it well or the market has already priced it really well.” I had a few. If you strip out temporary growth costs the company’s mediocre ROIC becomes much more attractive, ratios and margins would further improve as they transitioned new clients onto usage based contracts and I believed the market misunderstood the company. I also believed the market was penalising the company too harshly for having a single customer make up 95% of revenue.

In the end, I believe the true variant perception was that Plexure was no longer a high growth company. They wouldn’t be able to attract new customers and revenue would no longer grow at ~45% per year. Ultimately this would lead to departures of both the CEO and CFO and a deterioration in company culture. Their non-compete with the golden arches may as well have been a set of golden handcuffs; handcuffing them from executing on their growth strategy.

https://podcasts.apple.com/us/podcast/dave-sather-sean-stannard-stockton-and-felix-narhi-on/id1260964219?i=1000442558695

Plexure is making 55 "non-engineering" roles redundant in order to save $8M. $8M/55 = an average salary of $145,500 per employee being let go.

https://www.rnz.co.nz/news/business/457883/plexure-lays-off-55-staff-to-reduce-costs-by-8m

PX1 raising AUD20m to support its acquisition of Task. An additional $80-90m of shares to be issued and $10m cash used for this. Dilutional but I think positive and accretive. Might also unlock them from the over-reliance in McDonalds as others have suggested.  
Disc. I am a long suffering PX1 holder

What Does the Task Retail Merger Mean?

With an inability to sign up new customers, company culture deteriorating and sudden departures from the CFO and then CEO, Plexure hasn’t looked pretty. However, their recent merge with Task Retail is a life raft that the market likely won’t appreciate. It’s not the fact Task doubles Plexures revenue that excites me. Nor the fact Task primarily generates recurring revenue making up 79% of their total. Despite a pricey 9x sales, what excites me about the merger is that McDonald’s revenue is expected to make up less than 50% of total group revenue. It currently makes up 95%.

Why is this so important aside from the obvious? Plexure has a phenomenal business model as outlined in my thesis; however, they’ve been hamstrung by their agreement with McDonald’s. As part of the McDonald’s 10% equity purchase, Plexure was provided with a list of 10 quick serve restaurants (QSRs) that they can’t sign as customers. While this list isn’t publicly available, we do know KFC and Starbucks are on it. To better understand the impact this has it helps to understand revenue by the top US QSR brands. This drops off quickly after the top 2 and quickly starts to fade past 10.

https://www.qsrmagazine.com/content/ranking-top-50-fast-food-chains-america

Plexure has 2 outs to this. The first is if they acquire a company already working with one of the 10 names on the list then they can go ahead and sign the customer. The second is if McDonald’s revenue sinks below 40%. With the Task merger, the first is ticked but to what extent we don’t know and the second is getting very close.

With all the problems Plexure has faced, I believe the McDonalds non-compete has likely been the biggest contributor. Plexure still needs to show me they complement each other well, the new CEO can execute and improve company culture and I still need to dig into Task Retail the company itself. However, it looks like the merger removes Plexure’s biggest barrier to growth.

When CEO & ED Craig Herbison resigned with immediate effect less than 2 weeks ago I said it "will be interesting to see who comes in and what they bring, not a great time to be a Plexure shareholder..."

Well, now (I think) I know why the timing of the CEO exit seemed a little sudden. I expect he was unhappy with the planned acquisition of TASK and the TASK CEO assuming the role of CEO for the combined entity, so was exited immediately (probably of benefit to both parties).

This is a huge acquisition for Plexure, and looks to be very complimentary on a number of fronts - reduces customer concentration, complementary products, cross sell opportunities.

There are a few concerns for me which has stopped me from adding to my position at this stage:

1) This almost doubles the market cap of Plexure, so there will be a lot to integrate with associated risks.

2) The new CEO Daniel Houden and his brother Dean (CTO) from TASK have no LinkedIn Profile and are an unknown quantity having only worked for this company (that their father started 20 years ago) since they left school.

3) There's no accounts provided for TASK, so I have no idea if the price paid is a good one or not for TASK.

4) Not sure if this is papering over some cracks for either company - only time will tell.

2 weeks can be a long time in small caps, it might actually be a great time to be a Plexure shareholder...

Disc: Held

CEO & ED Craig Herbison, has resigned with immediate effect from today, 4 August 2021, per this announcement https://www.nzx.com/announcements/376711

Not a good look to be going with immediate effect.

As @CanadianAussie pointed out here, the CFO recently resigned.

Looks like there's more than one cockroach in this kitchen, the question is how many.

Will be interesting to see who comes in and what they bring, not a great time to be a Plexure shareholder...

Disc: Held

Resignation of CFO Andrew Dalziel

Plexure advises that CFO Andrew Dalziel has resigned.

Dalziel had been with the company nearly 5 years and played an important role in the company's turnaround. I outlined in my initial thesis I would consider selling if any of Norman, Dalziel or Herbison left and have to stay true to this.

Of additional concern is a lack of new customer signings, a deteriorating company culture and difficulty executing their growth strategy.

Plexure announced they’ve signed a deal with Pita Pit

The Pita Pit app has a 2.3 star rating on Android & a 4.7 star rating on Apple. I downloaded & had a play around on the Android app & it appears pretty clean & easy to use. While I’m inclined to say they won’t need an app developed or mobile order & pay the release states:

“…decided the time is right to engage with Plexure in an effort to consolidate these brands within one mobile app and improve the overall customer experience through harnessing their customer data.”

It sounds like they’ll be developing a single app for all of Pita Pit & their virtual restaurants Bowl’d and Egg’d as well as providing personalisation and analytics.

I couldn’t find a website for Egg’d (they appear NZ based) but Bowl’d appears to have 4 locations in Australia.

Significance

Pita Pit – Over 500 locations in 12 countries

According to Google Pita Pit generates $300M in annual revenue

2 of Plexure’s current customers (for context)

White Castle – 363 of a total 377 locations in 13 US states

White Castle generates $1-10M in annual revenue

McDonald’s – ~11,500 of a total >37,855 locations

It’s good to see Plexure with their first new customer win of the year.

I had never heard of a virtual restaurant before and was pretty intrigued. As per Wikipedia:

A virtual restaurant is a food service business that serves customers exclusively by delivery based on phone orders or online food ordering. It is a separate food vendor entity that operates out of an existing restaurant's kitchen.

Virtual restaurants are set up within existing restaurants, allowing businesses to cut costs by sharing space. Virtual restaurants also save money by avoiding dine-in service through reliance on delivery service. Virtual restaurants rely on their own delivery drivers or third-party delivery apps such as Grubhub, Uber Eats, Postmates and DoorDash to deliver food to customers. However, some companies also incorporate their own delivery system into the business model.

file:///C:/Users/Canad/AppData/Local/Temp/02380471-1.pdf

https://www.bowld.com.au/

https://en.wikipedia.org/wiki/Virtual_restaurant

Plexure held their Virtual Roundtable – The Future of Mobile Commerce

Takeaways:

Strong tailwinds for company’s such as Plexure leveraging mobile.

As more companies adopt tech this puts pressure on competitors to keep up.

The security concerns touched on were also interesting as my understanding is that Plexure has one of/the highest level of security across its competitors.

Notes

Craig Herbison – CEO & Director, Plexure

Mobile commerce has become a priority. People are shopping at a distance & often fearful of going into retail environments, even if they’re able to in some parts of the world.

This is accelerating people’s desire to use mobile to search, order, buy & get fulfilment (pick-up, drive-through, curb side or delivery)

Plexure is front and centre of this trend

Plexure’s customers are increasingly using their mobile order and pay to complete transactions at distance

Mentioned a customer in Indonesia1 wanted to run really hard but they had to dial them back to get them up and ready. Once they did this they’d completed their business case in the first 2 months.

Mentions more mature clients in Japan who are “on fire” using mobile order & pay and growing their business through that channel

Company’s adopting these technologies set the standard, setting them apart, winning them more business & market share. It puts pressure on competitors to follow suit.

1 This would be in relation to grocer Super Indo who exceeded app user targets in the first 2 months of adopting Plexure’s tech.

Cathy Novelli - VP Marketing & Comms, Rakuten Ready

Covid forced people to rethink how easy shopping experience is and how seamless online to offline was.

This is where mobile shined.

When you can move more of your customers to mobile it gives you more opportunity to build your orders and fulfillment around the customer – being truly customer centric. They can order online and you can know exactly where they are on their way to pick up.

Mobile will allow a more perfect customer experience leading to brand loyalty, repeat customers and business growth. Brands will be able to rethink what the perfect customer experience is.

Before Covid Rakuten was more of a luxury technology. Covid accelerated this, it reshuffled tech priorities. She believes mobile is at the centre of it.

Vanessa Sorenson – Managing Director, Microsoft

Saw more digital transformation in 2 months than they would have in 2-10 years.

Views mobile commerce more broadly – it’s “anywhere commerce”, bridging the digital and physical world.

The organisations who had already embraced or started to were able to pivot so much quicker.

82% of consumers view contactless as cleaner and easier way to pay.

“Everything we do has to make sure that it fits and works on a mobile device.”

Businesses must excel in a number of areas to compete – personalisation, staffing, supply chain, cross channel experience; while ensuring customer & employee safety.

Critical to each of these requirements is the ability to leverage data rich intelligence and ensure these insights are distributed across all levels of the organisation.

Marcy Larsen – Retail Industry Executive, Microsoft

This may be the largest data gathering event of our time and mobile is the best/only way to present this personalised experience.

Microsoft is looking at the bigger picture – data.

Feels the trend of presenting customers data in a trusted, secure and private environment will continue.

Privacy and security even more important with rise of bad actors.

With regards to data it’s critical to understand consumer behaviour

As more of the business process is moving to mobile, employees (hospitality, convenience) are becoming “app assistants”. Employees may need to understand how to help customers with the app.

Craig Herbison – CEO & Director, Plexure

A lot of questions Plexure gets is around privacy and data protection. Plexure aims for the highest level. It’s complex and often requires Plexure to help customers navigate that.

Zack Oates – Founder & CEO, Ovation

Number one reason people don’t fill out surveys – the hassle.

Mobile has changed this – it’s easy for the consumer.

Over 52% of restaurants are using QR codes for menus & nearly all iPhones have a native QR code reader

All about making feedback simple and easy for merchant and customer and bridging gap between digital and physical. Mobile achieves this.

John Dittig – Senior Leader Business Development, Samsung America

Q What is the impact of 5G on mobility and mobility services?

A It’s more efficient and faster.

5G is changing the game with regards to retail, QSR, grocery as it’s all about efficiency and speed.

Certain verticals in particular depend on 5G; for example, self-service.

Q What’s your perspective on any particular verticals or categories that are adopting this fastest?

A QSR is ahead of the curve. You still can’t go into many in the US and if you do there’s a line wrapped around the building. QSR wants to cut these lines down.

This then pushes convenience stores to adapt as they feel they’re in competition with QSR.

Tier 1 retail. The household names (Woolies of the US) have adapted quicker as it’s even more important [due to investment in physical stores?] for them to make customer experience seamless.

Past year has had the most customisation to fit customers’ needs he’s ever seen in the industry

Colin Daymude – Head of Marketing, Plexure

Brands that understood how to communicate with their customers during Covid-19 were the big winners.

McDonald’s Japan saw incredible adoption of mobile order & pay as they were able to efficiently communicate this offering to customers.

CEO Craig Herbison presented at the ASX Small & Mid Cap Conference.

A few highlights:

Cashflow positive past 3 years but decided in April 2020 to return to cashflow negative to pursue growth as they were confident enough in the business

Raised $30M through a CR and are putting this towards growth – mainly increasing employee headcount

Will be cashflow negative for the next 3 years before returning to profitability

Well-funded with $40M cash in bank

Covid has negatively impacted revenue growth over short-term

Employee growth is where majority of costs are going

Recurring Revenue

Platform Revenue

Makes up 67% of FY20

License fee – active users, % of transactions, profit share, # of stores – varies

Usage fee – # of customers engaging on platform

Support fee – percentage of overall license

Managed service fee – predominately people they put in customers environment to help them with process

Non-Recurring Revenue

Services Revenue

Integration fee – enterprise scale piece of software & tech requiring integration to point of sale

Funded development fee – configuring or customising experience into their local markets

Consulting service fee – help customers identify revenue opportunities and build out campaigns

Craig seemed rushed but did a good job overall. If you’re familiar with the company, there’s little new information; however, if you’re not this is a good place to start.

https://www.youtube.com/watch?v=XHufJYBO22c&list=PLUm38kI3ZeYsrDffosUoSwbnA4r8iJtPd&index=9

Thesis (Aug 2020)

•45%+ revenue growth over the past 3 years

•Profitable over the past 2 years1 & Cash flow positive for the past 3 years1

•High gross margins averaging 75% the past 3 years

•Strong balance sheet with no debt

•Strong company culture

•Bluechip customer base

•Strong and experienced management team

•Directors and management own 2.55% with further 5.7% possible through employee options2

•Employees have doubled from pcp – suggesting company is targeting growth++

                -further 10 Auckland based job listings in past 14 days3

•Resilient business model showing continued revenue growth during Covid-19

•Largest customer in McDonald’s holds 10% in the company

                -highlights high-quality offering

•Valuation - DCF bear case NZD$1.61/AUD$1.43, base case NZD$2.52/AUD$2.39

                -undervalued 14-92%4

•Positively trending ROIC indicates improving competitive advantage

•ROIC 7%; improves to 23% when negating staff costs associated with aggressive growth

                -management are strong capital allocators

•Strong 40% rule - score of 80%, 63% and 67% over past 3 years (growth rate + EBITDA)

•Highly scalable

•Potential for highly sticky customers

•Misunderstood – company/industry can be difficult to understand

•Disruptive

•Strong tailwinds

Why I Would Consider Selling

•McDonalds sells a significant stake (>50%)

•Dalziel, Herbison or Norman leave

•Company culture deteriorates

•Company unable to execute on growth strategy

•Government regulations negatively affecting business model

Notes

1 ignoring issue of convertible notes in 2018 & 2019

2 excludes any dilution from ASX IPO

3 as of 19/08/20

4 Updated to include dilution from raising $32M worth of shares from an ASX listing based on share price of $1.31. Discount rate 12%, Perp Growth Rate 4%, EV/EBITDA Multiple 8.0x, 5-year DCF. Bear case 25%, 25%, 20%, 20%, 20% revenue growth over 5 years. Base case 27.5%, 55%, 45%, 45% & 25% revenue growth. Does this make sense? CEO “We want to be a $100M revenue business in a very short period of time.” Base case has $105M revenue 2024; Yes.

5 Accounts receivable total of $4.341m, $2.167m is showing as past due (2019: $1.222m); however, based on overseas payment patterns this is considered normal.

6 successful expansion into grocers will provide diversification. Ahold Delhaize operates supermarkets and e-commerce businesses with 6,500 stores in 11 countries. In March 2020 Plexure launched mobile marketing technology for Super Indo – one of Indonesia’s largest supermarket chains. Super Indo is majority owned by Ahold Delhaize and should they be successful could provide an opportunity with Ahold Delhaize’s remaining brands.

I hold PX1

Full research report attached.

Competitors

Gartner defines Mobile Marketing Platforms as “software solutions that help organizations manage, activate and optimize marketing campaigns that target consumers with multiple message types — SMS/text, push notifications and in-app messages — on their mobile device.”

This competitor analyses focuses on mobile marketing platforms operating as stand-alone, purpose-built marketing platforms.

Core capabilities of mobile marketing platforms, as defined by Gartner, include the ability to:

•Gain insights via web and app analytics about customer activity on a brand’s mobile website and/or application and generate useful engagements.

•Employ any of the major messaging types to enhance multichannel campaigns or to deliver mobile campaigns to a brand’s customers.

•Leverage existing customer datasets to deliver a full range of marketing engagement types to an audience primarily accessible on mobile devices.

Leaders

Airship

Size: 201-500 employees

Focused on US and European markets with growing presence in Singapore and New Delhi. Clientele predominantly media and entertainment, retail, and travel and hospitality.

Strengths: scalable platform, can integrate data from multiple 3rd party systems, can stream data from Airship to other systems in real time. Tech partnerships with Salesforce, Adobe, Acoustic and Movable Ink.

Weaknesses: price and analytics and reporting.

Culture: 55 Glassdoor reviews, 3.6/5, 70% approve of CEO, 62% recommend to a friend.

MoEngage

Revenue: $10-25M

Size: 201-500 employees

Geographically diverse with clientele predominantly financial services, retail, telco and media. Employs AI & ML with focus on expanding AI capabilities. Strong company culture.

Strengths: AI-driven optimisation, training and support, push and app content customisation.

Weaknesses: can be a 45-60-minute refresh interval limiting real-time audience engagement in some cases, issues with platform performance consistency.

Culture: 66 Glassdoor reviews, 4.4/5, 94% approve of CEO, 85% recommend to a friend.

Swrve

Size: 51-200 employees

Geographically diverse with clientele predominantly travel and hospitality, streaming media, and financial services.

Strengths: real-time support, automation, dashboard and reporting, investments in AI and ML

Weaknesses: lack of B2B and small to midsize organisation focus as it shifts focus to enterprise customers – will service and support scale?

Culture: 63 Glassdoor reviews, 3.2/5, 80% approve of CEO, 55% recommend to a friend.

Vibes

Size: 1-50 employees

Focused on US and UK and clientele are typically restaurants, financial services, and retail. Similar to Plexure they are focused on enriching customer experiences between a company’s physical locations and mobile channels.

Strengths: analytics and data visualisations, support for complex integrations, mobile messaging, ease of use for clients to access data.

Weaknesses: aimed at midsize-enterprise marketing teams with mature mobile marketing strategy.

Culture: 60 Glassdoor reviews, 3.8/5, 62% approve of CEO, 61% recommend to a friend.

Challengers

FollowAnalytics

Size: 1-50 employees

Integrates with MMH platform vendors to deliver a mobile product to enterprise marketing teams. Focused on US and France with expansions into Asia Pacific. Serves hospitality, retail and financial services.

Strengths: AI with plans to further expand, MMH integrations (Salesforce, Oracle, Adobe, SAP, Shopify), predictive capabilities.

Culture: 12 Glassdoor reviews, 3.8/5, 0% approve of CEO, 76% recommend to a friend.

IMImobile

Revenue: UK$171M Net Profit: UK$1.97M

Size: 1,100 employees

Geographically diverse with clientele mainly large enterprises in banking and financial services, telco, and retail. High CEO approval scores from employees.

Strengths: comprehensive channel offering (Apple Business Chat, WhatsApp etc), usability, real-time engagements.

Weaknesses: analytics and reporting, customer profile enrichment (may need to rely on IT support in some instances).

Culture: 178 Glassdoor reviews, 4.1/5, 97% approve of CEO, 67% recommend to a friend.

Pyze

Size: 1-50 employees

Geographically diverse with clientele typically large B2B and B2C in numerous industries.

Strengths: ability to track users across multiple channels and integrate a variety of data sources, customer journey analytics, white label services to integrate with mobile app development and publishing platforms. Strong company culture and CEO approval.

Weaknesses: widely spread focus, enterprise focus.

Culture: 14 Glassdoor reviews, 4.3/5, 100% approve of CEO, 100% recommend to a friend.

Upland

Revenue: $260M

Size: 832 employees

Acquired Localytics in 2020. Focused mainly in US and Europe with clientele predominantly media and entertainment, retail, financial services, non-profit and government. Common employee complaint – difficulty assimilating culture/people of acquisitions to Upland.

Strengths: analytics capabilities, ease of use, personalisation.

Weaknesses: growth strategy revolves around acquisition; feature sets tend to lag behind competitors.

Culture: 167 Glassdoor reviews, 3.4/5, 64% approve of CEO, 58% recommend to a friend.

Xtremepush

Focused mainly on North America and Europe but expanding globally. Clientele predominantly midsize companies in gaming, publishing, digital commerce, and financial services. Platform centres around AI & ML and customer engagement.

Strengths: AI & ML capabilities, advanced chat, extensive and easy to use workflows for mobile campaigns.

Weaknesses: does not offer messaging for OTT devices, dashboard lacks advanced visualisations or customisation capabilities.

Culture: n/a

Niche Players

CleverTap

Size: 51-200 employees

Geographically diverse with clientele predominantly small and midsize companies in retail, financial services, and media and entertainment. Focused on customer engagement and retention, audience segmentation and analytics for mobile apps.

Strengths: data visualisations, ease of use, audience segmentation

Weaknesses: may struggle servicing larger clients with legacy systems, customer acquisition.

Culture: 41 Glassdoor reviews, 3.7/5, 80% approve of CEO, 76% recommend to a friend.

Leanplum

Size: 51-200 employees

Geographically diverse with clientele typically in gaming, retail, and media and entertainment.

Strengths: single product, (A/B) testing and optimisation, natural and easy to use.

Weaknesses: simple predictive models, recent management changes and lack of revenue growth.

Culture: 113 Glassdoor reviews, 3.2/5, 100% approve of CEO, 56% recommend to a friend.

Punchh

Revenue: $100-500M

Size: 201-500 employees

Focused on developing customer relationships across physical locations and mobile channels as well as managing loyalty programs. Geographically diverse with clientele mainly QSR, convenience stores and retail organisations. Planning to expand into financial services, hospitality and life sciences.

Strengths: integration with physical retail, customer-oriented design.

Weaknesses: difficulty integrating with some legacy POS systems, predominant experience is in retail.

Culture: 60 Glassdoor reviews, 3.7/5, 76% approve of CEO, 75% recommend to a friend.

Plexure

Size: 161 employees

Geographically diverse serving QSR, retail (negligible), and grocery.

Strengths: modular platform layered onto AI & ML, real-time capabilities and predictive analytics make them well suited to for high-volume, high-frequency campaigns highly valued by large franchised QSR and franchised retail, fraud detection beyond SOC 2 compliance.

Weaknesses: mobile channel focus, size and resources

Culture: 3 Glassdoor reviews, 4.7/5

Summary

The market is young with plenty of time for companies to establish themselves in each market segment. If any decide to go public (appears only IMImobile and Upland are publicly listed) this could more easily provide them with funds to accelerate growth. Plexure has the advantage of already being publicly listed and the benefits that come with this.

Retail, telco and financial services appear to be the most competitive space and one that Plexure is not currently targeting.

Companies with a similar strategy of enriching customer engagement with physical stores through mobile but NOT directly operating in the same industry’s include:

Vibes

Punchh

Neither are currently targeting Plexure’s markets. Plexure has first mover advantage with grocery and preference for any unserved McDonald’s markets having proof of value and McDonald’s ownership stake.

Vibes is targeted at companies with a “mature mobile marketing strategy” whereas, Plexure has shown the capability serve both immature (McDonald’s Japan) and mature mobile marketing segments.

Punchh provides a more geographical threat as well as industry overlap serving QSR, convenience and retail and managing loyalty programs. Similar to Plexure, Punchh’s strengths are integrating with physical retail and customer-oriented design.

Founder led Pyze may have some overlap with Plexure but appear more widely focused and less specialised. Pyze has a strong company culture.

Threat from any of the others is a possibility and will require monitoring.

Plexure appears to have the highest security/anti-fraud detection of the group and their weaknesses seem the most addressable. They also have one of the strongest company cultures; however, there are only 3 reviews.

This competitor analysis focuses only on stand-alone mobile marketing. Additional competitors exist, such as Salesforce, Oracle, Acoustic, Braze, Adobe, & Sailthru, whose capabilities are sold as part of MMH solution and not stand-alone purpose-built mobile.

Gartner Magic quadrant Oct 26, 2020

https://www.gartner.com/doc/reprints?id=1-24GWT8KI&ct=201027&st=sb&submissionGuid=b0359c8c-08e3-4555-b42e-a93c6db0d3e5

Management & Board

Phil Norman – Independent Non-Executive Chairman NZ$92,500; 2.28%

•Phil was the founding Chairman of Xero Limited, retiring from Xero’s Board in July 2012 after five years.

•Current director roles: Independent Chairmanship of Loyalty New Zealand Limited and Chairman of ASX-listed Straker Translations Limited. Recently appointed a Director of NZX-listed Just Life Group Limited.

•Phil holds an MBA degree from the University of Auckland and is a Chartered Member of the New Zealand Institute of Directors.

With a 2.28% stake and proven experience in a successful high growth tech start-up Phil is the type of director you want on the board.

Craig Herbison – CEO & Director NZ$717,002 (base salary $500,000); 0%*

•Craig took over as CEO in Sept 2017 from the founder and has been an executive director since June 2018.

•Internationally experienced leader with over 20 years of digital brand marketing, business transformation, sales and corporate leadership experience.

•Experience with BNZ as Chief Marketing Officer, General Manager of Marketing and Brand at Spark New Zealand Ltd where he developed and led rebrand of Telecom’s ‘spark’ brand, regional General Manager of brand and communications for Vodafone New Zealand.

Not only has Craig led Plexure’s successful turnaround but he has a proven track record in the marketing space. A passionate CEO with relevant industry experience and proven track record. One negative is zero insider ownership (update: he will NOT be participating in the SPP). However, Craig does hold options.

*As at March 2020 Craig has 3,250,000 options granted to him.

Remaining directors are all reasonably paid making <NZ$50,000

Are key management diverse?

Of the 10 KMP 2 are females.

Does the BOD possess relevant experience?

Strong experience across marketing, tech and start-ups. Only one board member with AI & ML experience; Brian Russell “has 27 years of experience in artificial intelligence and machine learning, global technology commercialisation…”.

Culture

Strong company culture (most of the following is from the website and job listings)

•“Jeans and t-shirt kind of company”

•Have a bring your dog to work day

•Flexible work culture with 2 work from home days a week “we want people to do the best work of their lives and fulfill their career goals while maintaining a happy work-life balance”

•“We also have an open plan office aids both work and play with a pool table, board games and large break out spaces with lots of comfy couches.”

•During a CEO interview on Spotify you can hear pool being played in the background

•“we do provide snacks and fruit and have a thriving and competitive team of pool and table tennis players!”

•“opportunity to build your personal brand as you like”

•Focus on wellbeing – access to employee assistance program, free flu shots, special membership offers at local gym

•Learning and growth opportunities – leadership development programs, internal promotions are the “norm”

Am I concerned the workplace could be too laid back? No, financial performance has been strong.

Do Glassdoor reviews match what management is saying?

3 reviews 4.7/5

04/06/2020 “Great place to work” - positive outlook, great culture, open to innovation, excellent product, willingness to listen; nothing negative comes to mind; 5/5

14/06/2020 “Good place to work” - neutral outlook, cons – lots of managers, filter applicants better; 4/5

02/04/2020 “Strong business” - strong growth trajectory and quality product, recommends with neutral outlook, management “keep up the good work”, no cons; 5/5

10 Auckland based job listings in past 2 weeks. 14 listings in total*

The high number of recent job listings and increase in staff numbers are a strong leading indicator of growth.

Update: 4 of the 10 Technology job listings as of Aug 2020 are still listed (currently Nov 2020) – Intermediate Devops Engineers, Senior Data Engineers, Senior Devops Engineers, and Senior Software Engineers. Could a difficulty recruiting talent affect the company going forward? Yes, however, this is more likely this is due to quarantine and travel restrictions.

*As of 19/08/2020

Is the workforce diverse?

Based on https://www.plexure.com/careers/; and CEO stating they have 29 different ethnicities; Yes.

Market

Plexure operates across 3 segments: mobile customer engagement, loyalty management and mobile order & pay. They are focusing on the predictable high-frequency physical retail vertical – QSR and grocery; in other words, they’re targeting the most attractive sector of the market where customers shop frequently and purchase many items.

Mobile customer engagement platforms expected to grow at a 43% 6-year CAGR to US$39B by 2023

Loyalty management platforms expected to grow at a 20% 7-year CAGR to US$7T by 2023

Mobile order and pay anticipated to grow strongly (no numbers provided)

Platform

Plexure’s platform provides personalised content in real-time driving in-store and repeat visits. The platform uses customer and contextual data sources such as weather, purchase history, behaviour, customer demographics etc to personalise content. Plexure then employs AI and ML to determine the right offer at the right time to provide a highly personalised customer experience.

Plexure has the ability to deliver a loyalty program and personalised advertising content in the form of offers via banners, game pages and push notifications.

Platform offers the ability to link Plexure’s mobile marketing functionality to customers’ existing mobile app or Plexure’s own mobile app if client does not have one themselves (e.g. McDonald’s Japan). This app enables customers to browse, place orders and pay from their mobile device.

What problem does Plexure solve for the grocery business?

Bulk discounting erodes profitability – influence shopper’s behaviour with targeted offers as needed

Online ordering erodes margins – encourage consumers to visit physical store through targeted offers only redeemable in-store

Trend to online grocery – incentivise customers to re-establish previous behaviours of in-store shopping

Aggressive new competitors – deepen relationship with customers with highly personalised engagements

Since Plexure launched their app for grocer Super Indo they have had 107% of their first-year registration target achieved in the first 3 months. App users have a 55% higher basket spend than non-users, 42% of app users have redeemed in store, 20% offer utilisation per transaction and 4.6 stars from 1,200 Play Store reviews, proving Plexure’s value.

Clients

McDonald’s, Super Indo, White Castle and Loyalty NZ.

McDonald’s and Super Indo are the only 2 of significant importance. McDonald’s currently accounts for 95% of PLX’s revenue, while Super Indo (though parent company Ahold Delhaize) provides a significant growth opportunity in the grocery vertical and a chance to diversify revenue and industry concentration.

If Plexure can execute and prove value to Super Indo this is expected to lead to further contracts with Ahold Delhaize and potentially other grocers. Ahold Delhaize operates supermarkets and e-commerce businesses with 6,500 stores in 11 countries and if you view their Twitter page https://twitter.com/AholdDelhaize have been actively pursuing AI in their business model.

CEO Craig Herbison has stated concentration risk with McDonald’s is not an issue as McDonald’s are individual contracts/separate markets. While the company states there is still significant growth runway left with McDonald’s it should be noted some markets have their own tech (North America may be one of these) restricting Plexure’s growth in remaining McDonald’s markets.

Plexure states existing McDonald’s markets can grow through:

•Upselling additional platform and product offers to existing McDonald’s customers

•Securing new territories/countries

•Developing new products

•Increasing user penetration

Plexure is restricted from pursuing contracts with select QSRs as part of the T&Cs when McDonalds bought a 9.9% stake in Plexure. This will limit their growth in the QSR sector.

Revenue Model

Recurring platform revenue (67%) consists of license fee, usage fee, support fee and managed service fee

Non-recurring services revenue (33%) consists of integration fee, funded development fee and consulting service fee

Non-recurring other revenue (1%) includes reimbursement of travel costs incurred by Plexure in servicing existing clients

Plexure plans to change their revenue model to usage so as users grow overtime Plexure will get the benefit with minimal additional cost.

Company Overview

Imagine you’re a quick serve restaurant (QSR) and your customer is driving by the store with no intention of coming in. Once your customers phone gets within 5km of your “geofence” (a virtual boundary around your store picked up by the app using GPS) your app sends your customer a push notification. The app has been collecting that customers data, all of their purchase history and behaviours and running it through Plexure’s AI and machine learning algorithms. It knows that this specific customer loves cheeseburgers and fries after work and that on cold rainy nights like tonight they enjoy a hot chocolate instead of a coffee. Your customer gets a promotion for a double cheeseburger meal and hot chocolate. They hit “buy now” knowing it will be sitting in the warming slot waiting for them as they pull in.

By employing Plexure’s software you’ve increased your guest count by 32% and average transaction value by 35% all because you can create a highly personalised and timely offer. Customers using personalised upsell offers will spend nearly double. Compare that to the effectiveness and cost of a generic TV ad, social media ad or those annoying Dominos Pizza flyers we get in our letterboxes.

How about those customers you’re losing to the new Guzman y Gomez that opened up across the street? 71% of customers at high risk of churn can be engaged by personalised coupons bringing 20% of churned customers back to store.

Personalisation results in higher spend, more visits, lower churn and more engaged customers all while increasing brand loyalty.

By integrating Plexures platform into your existing app, or in McDonald Japans case having Plexure build your app, Plexure makes the sales process for physical retailers seamless, engaging and profitable by identifying where customers are, what they want and then facilitating their purchases.

Plexure has 210M users on their platform, 6B API calls per month, sends 740M push messages per month and is in 78 different languages and 58 countries.

Now imagine you’re a grocery store. You are facing increased competition from aggressive competitors, eroding profitability from bulk discounting and Covid-19 has hit causing many customers to now prefer online ordering which further erodes your margins. Plexure’s platform can encourage customers to visit physical stores through targeted offers only redeemable in store. These offers can influence shoppers’ behaviours and incentivise them to re-establish their previous behaviours of in-store shopping all while deepening your brand loyalty and relationship.

Since Plexure launched their app for grocer Super Indo users have a 55% higher basket spend than non-users, 42% of app users have redeemed in store, they’ve achieved a 20% offer utilisation per transaction and 4.6 stars from 1,200 Play Store reviews, highlighting Plexure’s value.

Compare these examples to traditional deeply impersonal marketing methods. You can now employ highly scalable data collection and ML programs to connect and engage with your customers in real time on their mobile phones.

McDonalds Japan Case Study

https://www.youtube.com/watch?v=XZKEwzu2AnI

Super Indo Case Study

https://www.youtube.com/watch?v=IBvEgmfFJYQ&feature=emb_logo