DISCLOSURE: THE FOLLOWING POST CONTAINS MY PERSONAL OPINIONS ONLY. THIS POST IS NOT FINANCIAL ADVICE, NOR A RECOMMENDATION TO BUY OR SELL SECURITIES IN ANY OF THE MENTIONED COMPANIES. PLEASE CONSULT A LICENSED FINANCIAL ADVISOR BEFORE MAKING ANY INVESTMENT OR TRADING DECISIONS.
STOCK CODE: BTH – BIGTINCAN HOLDINGS LIMITED Shares on Issue: 176m Share Price: 27c Market Capitalisation: $48m Sector: Technology (SaaS) Cash:
Recent Presentation: http://www.asx.com.au//asxpdf/20171122/pdf/43pgh6j7gfz6mv.pdf
Company Overview Video:
Company Customer Story Video:
CEO Inverview:
Overview
Bigtincan Holdings (BTH) is a software-as-a-service (SaaS) company that provides businesses with software solutions to simplify and increase productivity in sales enablement. The company has its own proprietary software and Intellectual property that uses artificial intelligence to help its clients increase sales and productivity.
“Bigtincan is a leading provider of enterprise mobility software, that enables sales and service organisations to increase sales win rates, reduce expenditures and improve customer satisfaction through improved mobile worker productivity. The core of Bigtincan’s business is its integrated single-platform for sales and service organisations, Bigtincan Hub.” (Source: BTH Prospectus)
Where the business is now: The Company is in the process of scaling, adding contracts, landing new contracts and expanding relationships with existing clients. This growth is reflected on the company’s strong revenue growths, and reducing cash burn; as it targets profitability in 12 to 24 months.
Capital Structure: Insiders own 33% of the shares on issue, their interests are strongly aligned with that of shareholders. Institutional shareholders include Australian Ethical Investments (9.55%), Regal Funds Management (9%), Southern Cross Venture Capital (17.3%)
SaaS Market: The majority of SaaS companies do business in fairly new product markets. Such markets include a small number of fast growing companies that compete for market share. There is typically one winner, with first mover advantage that will dominate each product market, by expanding quickly and taking a large chunk of market share. The niche software segment that BTH is in, reflects such a dynamic. As an example of this, one can just look at the highly successful ASX listed WTC, that has dominated its niche market and expanded rapidly to take a large chunk of market share.
Key Clients & Partners: Bigtincan has a number of large multinational clients & partners, including Apple, AT&T, Verizon, Optus, Samsung, Salesforce, Symantec, Singtel, amongst others.
Recurring Revenue: Bigtincan’s revenue is very sticky, with 85% recurring revenue as at FY17, which shows that its products work and clients are happy with it.
Targeting Profitability
So far, Bigtincan is tracking well, and doing all the right things in terms growing revenues and reducing cash burn.
Monthly cash burn has reduced from $413k at end of FY16, to $363k at end of FY17
Monthly cash burn is forecast to reduce even further to $259k at the end of the 2017 Calendar Year.
If the trend of revenue growth continues to accelerate, and monthly cash burn continues to decrease, shareholders can look forward to the day Bigtincan eventually turns cash flow positive, and eventually profitable.
If the current trend continues, Bigtincan won’t have to raise anymore capital before becoming profitable, unless they acquire other businesses
I have created the following chart to demonstrate this in a visual manner.
Now i want to highlight, that i am getting a sense of dejavu here, and let me show you why.
Ahhh… good old BIG.. now its easy to see visually what i am seeing, as its exactly the same sort of pattern i saw in BIG back in April when it was 40c a share. Granted BIG was growing its revenues at a much faster rate, hence the share price increased at a much greater pace than what i would expect Bigtincan’s to.
Peer Comparison: Its no secret, that successful SaaS companies trade at crazy valuations. Some ASX examples include WTC and XRO. I will use WTC as a case study comparison, because like Bigtincan, it was a first mover in its niche product market, and has proceeded to dominate it.
WTC’s 2016 IPO priced it at a market cap of $974m, while it made revenues of $70m in 2015, this gave it a market value of 13.9 times FY2015 revenue and 9.5 times FY2016 revenue. WTC was profitable at the time of its listing, and it appears that Bigtincan is looking like it may follow such a trajectory, with early stage profitability.
Bigtincan is currently valued/trading at 3.5 times FY2018 revenue. I can understand why Bigtincan presently trades at a low revenue multiple, due to it being a much earlier stage company than WTC, but there in lies the opportunity and the risk. If management continue to execute their growth strategy and turn profitable, there is no reason why Bigtincan wont rerate significantly in the future as more institutions and investors realise the opportunity for significant capital growth by investing in Bigtincan.
Summary: I think Bigtincan has all the right ingredients to make it BIG, but due to its early nature, it is a high risk bet. If management can continue to execute their growth strategy, keep growing revenues, while managing costs and decreasing the monthly cash burn, I think Bigtincan can turn into a profitable SaaS company in 12-24 months. On current metrics, they have enough cash to see them through to profitability.
Disclosure: I hold a significant position in BTH
The information below was sourced from the Baillieu Holst Research Report: https://www.baillieuholst.com.au/publishedresearch/2017/BTH_10apr17.pdf
BTH provides sales enablement software to sales and service-oriented companies. Such firms typically have a high percentage of their workforce out in the field using mobile computing devices. Bigtincan software is designed specifically to run on these devices, automating and streamlining business processes to improve employee productivity.
Full suite of capabilities and AI: Bigtincan Hub allows field employees to access, customise, present, collaborate on and share content from a mobile device within a single, integrated platform. The inbuilt machine learning and artificial intelligence (AI) system will automatically “push” the most recent and relevant content to a user’s mobile device, as well as capturing data for later analysis and automating manual processes.
Big benefits for end users: The major benefit of BTH’s software is in reducing the time field personnel spend finding or creating the content required to perform their primary task. After implementing similar sales enablement software, one customer saw a 28% decrease in time spent building presentations and a 45% increase in time dedicated to sales.
Highly scalable model with large US beachhead: North America is the largest market for Enterprise Content Management, with an estimated market size of around $16bn and growth of around 16% pa. BTH is already well-established in this region, with its marketing HQ located in Boston and around 90% of its revenue generated in the US.
BTH Price at posting:
27.5¢ Sentiment: Buy Disclosure: Held
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