Company Overview: Bigtincan Holdings Limited (ASX: BTH) is a sales enablement automation company, which is engaged in offering platforms including Bigtincan Learning Hub and intelligent automation solutions used for sales, marketing, learning, and to manage sales training courses. The company has more than 1,000 customer deployments, 500,000+ licensed users covering North America, the UK, and European markets.

BTH Details

BTH Rides on Growing Customer Base and Deal Wins: BTH remains on track with growing investments in Product and Engineering, and Sales and Marketing to attain scale benefits, both organically and inorganically. Despite the global pandemic, the company started FY21 on a strong note and recorded continued growth and expansion across several markets. The company also completed four major acquisitions (Agnitio A/S, ClearSlide Inc, VoiceVibes Inc and Vidinoti SA), which provided innovation opportunities by adding strategic new technologies and expanding BTH’s geographic reach in Europe.

Key Discoveries from FY21 Results:

• Rise in Revenues: In FY21, the company’s total revenue soared ~42% on pcp and came in at $43.9 million. The growth in revenue depicts the company’s continuous focus on optimising pricing and building a sustainable subscription-based model with its customers. The growth was aided by a stable customer retention rate of around 89% and higher subscription revenues (up 44% on pcp).
• Increase in Annualised Recurring Revenue (ARR): ARR stood at $53.1 million as of 30 June 2021, an increase of $17.3 million over the previous year. The rise in ARR was driven by effective investment in sales and marketing and expanding existing customer contracts.
• Increase in Net Loss: Net loss after tax stood at $13.9 million, up from $12.2 million reported in the year-ago period, owing to incremental revenues which were re-invested in the business.
• Gross Profit Expansion: In FY21, the company’s operating gross profit stood at $37.24 million, up from $26.23 million in FY20, underpinned by a higher revenues base.
• Increase in Staff Resources: In FY21, the company’s staff resources grew by 44% and came in at 230 employees through organic growth and acquisition.
• Higher Investments: The ongoing investments into additional sales resources, marketing activities and geographical expansion, led to an increase in operating expenses by 31% year over year. The higher level of investments into software development costs also led to an acceleration of product enhancements in FY21.
• Key Developments: During FY21, the company unveiled more than 100 versions of software across various platforms, delivering well on its product development and innovation strategies. The company also remained on track to expand in the product range with new capabilities and software releases across all platforms (IOS, Android, Web).
• Cash & Debt Position: The company exited FY21 with a cash balance of $56.3 million and total lease obligation of $1.3 million. The favourable capital structure helps BTH to attain its long-term objectives and pursue strategic acquisitions. In addition, the company made an additional capital raise of $35 million in December 2020, which enabled the acquisition of Clearslide.

The below picture depicts a continuous growth trajectory in BTH’s operating revenues since 2016. 

Trend in Operating Revenue; Analysis by Kalkine Group

Key Metrics: For FY21, the company reported a gross margin of 84.9%, slightly higher than the year-ago figure of 84.6%. In FY21, the company recorded cash cycle days of negative 214.8 days compared to the FY20 figure of negative 145.3 days.  Debt-to-Equity ratio in FY21 stood at 0.01x. 

Profitability and Liquidity Profile; Analysis by Kalkine Group  

Top 10 Shareholders: The top 10 shareholders together form around 36.55% of the total shareholdings, while the top 4 constitute the maximum holding. SQN Investors LP held the maximum number of shares with a percentage holding of 13.73%, followed by Regal Funds Management Pty. Ltd. holding 7.1%, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis:

• Loss of key Customers: The company’s financial performance might get impacted by caution in buying behaviour. Also, change in customer preference, and supplier concentration risk add to the woes.
• COVID-19 Led Uncertainties: The company is exposed to the prevailing global uncertainties related to COVID-19 and other geopolitical tensions.
• Stiff Competition: The company is exposed to stiff rivalry from competitors developing similar product lines and services.
• Disruption of Technology Systems: The company is dependent on the performance, reliability, and availability of its technology platforms, data centres and global communications systems. Any disruption, failure, and breaches of customer data could potentially impact the financials of the company.
• The company is also exposed to forex risks and stringent regulatory measures.

Outlook: The company is dedicated to the mergers and acquisitions team, and targets to win new customers and upselling the existing customers. BTH is also investing in technology to support growth in digital and mobility that could positively impact the company’s profitability. The company is anticipating pro forma combined revenues of more than $109 million in FY22. The combined ARR in FY22 is expected to be over $119 million. The company remains on track to benefit from the Sales Enablement market, which continues to exhibit growth and focus across the market on digitisation and mobility.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Recently, the company appointed two Non-Executive Directors, Inese Kingsmill and Farouk Hussein, to the Board of Bigtincan Holdings Limited. The stock of the company has been corrected by ~8.27% in the past one-month. Currently, the stock has a 52-week high and low levels of $1.561 and $0.761, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount as compared to its peers’ average EV/Sales multiple, owing to rising losses, technology disruption, dependence on single products, failure to retain existing customers and attract new customers, etc. For this purpose of valuation, peers such as Nearmap Ltd (ASX: NEA), Livetiles Ltd (ASX: LVT), Appen Ltd. (ASX: APX) and other have been considered. Considering decent liquidity position, higher revenue base, positive outlook, robust customer base, acquisitions synergies, current trading levels, valuation, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.21 as on 15 October 2021, 1:30 PM (GMT+10), Sydney, Eastern Australia.

BTH Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.