Company Overview: Bigtincan Holdings Limited (ASX: BTH) is a recognized global leader of a powerful, intelligent, collaborative and secure solution that automatically delivers the most relevant content to the right users directly, across any device and any network. Top prominent brands including AT&T, Merck, ANZ Bank, ThermoFisher and several others depend on BTH to improve sales productivity and increase customer engagement. The company has implemented a significant enhancement to its product suite with over 125 products. The group operates as a single business unit with revenues from different locations including Australia, the United States of America and other countries.

BTH Details



 
Expansion in Sales Capability and Record ARR: Bigtincan Holdings Limited (ASX: BTH) is a leading provider of enterprise mobility software in the rapidly growing sales enablement market. The company provides an integrated, online platform - “Bigtincan Hub”, which is a powerful, intelligent, collaborative and secure solution that automatically delivers the most relevant content to the right users directly, across any device and any network. As on 20 March 2020, market capitalization of the company stood at ~$81.91 million. During FY19, the company made excellent progress both financially and strategically and continued to demonstrate strong growth in all areas of business. During FY19, Annualized Recurring Revenue (ARR) hit a record of $23.4 million, representing an increase of 52% on FY18. In the same time span, BTH continued to expand its sales capability and focused on new customer wins and expansion opportunities which resulted in an increase in total revenue by 51% to $19.9 million. This resulted in an increase of 5% in gross profit margin to 88% and a decline of 38% in loss before tax to $4.1 million. The reduction in loss represents the maturing of the subscription revenue model of the company and the impact of operational efficiencies in scaling and growing the business. During the year, the company introduced unit economics around the lifetime value of customers and separated out organic and acquisition growth. In FY19, the company delivered 15 new versions of Bigtincan platform software across six different client platforms and launched new product initiatives across key product pillars.

BTH has recently released its interim results for the period ending 31 December 2019, demonstrating growth trajectory with strong unit economics and overall financial progress. During 1H20, the company continued to win new deals and expanded existing customers and delivered product innovation.

The company remains optimistic about the ongoing growth potential and believes that it is well-positioned to take benefit from the opportunities in the evolving Sales Enablement Software market. The company has expanded the US-based sales and go-to-market teams and has built out the structures necessary to support the increasing customers.


FY19 Financial Highlights (Source: Company Reports)

Details of Top 10 Shareholders: The following table provides an overview of the top 10 shareholders of Bigtincan Holdings Limited. Regal Funds Management Pty. Ltd. Ltd is the largest shareholder in the company, with a percentage holding of 17.05%.


Top 10 Shareholders (Source: Thomson Reuters)

Management of Costs and Stability in Balance Sheet: During 1H20, gross margin of the company stood at 85.5%, higher than the industry median of 84.1%. This indicates that the company is managing its costs well and is able to convert its revenue into profit. Over the span of two years, the company witnessed an improvement in EBITDA margin and net margin, indicating the decline in indirect costs of the company. The company has witnessed a slight improvement in Return on Equity over the past one year, implying that the company is well managing the capital of its shareholders and might generate profits internally. During 1H20, current ratio of the company stood at 1.79x as compared to the industry median of 1.72x. This indicates that the company is liquid enough to pay off its current liabilities using its current assets. BTH has witnessed a YoY improvement in Assets/Equity ratio, which stood at 1.62x, as compared to 2.12x in 1H19. This indicates that the business is financed with a significant proportion of investor funding and a small amount of debt, resulting in a financially stable balance sheet. 


Key Margins (Source: Thomson Reuters)

Significant Growth in ARR and Expansion in Customer Base: The company has recently released its interim results wherein it reported an increase of 55% in Annualized Recurring Revenue to $32.4 million and a growth of 51% in revenue to $14.3 million. The company continued to win new deals in North America, Europe and the Asia Pacific and expanded its customer base. BTH also introduced a new product which offered new ways for customers to benefit from the full capability of the Bigtincan technology set. In 1H20, the company’s LTV (LifeTime Value) grew by 84% to $252 million, demonstrating the advantages of strong unit economics. BTH also improved its operating metrics with improvement in operating costs as a percentage of revenue at 112% as compared to 118% in pcp.


Growth of LTV (Source: Company Reports)

Bigtincan Secures $6.2 Million Contract with Global Technology Co.: The company has recently announced that it has received a 2-Year purchase order of $6.2 million after winning a competitive bid for a deployment with DXC Technology Services, LLC, a US-based global technology company. This demonstrates the continued success of the company in securing large enterprise customer deployments. The company has also won a competitive bid for a retail deployment with Sephora USA Inc. for $2.8 million. Bigtincan® Zunos software platform will be utilized to build a modern and personalized content environment, for use by several frontline retail staff in the US and other countries across the globe.

Future Expectations and Growth Opportunities: While the impact of Covid-19 on businesses as well as economy is still not clear, the company’s diverse customer base, flexible cost structure and cloud-based technology, place BTH to meet the operational challenges as and when they evolve. The company has implemented strategic plans to ensure ongoing service delivery and continues to experience strong demand for its core products. BTH has re-affirmed its FY20 guidance and expects a growth of 30-40% in organic revenue. The company has a strong and diverse customer base across multiple industries and geographies and is focused on executing its growth strategy. The decent operational performance of the company in FY19 has scaled up expansion in FY20. 


Key Valuation Metrics (Source: Thomson Reuters)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation Approach


EV/Sales Multiple Based Relative Valuation Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of BTH is trading near its 52-weeks’ low level of $0.265, proffering a decent opportunity to enter the market. Over the span of 4 years from FY15 to FY19, the company witnessed a CAGR (Compound Annual Growth Rate) of 40.03% in revenue and a CAGR of 45.37% in gross profit, reflecting the expansion of its technology base as the platform for future growth. The new technology, market offerings, partnerships and strong fundamentals are expected to support new market growth opportunities. Considering the trading levels, CAGR in revenue and gross profit, improvement in margins and decent growth opportunities, we have valued the stock using an EV/Sales multiple based relative valuation approach and have arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.40, up by 50.943% on 20 March 2020, owing to the recent update regarding FY20 guidance. 

 
BTH Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.