|Shares Out. (in M):||547||P/E||0||0|
|Market Cap (in $M):||541||P/FCF||0||0|
|Net Debt (in $M):||-56||EBIT||0||0|
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Bigtincan Holdings Ltd
ASX: BTH | AUD$0.99/shr | AUD$541m MV | AUD$486m EV | HQ: Waltham, MA
Bigtincan is an extremely cheap SaaS business in an exciting new category called Sales Enablement. Despite organic growth approximating 20%, the company trades at just 4x forward ARR and sales. Although listed in Australia, Bigtincan derives 90% of its ~A$100 million in revenue from customers in the United States, making an eventual NASDAQ listing a strong potential catalyst for revaluation.
The company is run by an owner-operator CEO, David Keene (fourth largest shareholder), and recently received a strategic direct investment from SQN Investors (now the largest shareholder), an experienced software investor based in San Francisco. Based on a US SaaS peer multiple of 8x sales, BTH shares should double over the next three years, with downside strongly protected by the significant margin of undervaluation, as well as the high-retention, high-margin nature of the business.
What is Sales Enablement?
Whereas traditional CRM software is about providing management with visibility into the sales department, Sales Enablement software is about helping the sales people succeed in the field. A salesperson’s success is measured in numbers such as win rate, deal size, profit margin, and the time to close a sale. Sales Enablement software helps a company improve these quantitative measures with tools focused on the qualitative: how salespeople are onboarded and trained, how they communicate with prospects, and how they interact with their own marketing department.
The functions of Sales Enablement software fall under two primary umbrellas, learning management and document management. In the context of sales, learning management consists of tools such as online videos and training curricula designed to help salespeople get up to speed, learn the features of their products, and get coached in effective sales skills. It also helps companies spread the methods of their best salespeople to the rest of the team. Document management for sales consists of tools to create, organize and distribute the collateral salespeople use, and to track the impact on buyers. It also connects sales and marketing departments with each other so that salespeople have the most up-to-date content for each product and audience, and so that marketing can better understand which sales collateral is most effective in the field.
Sales Enablement tools are clearly needed. Wireless carrier T-Mobile, a large Bigtincan customer, has over 20,000 sales reps across the United States. Imagine onboarding hundreds or thousands of new reps per year, keeping all 20,000+ sales reps up-to-date on the latest phone models and calling plans, and keeping marketing informed about what’s working in the retail stores — without software.
Bigtincan has customers like AT&T and T-Mobile within the communications vertical, Cardinal Health and Merck in the life sciences, ANZ Bank and Mastercard in financial services, GUESS and Sephora in retail, Anheuser-Busch and Red Bull in beverages, and many others. We think this early progress with some of the largest organizations in the world is impressive for a small company and provides strong validation of both Bigtincan’s product and the Sales Enablement category as a whole.
Given the number of salespeople in the world, and the average revenue per user across the Sales Enablement category, we estimate a global market opportunity that is many billions of dollars. That leaves plenty of headroom for a company with ~A$100 million in revenue. And the use of software to improve salesperson performance on the ground is in its earliest innings. New tools will be added to the suite, and as the toolkit expands, so will the market opportunity.
Sales Enablement is such a new category that Bigtincan’s most frequent competitor is not another vendor, but the typical status quo at most companies: no formal Sales Enablement tool. With that said, while Bigtincan is the only publicly-traded pure-play in Sales Enablement, it is essentially the fourth largest of a ‘Big Four’. Its three principal competitors — Seismic, Highspot, and Showpad — are all private, all venture funded, and all likely bigger than Bigtincan. These three companies have raised US$1 billion collectively to date:
Seismic has raised ~$430 million in total, most recently at a $3 billion valuation. It has $200 million of ARR, for an EV/ARR of 15x. We’ve seen varying estimates of Seismic’s growth, the most reliable of which claims the company has doubled its revenue in “less than three years”.
Highspot has raised ~$400 million in total, most recently at a $2.3 billion valuation.
Showpad has raised ~$160 million in total, most recently (2019) at a valuation of $1 billion. In 2020 the company claimed 58% “Platform” growth.
In contrast, Bigtincan has raised approximately US $200 million over the last eight years (half of it this year, and half of that amount still unspent), the vast majority via the Australian public equity markets.
Based on our conversations with people in the industry, we believe the product offerings are substantially similar across the four vendors, with each having small advantages in particular vertical markets or horizontal categories. While the companies do compete, the fields of competition do not overlap 100%.
For example, all of the Big Four claim to provide sales content management. But each has a different focus. Seismic has a strength in back-end content creation, assisting marketing departments in producing sales collateral. Bigtincan’s and Showpad’s products begin with finished collateral and focus on what happens next: how it gets distributed to salespeople and how prospects engage with it. This affects who within an organization each company sells to, and whether and how they actually compete.
Another example: Bigtincan and Showpad have the lead in mobile-first use cases. Of the Big Four, only they have robust iOS-centric offerings and partnerships with Apple. Bigtincan leads over Showpad here, but neither company is likely to even see Seismic in an iOS-focused deal. This mobile-first orientation has affected the types of customers and verticals Bigtincan plays in: it shines with retail-focused companies who have very large field sales forces, such as Anheuser-Busch, a 20,000+ seat deal that Bigtincan won. And it affects the pricing model: Anheuser-Busch is rumored to pay just $2-3 per user per month to Bigtincan. Competitors like Seismic and Highspot are stronger serving customers who have smaller B2B-focused sales forces (like other enterprise software companies: Domo and Informatica are Seismic customers, while Apptio and SAP Concur use Highspot), and may charge 10-20x more per seat, but with far fewer seats per deal. From a distance, the companies and their offerings look nearly identical, but up-close, each has strengths that direct it to a particular niche and partially insulate it from competition.
The above differences in focus and niche impact the near-term TAM and growth opportunity for each of the Big Four, but all the players are broadening their offerings, and expanding their TAMs as a result, mainly via acquisition. Out of the Big Four, Highspot is the only company with a platform that has been natively built end-to-end. The other three (including Bigtincan) have continually added functionality via M&A. This activity does mean competition will increase, but it will happen in tandem with an expansion of the market with new use cases.
In the meantime, we believe that the majority of the delta in growth rates between the companies comes from sales force size and efficacy, rather than product quality. In other words, the competitors with access to abundant VC funding (to hire lots of salespeople) have grown the fastest.
Will Bigtincan somehow manage to outgrow these three competitors and take the lead in Sales Enablement? We aren’t betting on it. But as Seismic, Highspot, and Showpad begin contemplating IPOs, Bigtincan will be a very appealing pre-IPO acquisition candidate, given its size as well as the arbitrage between where Bigtincan trades currently and where any of the three larger competitors would likely be valued in a US IPO. Bigtincan would be a very attractive candidate for software-focused PE firms as well.
Management and Shareholders
Bigtincan is run by an owner-operator CEO, David Keane, who co-founded the company and owns 4% of the shares. In order to capture the US market, which represents about 90% of Bigtincan’s revenue, Keane moved the company’s headquarters from Sydney, Australia to Boston, MA, and moved himself along with it.
In August of 2021, the company raised US $99M to fund its acquisition of competitor Brainshark (discussed in the next section). The money was raised via a rights offering backstopped by a $21 million direct investment from US-based firm SQN Investors. SQN now owns 14% of Bigtincan, and installed one of its partners, Farouk Hussein, on the board. SQN is a successful fund that has been focused on cloud-based software since its founding in 2014. We view their committed involvement, as well as Hussein’s participation on the board, as a big plus, especially as it relates to helping Bigtincan access US capital and move towards the US SaaS valuation it deserves.
In August of 2021 Bigtincan acquired Brainshark, which focuses on sales readiness and coaching via a suite of LMS-like capabilities, for US $86 million, or about 2.5x ARR.
Brainshark was one of a host of smaller companies focused specifically on coaching and training. These companies typically partnered with the Big Four, but they were losing out to the Big Four’s more broad-based Enablement platforms; e.g. Brainshark’s organic growth has been about 15% whereas Bigtincan has been closer to 25%. A consolidation wave ensued, with Bigtincan buying Brainshark, Seismic acquiring Lessonly, and Showpad acquiring LearnCore.
The Brainshark deal does a couple of things for Bigtincan. First, it offers a complete suite of readiness and coaching capabilities that can be integrated into the core Bigtincan UI and offered to customers directly. Second, it adds a meaningful number of customers to whom Bigtincan can cross-sell the entire Bigtincan Sales Enablement platform. If the company is successful doing this, the organic growth rate of the entire organization could move back toward the legacy Bigtincan’s 25% rate, likely driving the stock much higher.
Valuation and Price Target
The company’s guidance for FY22 (ending in June) is at least $119 million of ARR and $109 million of revenue, equating to organic growth of about 19%. This is made up of ~15% growth at Brainshark and ~25% growth at Bigtincan.
The US SaaS companies that are growing 20% or less organically currently trade in a fairly tight range around 8x sales. An 8x multiple would value BTH at about $1.65 per share (up 60% from the current price) on FY22 revenue, and about $2.10 per share (up 105%) based on FY24, assuming continued 20% growth.
Bigtincan’s organic growth rate in the coming years is the most important factor here. If the company can effectively cross-sell into the Brainshark customer base while continuing to add new customers, it should be able to sustain or even improve upon the current 20% growth rate, and shareholders should do very well from the current price. But even if growth gradually slows as the company gets bigger, the extremely low current valuation still suggests material upside based on peer multiples. And we think that if it isn’t acquired first, Bigtincan will eventually list on NASDAQ once it reaches sufficient size, at which point it will start showing up on every SaaS comp table as one of the cheapest growing SaaS companies in the US.
Success integrating Brainshark.
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