Yahoo Finance
Filing
2. Management
Filing
July 22, 2022
Mar. 31, 2022 Data
Price: $3.5. Shares: 25.3m, Cap: $94m.
1. Business
(1) History
(1) History
It was founded in 1998 by Brain Shepard and was called Canada Web Hosting at the beginning. Brian Shepard was the CEO since 2002. In 2009 it was changed to Tenzing Managed IT Services reflecting it was more than just a web hosting company.
In 2010, it received $4.6m funding from Eventi Capital. In 2015, the Company completed a $5 million Eventi Capital-led buyout of its founder. Brian Shepard was succeeded by Bill Di Nardo who is a partner of Eventi as CEO of the Company.
In February 2018, the Company acquired ThinkWrap, a professional services firm, and Spark::Red, a managed application service provider for around $10m in cash. The company raised around $9.1m in preferred D shares and issued $6m debt in 2018. In September 2019, the company was rebranded as Pivotree Inc.
The integration of these two companies went pretty well. In 2018 and 2019, it generated 50m and 60m in revenue respectively, and also made cash flow even.
In Nov. 2020, it IPOed on the TSX venture with a raising of around $65m at $8.5/share. Since IPO, the company experienced some setbacks mainly from the churn of its legacy Oracle ATG services. In 2020, its revenue grew a little bit but was still cash positive. However, in 2021, it burned around $8m in cash.
In Sept. 2021, it acquired Bridge Solutions for $8m + $5m earnout. Bridge Solutions is a supply chain service provider. In 2021, it had sales of $10m and $600k profit. In Apr. 2022, PVT paid a $2.6m earnout to the previous bridge owner.
In Nov. 2021, it acquired Codifyd for $18m+$4
m earnout. Codifyd Inc. is a Data Services and Master Data Management firm. For 2021, total revenue of Codifyd was $19,283,036 and net income was $6,469,637.
In Q1 2022, it had a record revenue of $25m with a $1.1k cash burn. $8m of the revenue is from new acquisitions and organic growth is around 10%.
(2) Product & Business
Managed Service: Under the subsidiary Spark:Red. Services are recurring in nature. Around $10m/quarter in last 2 years. It has profit margin around 50%. ATG Oracle Commerce is a major part of it. Since Q1 2021, it has incurred some churn in this legacy service. I estimated around $6m in revenue loss from the churn in 2021. Lately, the churn has been slowed down. However, according to the company, it will still lose around 5%( $5m?) of its annual revenue from this.
Professional Services: Projected-based services. Around $5m/quarter before the 2 latest acquisitions. Lately, in Q1 2022, it has been raised to $15m. Its margin is around 40%. The service includes e-commence implementation such as Oracle ATG, SAP Hybris, Shopify, etc. It also provides Master Data Management(MDM), Supply chain management, etc.
(3) Industry
(1) Management
CEO Bill Di Nardo: Previously he was the co-founder of Grocery Gateway, a online grocery delivery service in 1997. He left the company in 2002. Later in 2004 the company was acquired by Longo's. In 2002, he co-founded Eventi Capital Partners which is a VC firm. Eventi provided major initial funding for Pivotree. Since 2015, he become the CEO of then called Tenzing Managed IT Services.
(2) Ownership and Compensation
Bill Di Nardo: CEO. Director since 2007. 1.9m shares. Compensation in 2021 360k, no options.
Scott Bryan: Director since 2007, Co-founder of Eventi. 1.9m shares.
Vernon Lobo: Director since 2015, from Mosaic Capital. 1.4m shares.
Brian O'Neil: Director since 2025. from A Faire Aujourd'hui Inc. 1.8m. shares.
All insiders hold 7.1m shares. 28%.
3. Financial data
Notes: Margin
Since 2020, it started to use public cloud instead of its own cloud. As a result, its expense is up which caused the margin to down while CapX is down. The amount might be around $2m which could cause the margin down by 3%.
Notes: SR&ED
SR&ED in 2020 might be $430k. No SR&ED in 2021.
Notes: CEWS & PPP
The company received $700k CEWS and USD$1m PPP in 2020. No such benefit in 2021.
Notes: Debt and cash
As of Mar. 2022, $20m cash. No debt. Earnouts liability is around $9.0m
Notes: Share data
1. The original $5m capital was converted to 7m shares after IPO which indicated a price of $0.7/share
2. The total $13.6m preferred shares (A, B, C, D) were converted to 8.3m shares for a price of $0, $1.27, $1.21, and $2.55 per share respectively.
3. Issued 7m shares at IPO at $8.5/share. Raised $65m
4. In Mar. 2022, total shares outstanding 25.3m. Total paid-in capital is around $90m. The average cost is $3.6/share. 1.5m options outstanding, average price $1.88.
4. Valuation and comments
(1) Currently the company is traded less than 1 time of its annualized sales. Although only 40% of its revenue is recurring. It is still quite cheap at 2.5 times of recurring revenue. However, on a profit basis, it is not generating positive cash flow yet.
(1) Currently the company is traded less than 1 time of its annualized sales. Although only 40% of its revenue is recurring. It is still quite cheap at 2.5 times of recurring revenue. However, on a profit basis, it is not generating positive cash flow yet.
(2) The losses in 2021 vs 2020 are mainly from less government assistance ($2m), higher marketing expense(3.5m), and higher R&D(1.5m). Offset by lower interest expense, etc.
(3) Current management seems to do well integrating previously acquired businesses. However, the margin was down since 2020. It's related to the Oracle churn, shifting to the public cloud, and more revenue weight on the lower margin professional service.
(4) Overall the market for digital transformation and e-commerce should be good for the near future. Although in a short term, the demand might vary.
5. Risk
(1) The churn from Oracle-related business still has a negative effect on its business. However, as the total revenue is getting higher. This will be less of a concern. The recurring revenue is growing somewhat, but the growth barely is able to offset the churn of Oracle.
(1) The churn from Oracle-related business still has a negative effect on its business. However, as the total revenue is getting higher. This will be less of a concern. The recurring revenue is growing somewhat, but the growth barely is able to offset the churn of Oracle.
(3) The company is still not profitable yet. There is still quite some money to be paid for the previous acquisitions. It might need to raise additional capital in the future.
(4) Don't really understand its products and the whole industry it is in.
6. Conclusion
Overall, the company has grown both organically and by acquisition. On a price-to-sales basis, it has been valued as relatively cheap. It is also very close to cash even. However, the Oracle churn is still a concern. Should invest cautiously.
7. Links
