Voxtur Analytics boosts revenue but prepares for economic downturn (OTCMKTS: VXTRF)


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A quick overview of Voxtur Analytics

Voxtur Analytics Corp. (OTCQB: VXTRF) recently released its first quarter 2022 financial results on May 31, 2022, as revenue and gross profit increased sequentially.

The company provides a suite of software as a service (“SaaS”) real estate valuation, valuation, settlement and other related software features to businesses worldwide.

VXTRF faces risks as it appears that the US economy is approaching or already in recession, which could slow sales cycles for some of its offerings.

With these macro risks and rising operating losses, I’m holding on for VXTRF in the short term, although the stock deserves a watchlist.

Introducing Voxtur Analytics

Voxtur, based in London, Canada, was founded as iLOOKABOUT to provide real estate software technologies to investors, lenders, government agencies and mortgage services.

The firm is led by Chairman and CEO Jim Albertelli, who was previously the founder of ALAW, a provider of legal services to financial services companies and mortgage banks in North America.

The company’s main offerings include:

  • Tax assessment

  • Property valuation

  • Settlement Services

  • Data and information

  • Lawyer Opinion Letter [AOL]

  • Wealth

Voxtur Market

According to a 2021 market research report by Grand View Research, the global real estate-related software market was estimated at $9.34 billion in 2020 and is expected to reach $19.6 billion by 2028.

This represents a projected CAGR of 9.7% from 2021 to 2028.

The main drivers of this expected growth are a market recovery after the 2020-2021 pandemic and a growing demand for digitalization of real estate functionalities.

Additionally, the chart below shows the historical and projected U.S. real estate software market, from 2018 to 2028:

US real estate software market

US real estate software market (Grand View Research)

Notably, cloud-based systems were dominant in 2020 over on-premises deployments and are expected to grow at a CAGR of over 11% from 2021 to 2028.

Additionally, North America accounted for nearly 35% market share by region, although Asia-Pacific is expected to experience the fastest growth through 2028.

Voxtur’s recent financial performance

  • Total revenue per quarter has increased significantly over the last 5 quarters:

Total turnover over 5 quarters

Total turnover over 5 quarters (Looking for Alpha)

  • Gross margin per quarter also increased in line with total revenue:

Gross profit over 5 quarters

Gross profit over 5 quarters (Looking for Alpha)

  • Selling, G&A expenses as a percentage of total revenue per quarter decreased as revenue increased:

Sales over 5 quarters, G&A % of turnover

Sales over 5 quarters, G&A % of turnover (Looking for Alpha)

  • Operating losses per quarter have worsened in recent quarters:

Operating result for the 5 quarters

Operating result for the 5 quarters (Looking for Alpha)

  • Earnings per share (diluted) remained negative as shown in the chart below:

5 quarters of earnings per share

5 quarters of earnings per share (Looking for Alpha)

(All data in the charts above is in accordance with GAAP.)

Over the past 12 months, VXTRF’s stock price has fallen 31.5% compared to the US S&P 500 Index’s fall of around 9.2%, as shown in the chart below :

52 week stock prices

52 week stock prices (Looking for Alpha)

Valuation and other measures for Voxtur

Below is a table of relevant capitalization and valuation figures for the company:

Measure

Rising

Enterprise value

$210,910,000

Market capitalization

$198,380,000

Enterprise Value / Sales [TTM]

2.16

Price / Sales [TTM]

1.81

Revenue growth rate [TTM]

309.66%

Operating cash flow [TTM]

-$17,830,000

Earnings per share (fully diluted)

-$0.06

(Source – Alpha Research)

The Rule of 40 is a software industry rule of thumb that states that as long as the combined revenue growth rate and EBITDA percentage rate are equal to or greater than 40%, the company is on a trajectory acceptable growth/EBITDA.

Voxtur’s last GAAP Rule of 40 calculation was 287% in Q1 2022, so the company has done quite well in this regard, according to the table below:

GAAP Rule of 40

Calculation

Recent Rev. Growth %

310%

% EBITDA GAAP

-23%

Total

287%

(Source – Alpha Research)

Comment on Voxtur

In its latest earnings call (Source – Seeking Alpha), covering Q1 2022 results, management highlighted the countercyclical nature of some of its SaaS offerings which are priced individually.

Its Real Property Tax Analytics offering and programmatic asset management system do not appear to have any procyclical characteristics.

Additionally, management believes that its attorney opinion letter and valuation software have countercyclical aspects that may offset revenue declines in other segments.

Regarding its financial results, revenue increased 182% year over year, while gross profit increased 93% compared to the first quarter of 2021.

However, operating losses have worsened significantly over the past 2 quarters, a concern for technology stocks which have been beaten by the current market as the cost of capital has risen.

For the balance sheet, the company ended the quarter with $32 million in cash, but used $4.9 million in cash and therefore must reduce its cash burn in subsequent quarters for fear of running out of cash.

Looking ahead, management reiterated its full-year 2022 guidance for revenue of $180 million in the middle of the range and gross profit of $92 million in the middle. He believes the business will generate “positive EBITDA in the latter part of 2022”.

In terms of valuation, the market values ​​VXTRF at an EV/Sales multiple of around 2.2x.

The SaaS Capital Index of publicly held SaaS software companies had an EV/Average Revenue multiple of approximately 7.5x as of June 30, 2022, as shown in the chart below:

SaaS Capital Index

SaaS Capital Index (SaaS Capital)

Thus, by comparison, VXTRF is currently priced by the market at a steep discount to the SaaS Capital index, as of June 30, 2022.

The main risk to the company’s outlook would be a recession in North America that reduces customer demand or slows its sales cycles for some of its offerings.

A potential upside catalyst for the stock could include a pause in interest rate hikes, which could have the effect of increasing its valuation multiple as the cost of capital stops rising and may even fall.

However, the company faces uncertainties as it appears that the US economy is approaching or already in recession.

With these macro risks and rising operating losses, I’m holding on for VXTRF in the short term, although the stock deserves a watchlist.

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