Lleidanetworks Serveis Telemātics S A : Checkpoint ˇ Avril 2021
04/20/2021 | 03:20am EDT
The shining light of profit growth
Analyst: Guillermo Serrano firstname.lastname@example.org
Lleida.net has reported a 1Q21 475% increase in profits before tax to €391k, stemming from a mixture of continued strong SaaS performance (+46%) and lower cash operating costs (-3%) and despite the ICX weakness (-25%) that we already saw in 4Q20 (-23%).
Undoubtedly the high margin SaaS division is emerging as the main locomotive of Lleida.net following the surge of Covid related demand for on-line contracting and notification services.
The post-Covid outlook remains bright as companies realise how efficient and cost effective the digital alternative is compared to the use of ordinary mail. Our SaaS forecasts for 2021 point towards an annual growth of 67% for a total of €9.5 million.
ICX (wholesale SMS) has had a very weak quarter again (second in a row) due to a combination of a shrinking market (tourism and travel are a significant component of demand), rising termination fees (telco operators leveraging their monopoly power to balance out dwindling roaming revenues) and the resulting increased competition. We are lowering our ICX revenue 2021 forecasts from €9,1 million to €7.9 million, with a relatively small €300k impact in our cash Ebitda expectations.
The SMS solutions (mainly Spanish corporate clients) division grew some 4%, in line with our expectations. Interestingly this division has remained largely unaffected by Covid.
The financial position of the company remains strong and largely unchanged at €2.2 million net cash position.
We remain positive on Lleida stock with a BUY recommendation and maintain a €11.15 target price (a €0.20 drop vs prior report, as a result of ICX) providing an 79% upside over the next 12-18 months.
7am, 20th April 2021
Price (4 pm 19/4/21):
52 week range (€):
1.69 - 10.40
Mkt Cap (€ millions):
No. Shares (millions):
Avg Daily vol (€ LTM):
Share Price Chart (LTM)
This report has been prepared by Checkpoint Partners (España) SLU
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Checkpoint7am 20th April 2021
Can Lleida.net compete with DocuSign? The quick answer is YES
The evidence during the present and past quarterly results are undeniable proof there is a growing demand for Lleida.net services, although some observers are concerned the US based DocuSign may pose a competitive threat to a much smaller Lleida.net.
We have analysed DocuSign and Lleida.net comparatively from an operating and financial perspective. On both counts we believe Lleida.net stands its ground despite the difference in size.
1. OPERATIONAL COMPARISON
From an operational perspective, there are five main differences between the two companies that suggest they are not in a collision course with each other, anytime soon:
Notification services: DocuSign is an Agreement based service centred service built around the e-signature whereas Lleida.net draws its revenues primarily from its certified notification services. This 1Q21 LLN reported 355k Click & Sign API transactions (related mostly to the signing of contracts) and some 3.7 million certified emails (related to notifications). In addition, Lleida.net provides KyC services that DocuSign does not.
B2B vs B2B2C: DocuSign is a very standardized off-the-self product that fits well into small volumes of documents being signed, which would be the norm in a B2B environment. Lleida.net specializes in large volumes of contracts such as the ones banks, insurance companies or utilities sign with the millions of customers (a B2B2C environment). As such Lleida.net has the in-house capability to adapt its service to the requirement of its clients and not the other way around.
Geographical focus: DocuSign generates 80% of its revenues in the US given its e-signature product has been designed based on the US legal system requirements. More than 50% of Lleida.net´s revenues are generated outside Spain and its SaaS services have been designed from a high-burden-of-proof standpoint that adapts well into every legal jurisdiction around the world.
Pricing of services and cost base: We know that DocuSign lost over $200 million in their fiscal year 2021 (calendar year 2020) and their pricing per-contract- signed in their monthly fee pricing offer is more expensive than Lleida.net´s and yet Lleida.net runs a profitable operation, which suggests its cost base is far more competitive.
Checkpoint7am 20th April 2021
Source: DocuSign. Photo taken on 19th April 2021
On the DocuSign website above you may notice that window on the right is written in Portuguese and provides a customer phone number in the UK, on the Spanish language website. Whereas those mistakes may be corrected over time, it comes to show the main focus for DocuSign is probably still the US and at best English speaking jurisdictions.
Source: Lleida.net. Photo taken on 19th April 2021
The Lleida.net (above) Click & Sign product provides the corporate customer with a broader range of alternatives compared to DocuSign, with the comparable basic product at approximately half the price.
Checkpoint7am 20th April 2021
Telecommunication services: DocuSign is strictly a software company and a very successful one at that. Lleida.net is a telecom and software services hybrid, providing that extra level of certainty from a legal perspective given that its legal standing as a telecom operator is that of a Trusted Third Party in the eyes of the law. This is particularly useful in high burden of proof legal jurisdictions.
Whereas any company with large amounts of available capital may be able to enter a market and displace the incumbent player, we believe DocuSign will continue to focus on its existing business lines essentially because growth remains strong. In the short term it has little incentive to shift it attention or change its business model for the sake of wiping the 70x smaller Lleida.net out of the map.
Instead, Lleida net has found its own corner in the contract and notifications market, servicing large volume users with lower prices and a high capacity to adapt to each of their client needs. Moreover, its competitive position is also protected by its proprietary patent families which should provide comfort to existing and prospective investors.
2. FINANCIAL COMPARISON
From a capital efficiency perspective Lleida.net excels relative to DocuSign. DocuSign is a much larger enterprise because there has been more money thrown into the company, but the data shows Lleida.net has been far more efficient with the use of its capital.
In both their lifetimes, some €1.7 billion (€1.4 billion) in equity investment has gone into DocuSign compared to €6 million in Lleida.net, 230x more, which clearly shows the difference in scale between the two companies. In terms of revenues, last year DocuSign generated $1.5 billion (€1.2 billion) compared to Lleida.net that reported some €16.5 million, 70x more.
This means that for every dollar of equity raised by DocuSign it generated $0.85 of sales in 2020. In the case of Lleida.net, for every €1 in equity injected, Lleida.net delivered €2.75 in sales last year. DocuSign is loss making and Lleida.net is profitable, which sums up performance to date in favour of Lleida.net.
Despite the differences in actual operating returns, the particulars of the US equity market place DocuSign on an 2020 EV/Sales of around 26x, whilst the market places a 6x multiple on Lleida.net´s stock. From a revenue guidance perspective DocuSign guidance is pointing towards 35% growth in 2021 (fiscal year 2022 since they account from February to January) compared to our forecasts of 22% growth for Lleida.net. Not even the differences in growth expectations can account for such a large disparity in the valuation.
Checkpoint7am 20th April 2021
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Lleidanetworks Serveis Telematics SA published this content on 20 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 April 2021 07:19:09 UTC.
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