HelpDesk Integration And New Partnerships Will Create Cross-Channel Upselling Opportunities

Key Takeaways

• Transition to HelpDesk enhances upselling, potentially increasing average revenue per customer and benefiting future revenues through larger clients.
  
• U.S. sales expansion and new partnerships suggest increased revenue and improved earnings by accessing high-value clients and new distribution channels.
  
• The company faces revenue and margin pressures due to customer churn, infrastructure costs, and high acquisition expenses, with added risks from cryptocurrency payment volatility.

Catalysts

Develops and distributes online text communication software for businesses worldwide.

• The transition from the native ticketing system to HelpDesk has led to an increase in upselling opportunities and could result in higher average revenue per customer, potentially boosting future revenues as larger clients with increased lifetime value use the HelpDesk product.
  
• The joint trial of LiveChat and ChatBot, alongside improvements in cloud infrastructure, suggests expected cost efficiencies going forward. This could positively impact net margins as operational costs related to cloud services decrease.
  
• Expanding sales operations to have a local U.S. presence and securing large annual contracts indicate efforts to increase revenue from high-value clients, suggesting potential for increased revenues and improved earnings performance.
  
• Entry into the HubSpot App Partner Program and other new partnerships could drive top-line growth by opening new distribution channels and client bases, which could enhance revenue through integration and cross-promotion opportunities.
  
• Introducing cryptocurrency payment options in the enterprise plan anticipates capturing a growing market segment, suggesting potential for increased revenues and improved customer acquisition and retention among tech-savvy enterprises.

Text Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Text's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 47.5% today to 44.8% in 3 years time.
• Analysts expect earnings to reach PLN 167.4 million (and earnings per share of PLN 7.51) by about April 2028, up from PLN 165.6 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as PLN185.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.4x on those 2028 earnings, up from 7.9x today. This future PE is lower than the current PE for the GB Software industry at 16.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.34%, as per the Simply Wall St company report.

Text Future Earnings Per Share Growth

Risks

• The sunsetting of the native ticketing system in LiveChat led to a significant loss of LiveChat customers, affecting customer numbers and potentially impacting future revenues.
  
• The company is experiencing high customer churn, particularly among smaller clients, which could negatively affect revenue growth and stability.
  
• There were significant costs associated with changes to the cloud infrastructure, contributing to expenses and impacting net margins; while these are expected to decrease, it highlights a risk of elevated operating costs.
  
• The shift to an offline sales team and expansion into larger clients involves higher acquisition costs, which may pressure net margins and profitability.
  
• The introduction of cryptocurrency payments, while driven by customer demand, presents a risk associated with volatility and operational complexity, potentially impacting earnings if not managed well.

Valuation

• The analysts have a consensus price target of PLN71.56 for Text based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PLN85.1, and the most bearish reporting a price target of just PLN56.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN373.5 million, earnings will come to PLN167.4 million, and it would be trading on a PE ratio of 14.4x, assuming you use a discount rate of 10.3%.
• Given the current share price of PLN50.75, the analyst price target of PLN71.56 is 29.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.