VOXTUR – 500% growth in 2022/2023.
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Triple-digit growth, year after year. With a lot of runway still to come. Expected margins are expected to increase to 75% by mid-2023.
Trading at 1.5 P/S 2022 estimates when similar companies trade at 20x multiples.
What is the street missing? Growth is mispriced because they trade in the TSX Exchange, and the company is hard to understand. The catalyst is that they are moving to Nasdaq next year.
We'll analyze Voxtur and why I think it is mispriced through this article. I'll argue that it deserves a much better valuation once you can put the multiple moving parts of mergers and acquisitions in context.
Voxtur trades in the TSX Venture exchange which is ignored by most investors, creating an opportunity due to the lack of popularity on the stock. This is why Management plans to list on Nasdaq in the next couple of quarters. This would bring more eyes and popularity to this stock, which deserves a much higher valuation.
The opportunity comes because the short-term growth is currently mispriced due to a lack of understanding of the company's growth sustainability.
What is Voxtur?
"One-stop shop for efficient access to real estate data and the entire real estate process."
"With the largest verified database in real estate, our workflow platforms efficiently appraise assets, originate and service loans, securitize portfolios, and evaluate tax assessments with verifiable proof. " - https://www.voxtur.com/
Originally started and listed in Canada, over 90% of their revenues are now generated in the U.S.
What does Voxtur do:
Voxtur can be better explained in the context of 4 different macro services inside the real estate industry. Here they are with a summary of their competitive advantage:
1. Valuation of real estate properties. They have a product that can make appraisals 20% cheaper in half of the time.
2. Tax Assessment. They access more than 65% of U.S. tax collectors in a database, allowing them to create and sell a $20 service to homeowners directly to analyze if their taxes are high or low compared to other comparable properties.
3. Settlement services – Tittle, closing, title insurance. With the development of automated and instant "Attorney Opinion Letters" Voxtur can create a cheap alternative to title insurance based on their proprietary data. They can bring the cost from $1500 down to $250 and keep 70% margins.
4. Data insights. Important for future product developments. Notice that Voxtur is not a SAAS but a DAAS (data as a service) with better business economics. But for simplification of this report, I'll refer to it as a SAAS.
"Once we've got all of these platforms that we own and built, each business is a minimum of a half a billion dollars… as far as revenue, each! "- Gary Yeoman
I'll develop these points later in depth. First, we need to understand Voxtur history.
Summary of Voxtur history:
It all starts with Gary Yeoman, current executive chair. Is the founder and former CEO of Altus Group (TSX: AIF), a real estate software, data, and analytics company. He has a deep domain expertise in building a similar multinational.
He partnered with Bank of Montreal for funding to finance acquisitions. For this negotiation not only did the bank get to make the loans but they also invested in the company and are the sponsor's for Voxtur to list in Nasdaq.
Once the funding was in place Gary goes out and starts buying and merging strategically with companies for:
· Their existing revenue
· Their licenses and clients
· To cross-sell similar non-competing products to the same clients.
· To create a "One-stop shop for efficient access to real estate data and the entire real estate process."
Management has stated that every merger or acquisition must be in real estate technology, synergistic, create value, and accept cash and stock as payment.
What problem do they solve?
If you ever have bought or sold a house, you know this:
You need a real estate agent to promote it (not always), you want a professional appraisal to determine what the house is worth for the bank loan, you need to pay the taxes, look for the title and see that it is "clean" (meaning no-one is suing you) and then you can transfer it.
For some reason, this is a very inefficient procedure; it takes 30 to 90 days.
Voxtur is speeding all that by putting data together of the companies it has acquired and substantially lowering the cost.
Imagine that you go to a fast-food restaurant to get a hamburger, to another one to get a coke, and yet to another one to get potatoes. That's the real estate business for you in a nutshell.
Here is Voxtur's road map:
Notice that the future upside for the stock is given by the dataset and future products they can create from this.
Gary starts with Ilookabout. An image database company. This is important because you want updated pictures in appraisals fast to review the appraiser's work.
Then acquires Clarocity Corporation. A provider of real estate valuation services through its data and analytics capabilities. This also opens the door to cross-sell Freddie Mac and Fannie Mae, saving years of pre-qualifications to Ilookabout to do business with them.
The Apex acquisition follows. This is the most popular sketching software for appraisers; they have a presence in over 2100 counties. This becomes a strategic acquisition that also allows for cross-selling different products.
Voxtur, originally a Title business, was acquired, and Jim Albertelli became CEO.
Next comes the ANOW.com acquisition. This is the appraisal side of the system, they charge a transactional fee to the lender, and appraisers (AMC = appraisal manager companies) pay a monthly fee.
They use the software to validate that the images were taken by appraisers, inspectors, and even owners coincide with images in their database.
They use machine learning to match to analyze images with MLS data.
Next comes the Xomesolutions.com acquisition, formerly owned by mrcooper.com, one of the top 5 mortgage servicers in the U.S. Mr. Cooper couldn't offer the service to competitors effectively until they made it independent.
Not only did they acquire AMC clients (appraisal manager companies) with some of the top 10 lenders of the U.S. They have also accumulated over 98.2% of all MLS data.
Most real estate agents use MLS to get certain information and list properties. It is limited to professionals only. I see it as a virtual monopoly in Us and Canada.
Notice that acquiring Xome lowered the margins in the financial statements, but this is just momentarily. Management expects margins of 60% by the end of 2022 and 70% to 75% hallway of 2023
Finally, the last acquisition was Benutech, one of the largest real-time real estate data repositories in the United States, enabling title professionals and real estate agents to access real estate data from multiple public and private data sources.
Team (note: Management ownership is approximately 40%)
Understanding Voxtur 4 macro services at a high level:
Voxtur has very specific niches within the real estate industry in North America:
And as we mentioned before, these Macro services are categorized like this:
1. Valuation of real estate properties.
2. Tax Assessment.
3. Settlement services – Tittle, closing, title insurance.
4. Data insights.
Voxtur has focused on "b2g" business-to-government in this niche. Governments, municipalities, counties, provinces, states to provide analytical services on property tax, currently, about 11 million dollars a year, to be about to be 15 million dollars a year with a new contract that they're getting with the province of Ontario.
"In Ontario alone, the government pays 75 million dollars a year just to fight assessment appeals we can mitigate a good portion of that by enabling them to deliver proper fair, equitable assessments and taxes…" - Gary Yeoman
There are two parts to the assessment on property tax business:
1) Provide imagery, desktop valuation services, mobile applications to provide assessment services to counties and municipalities.
2) Provide real property tax analytics. Use to confirm assessment or to create reports with a predictive analytics tool to tell you whether your property taxes are too high or too low and by how much. They are currently in 50 major cities and gaining speed.
Market size: 150 million residential properties in the U.S. alone with margins north of 90% once it's running at full force
They also serve b2b customers within the tax services, like lenders.
"no one is doing this …that we know of. Our proprietary algorithms coupled with the data that we're getting… of the MLS data from Mr. Cooper and Xome… core logics data that we're getting with the acquisition of Benutech, that should close any day …we think that WE HAVE THE MOST COMPREHENSIVE DATABASE YOU KNOW IN NORTH AMERICA. "– Gary Yeoman
"Our overall goal is to fully populate those appraisal cards, to roll out an insurance wrapper around those to guarantee the value to the lender. Today it takes 50 days versus the one a day they're doing now. "– Gary Yeoman
The technology that is offered in today's appraisals business is almost non-existent.
In order for a bank to apply for a mortgage, it costs eight hundred dollars and up to 20 days, and the lender must get access to title insurance after that.
Anow.com is the only fully digitized A.I. encrypted appraisal platform in North America. They just landed their first major client with United Wholesale doing 70 000 transactions a month.
Not only is this platform five times quicker and cheaper. It is a business with 30% margins that they expect to turn into a 70% margin business.
The appraisal market alone is 4 billion. On top of that, Voxtur will get increased demand with default, foreclosures, and refinancing once the governmental moratorium is lifted.
Settlement services – Title, closing, and title insurance.
As mentioned before. Once the seller gets an appraisal and everyone is ready to register the title, the buyer needs to get "title insurance." This insurance will cover the cost if there are issues with the title in the future. And all of this is needed because our legal system is archaic, and there could be pending lawsuits that may not have been found in the "title search."
The average cost in the U.S. is $1500. They can take it down in cost substantially. I'd heard they would price this anywhere from $500 to $250. The Title businesses can have margins between 45% to 55%, but with the improvements, they expect to take it up to 60% by the end of 2022.
I won't develop much on this point because I want to stick to facts. I want to mention that many of these services are done by repurposing existing assets. In this aspect, Voxtur resembles a "data-as-a-service" business model, which is better than a "Software-as-a-Service." Daas companies have better economic than Saas companies.
Their development cost is strictly marketing and programming to test, develop and deploy new products in their networks, easily done by cross-selling to existing clients in different niches.
Management recently mentioned that they have over 300 master services agreements already in place. Their clients don't like to be used to promote other stocks, which makes sense, so every time they get a new client, they don't come out with a press release. You must remember this are big clients sometimes like Mr. Cooper, Fannie Mae, etc. Only last month, investors in internet chatrooms found that United Wholesales is one of the new customers; this is one of the 4 top lenders in the U.S. The company never made a press announcement, so that you won't find it in your due diligence.
The best way to value a growing company in this stage is to use a fair multiple over revenues of comparable SAAS companies with similar margins and growth.
When you look at these numbers closely, please notice that Management commented about this same report on an interview, saying that they didn't think the revenue forecast here where high and that the multiples assigned were still conservative. They trust they can do even better than these projections.
Multiple on sales
Let me show you today's market multiples of the five fastest-growing SAAS companies that I could find.
- Bill.com 54x P/S, growth rate 151.9%
- Snowflake 79.5x P/S, growth rate 109.5%
- Sprout social 11.1x P/S, growth rate 96.1%
- Datadog 50.4x P/S, growth rate 74.9%%
- Asana 34.4x P/S, growth rate 70.3%
Assuming a 10X P/S multiple is conservative, in my opinion, because those are similar business models to Voxtur. But they are not growing as fast; they are already too big.
I am considering 2022 Revenue estimates of $273M, which is in line with current management projections.
That's a future market cap of 2.73 billion vs. today's $500M. Or 546% higher.
$0.81 * 546% = $4.42/share
Voxtur has created through Mergers and Acquisitions a series of products needed in the real estate market. As they transition to Nasdaq in the next year, I suspect the market will come to realize that their extraordinary growth and margins are sustainable for some time to come. Giving them a more realistic multiple will raise their valuation by five times higher than today.
If you are interested in learning more, I suggest a video series explaining the company valuation by Mariusz Skonieczny.
If you happen to disagree with me on the write up I’d started a Threat where you can comment and post your bear thesis bellow: