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Bigtincan (ASX:BTH) share price dives despite record ARR growth

The Bigtincan Holdings Ltd (ASX: BTH) share price finished nearly 9% lower by the end of trading today despite the ASX tech share releasing strong HY21 results.

Bigtincan is a global provider of sales enablement software. Its customers use its platform to increase their selling effectiveness through improvements in sales content management, sales training, document automation, and internal communications.

How did Bigtincan perform in the first half?

The company announced first-half FY21 annualised recurring revenue (ARR) of $48.4 million, up 50% on the prior corresponding period (pcp). This was driven by acquisitions as well as organic growth.

Revenue for the year came in at $18.4 million, up 33%, and the lifetime value of customers increased by 44% to $363 million at the end of the period.

Bigtincan remains well-capitalised with $65 million in cash, reflecting proceeds from an oversubscribed $35 million institutional capital raising last year. The company completed two strategic acquisitions during the half, Agnitio and ClearSide, which added remote selling and sales engagement technology to its product suite.

Costs have risen mostly in line with increased revenues, with sales and marketing increasing by 7% to 54% of total revenue.

Commenting on the results, Bigtincan CEO and Co-Founder, David Keane, said: “1H FY21 again demonstrated the success of the Bigtincan growth strategy, with strong organic growth, smart acquisitions and growing industry recognition. The Bigtincan teams around the world continued to show their ability to build our technology innovation pipeline, and help some of the world’s leading companies to solve their challenges for their customer-facing teams in an increasingly digital and remote economy.”

Full-year guidance

Bigtincan management has reaffirmed previous earnings guidance and anticipates ARR to be at the top end of the FY21 guidance range of $49 million to $53 million.

Revenue is expected to be between $41 million and $44 million, which represents growth of between 32% and 42% compared to the $31 million revenue result achieved in FY20.

My take

While Bigtincan’s report was positive, it seems the market was expecting more. I think it’s hard to value a business like Bigtincan due to the number of acquisitions it’s made over the past few years. Since 2018, it’s made at least 8 acquisitions in order to expand its total addressable market and enhance cross-selling opportunites.

This is not the sort of growth strategy I’d typically look for, so I don’t know if I’d be a buyer of Bigtincan shares today.

Two ASX software companies that I like right now are Xero Limited (ASX: XRO) and TechnologyOne Ltd (ASX: TNE), which both have longer track records of growth.

You can read about my thoughts on Xero and TechnologyOne in the following articles:

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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