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SiteMinder (ASX:SDR) shares fall 5% on maiden trading update

Recent initial public offering SiteMinder Limited (ASX: SDR) has announced its maiden business update with first-half revenue increasing 10%.

SiteMinder (ASX: SDR) share price soars 34% on ASX debut

Your guide to the SiteMinder Limited (ASX: SDR) IPO

SiteMinder creates software for the accommodation sector, connecting hoteliers with digital channels to market and manage their business.

In morning trade, the SiteMinder share price has dipped 5.24% to $5.61.

Cash burn outshines sales growth

Key highlights from the first half ending 31 December include:

  • Total revenue of $55 million, growing 10.4% year-on-year (YoY)
  • Annualised recurring revenue (ARR) of $111 million, a 13.5% improvement YoY
  • Free cash outflow of $16.2 million for the half

Despite growing its revenue and ARR during the half, the free cash outflow of $16 million is the most notable result from the update.

Free cash flow is a measure of the cash generated by the business. It’s largely considered as the gold-class standard of measuring profitability.

SiteMinder remains in the investment phase of its lifecycle, spending cash now with the hope of generating a return in the future.

However, the current cash burn represents 29% of its revenue.

For top-line growth in the low-teens, SiteMinder will need to accelerate its growth to justify the cash outflow.

Readying for post-pandemic pop

Over the quarter, SiteMinder increased its customer properties to 33,400, a 2% increase.

“The growth of our customer base mirrors the increasing pursuit and adoption of hotel commerce technology around the world” – Sankar Narayan, CEO & Managing Director

The business is ramping its ‘go-to-market capacity’, as travel begins to reopen across the globe.

The Omicron variant has had moderated effect on these plans, particularly corporate bookings.

However, the business will likely benefit from a bump in demand over 2022.

“Building on the momentum from the prior two quarters, SiteMinder is pleased to be reaccelerating post the COVID-19 slowdown”

“We are optimistic that we are on the path to recovery and our ARR growth from the prior year demonstrates this”

My take

Today’s sell-down of the SiteMinder share price isn’t surprising given its lofty valuation.

SiteMinder currently trades on a sales multiple of approximately 15.

With top-line growth of just 10%, it’s difficult to justify purchasing shares at current prices.

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