Post by
RealVal on Feb 20, 2022 3:56pm
Challenges to Valuing Venzee Potential
sGirls and Guys,
To show a bit more of how I think it is difficult for us to determine a valuation range for Venzee without more clarity on where we feel the company can get to in the next 4-5 years I will share with you a few of my current valuation projections. I'm sure most of you have done your own projections so by no means take mine as some authoritative source. Just my stab at trying to define current and potential future valuation ranges.
The company has stated publicly that they have exceeded their 2021 year end target of 2080 connectors. As I believe J|ohn Abrams and the company are a credible group I take them at their word on that point. Since then they have stated they have expanded the number of retail connections possible to over 500 from a prior 400 so effectively a 20% increase in available retail connections. They have also stated since then they have added some number of connectors to the second largest hardware retailer in US. So in sum I think it is not unreasonable to project that they may currently be in the range of a minimum of 2,300 connectors sold. If just their existing customer base was to increase their connectors by 10% through utilization of these now avalaible additional retail connections you would get to 2,300. The next quarterly financials announcement will likely give an updated connector total. So we will see.
2300 connectors with an average US$175/month subscription price (lower than the stated list price of US$250/month to be conservative and allow possible volume discounts to some of these PIM partner agreements) and a 1.27 CAD exchange rate equates to 6.13 Mil ARR. At this 'very small" size my belief is a 10 X ARR is not unrealistic given any acquirer would have a lot of runway to grow the company and justify that valuation. Using the current 235 Million outstanding shares you get a .26 cent/share price. If you used 300 Mil share count to allow for an additional 65 Mil warrants to convert then the price would be .20 cents/share.
You may disagree with these valuation numbers but at these connector and revenue numbers the company is very close to operating cash breakeven (unless the sales/marketing costs have skyrocketed which while I expect they will have increased I don't believe it will be to an irrational extent, again we will see) and it has effectively no debt so it is at least in the range.
That is how I see their current situation.
Now at 13,000 connectors, same revenue per connector, but using 362 MIL share count to project a fully diluted share count, 6X ARR = .57 per share, 8X ARR =.77/share, 10X ARR = .96/share.
Take your pick based on your bias for multiple.
Here is where we move into the void re valuation. We know Venzee feels 13k connectors is very possible. We can make our own determinations on whether agree or not and project out our own opinions on valuation potential at this number.
But beyond this were groping in the dark because we don't have any clear guidance as of yet from either Venzee or other groups (like a bank analyst, etc as their to small and no investment bank seems to follow them) as to what the "reasonable" servicable obtainable market is for this service and what percent of that market Venzee feels they can capture in the next 5 years.
If the SOM (servicable obtainable market) is say only 30,000 connectors then at 13,000 Venzee would already have 43% of the total market and that would dramatically effect the ARR multiple that any potential acquirer would be willing to pay (to say nothing of how much us as investors would be willing to pay to hold the stock for growth.....).
Now if the SOM is 75,000 or 100,000 connectors or more then that valuation multiple would be significantly higher especially at this point as it projects much more growth potential.
Again, if the company were to come out with their belief of what they feel the SOM is (with some supporting statistics/information to back up that belief) and some mid-term (3-5 years) projections for connectors sold, ARR and ideally Gross Margins along with churn rates we can then each make our own determinations of our confidence in those numbers and what that extrapolates into in terms of future company value.
Right now all we can rely on is our own individual due diligence/research efforts to try to determine relevant market size, primary competitors, etc. Without some guidance from the company to reference against it is not an easy task. Hopefully the company comes with some guidance in the near future as to where they believe they can take the company in the next 3-5 years to help us out. That guidance and consistent progess towards their near term goals I believe could be the catalysts with the most potential to move the stock closer to what many of us belief the fair value is.
Sorry that this kind of rattled on, but gives you an additional two cents worth on my views re: valuation and potential. Take them for whatever you feel there worth. :)