Tiny Ltd V.TINY

TD's Q4 Preview Comments

[ace1mccoy]

WeCommerce Holdings Ltd. (WE-V) C$18.20 Q4/20 Preview: Expecting a Strong Close to the Year


Impact: NEUTRAL
We forecast total revenue of $5.8mm, up 44% y/y. Specifically, we estimate recurring subscription revenue of $2.3mm, up 93% y/y, or 39% of total revenue mix this quarter. We also expect digital goods revenue of $2.3mm, up 35% y/y, and Agency service revenue of $1.2mm, up 8% y/y. We forecast $2.0mm of EBITDA, or 34.3% EBITDA margin.

WeCommerce is well positioned for strong growth in 2021. We expect WeCommerce to deliver total revenue of $42.8mm, up 102% y/y in 2021. We forecast that the recent acquisitions (Stamped and Foursixty) will contribute total recurring subscription revenue of ~$16.9mm. As a result, we believe WeCommerce will significantly increase its recurring revenue mix to ~61% in 2021, up from 33% in 2020. After successfully making a big acquisition debut with Stamped, we estimate that WeCommerce still has room for ~$16mm of additional acquisitions before reaching 4.0x net debt/EBITDA leverage ratio. We also believe that management will continue to focus on acquisition targets that are in the Apps market, which typically have strong recurring revenue mix. It is worth noting that Shopify's apps ecosystem grew to ~6,000 in 2020, up from ~3,700 y/y, which reflects positively on WeCommerce's potential acquisition pipeline.

What we are looking for on the call: colour on the Stamped acquisition, how the early stages of the integration are going, and how the acquisition pipeline is shaping up.

TD Investment Conclusion
We maintain our HOLD rating and C$26.00 target price. We are positive on WeCommerce's strong top-line growth and margin profile. However, we maintain our HOLD rating given that peer multiple contractions this year suggest that future potential acquisitions are largely priced in.

[freeradical1]

If the TD is correct, this would represent a significant drop in the sequential core business revenue for the digital goods and agency businesses although the Foursixty business will have grown nicely. Stamped numbers look good from yesterday's release. Hope they can keep the momentum going with Tommy leaving.