A high-quality SaaS business for a song.

This unloved small cap trades at ~1.8x EV/ARR, has improving fundamentals, and is likely to beat earnings estimates by a wide margin over the next 2 years.

Today we are taking a look at an unloved, UK-listed SaaS business that has de-rated significantly since it IPOed in 2021 - down 67% from the IPO and 80% from the all-time high.

Here are the key takeaways:

• The company is high quality, with high gross margins (+82%), recurring revenue through its SaaS products, and healthy retention (net +100%).

• The company has a sizeable market opportunity and has grown bookings, revenue, and ARR in the low 20% range over the past four years.

• For this year, the company has guided to mid-teens constant currency growth. However, I expect that growth can re-accelerate from here.

• Valuation is incredibly attractive, with the company trading at 1.8x 2024 EV/ARR, and 1.6x 2025 sales. The company is about to become EBITDA and free cash flow breakeven this year.

• Long-term, the business should generate steady-state margins in the +30% range. One of the company’s key markets, the UK, will generate ~$24m in EBITDA in 2025, imputing ~17x EV/EBITDA. Essentially, you can pay a reasonable multiple for the UK and get the rest of the business for free.

All-in, I expect the shares to double from the current price but could be worth multiples of that if the company executes in its less mature markets.

With that said, let’s take a look at the opportunity.