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LiveChat is a premium customer service software used by businesses to communicate with customers browsing their website. They see the product as a simple chat window placed on the website. The business owner and his agents, on the other hand, have access to the sophisticated application designed for communication and quick customers service in real time. So if you've ever seen a pop-up box on a website in the corner, chances are it was a Livechat plug-in or one of their competitors.
The business was founded in 2002 by Mariusz Cieply (one of the founders and main shareholders of LiveChat Software) and was relatively subpar until it transitioned to a SaaS model in 2010. This was also the first time it turned cash flow positive. Since then it has grown at above 40% revenue CAGR with net margins ~50% per year. During this time it has shaken up the market growing to a current 11% market share, superseded only by 'Tawk.to' and the US based 'Zendesk Chat'.
Zendesk is a business listed on NYSE. They pale in comparison to Livechat due to their heavy stock based compensation schemes and dilution of the common stock. As a result whilst they have positive cash flow, on an accounting basis they are losing money for shareholders. Unfortunately Tawk.to is not a listed company so no comments there.
In comparison Livechat has capacity to pay dividends, and is capital light enough to pay out virtually all profits as dividends, albeit they choose to pay out about 50%. Their policy is to payout unless attractive investment opportunities exist. They also are debt-free with only really cash and intangibles on the balance sheet besides some accrual recognition.
So how about value? Well sadly it's not a cheap business at ~21x TTM earnings. Keep in mind the quality of the business however and you could argue that 21x is quite easily a 'Fair multiple'. However consistent with my strategy is a conservative 'capping' of the growth assumptions. Therefore using the Davis double play I have it valued currently at:
3.5% Yield + 10% Growth - 3.5% Contraction = 10% IRR.
In saying this I've left it on my watchlist for a rainy day, as I believe with these types of businesses, the business can catch up to the valuation quite quickly if you take your eyes away from it, especially if they go in opposite directions.