Shares in ASX tech company Bigtincan Holdings Ltd (ASX: BTH) have had a disappointing start to 2021. The Bigtincan share price has already slid roughly 25% lower this year – and at their current price of $0.825, the software developer’s shares are not far off the 52-week low price of $0.69 they hit all the way back in June.
Bigtincan develops sales enablement software. Bigtincan’s flagship sales enablement automation platform is a centralised, integrated software solution designed to support its corporate clients throughout their entire sales and marketing lifecycle, from onboarding and training new staff, to engaging new customers and providing accurate reporting.
As with many other emerging ASX tech companies like Megaport Ltd (ASX: MP1), Dubber Corp Ltd (ASX: DUB) and ELMO Software Ltd (ASX: ELO), Bigtincan operates a software as a service business model. In other words, it sells its customers subscription-based licenses to access its software platform. This means that a lot of its revenue is recurring – customers will have to pay their subscription fees at regular intervals to maintain their access.
As an investor, this takes some of the risks out of an investment. As long as Bigtincan can keep customer churn low, it can develop regular income streams from subscription renewals.
This is why you’ll notice that a lot of these companies – particularly in their growth phase – will focus on annual recurring revenues and other similar metrics. The idea is that, while current cash receipts may still be low, these companies are locking in higher future revenues by growing their customer base.
For a growing company, Bigtincan’s financial performance has been pretty strong. First-half FY21 revenues were $18.4 million, an increase of 33% over the prior comparative period. And annualised recurring revenues – that key metric I mentioned before – jumped more than 50% over the first half of FY20 to a record $48.4 million.
This business momentum seems to have carried over into the third quarter. In an update issued at the end of April, Bigtincan reported that it had received $12.2 million in cash receipts for the March quarter – a quarter-on-quarter uplift of 13% – meaning it was on track to book the full cash value of its annualised subscription revenues.
However, shareholders must have been hoping for something more from Bigtincan’s third-quarter update, and it was sold off heavily again. On 30 April, the day the third-quarter update was released, the Bigtincan share price fell sharply, down almost 13% by the close of trade. They dropped a further 5% the next trading day as well.
Bigtincan expects full-year FY21 revenues to come in towards the top end of its previously issued guidance of between $41 million and $44 million. Included in its third-quarter update was a slight upgrade, to between $43 million and $44 million. Annualised recurring revenues are also expected to be at the higher end of $49 million and $53 million.
This could mean a year-on-year increase of as much as 42% for revenue, and 48% for annualised recurring revenues – both pretty substantial rates of growth. It will be interesting to see what impact that will have on the Bigtincan share price if the company can hit – or even exceed – those targets.