‘Bargain’ tech company Whispir reveals path to profits

Trading at a ratio less than three times its US peers, an analyst says Whispir is a ‘bargain’ as its CEO reveals the company’s path to big profits.

Whispir boss Jeromy Wells says the tech company is set to breakeven within two years.

Whispir chief Jeromy Wells says the cloud communications company will be cash flow break-even within the next two years as it signs on scores of new customers, including South-East Asia’s biggest telco.

Despite its loss doubling to $7m for the six months to December 31, Mr Wells said the business is “scaling profitability”. Revenue jumped 70 per cent to $39.4m, with a customer churn rate of 1.8 per cent.

“The company reported gross profit of $23m this half, 65 per cent growth over the prior corresponding period. This means our revenue growth of 70 per cent is contributing to profitability,” Mr Wells said.

“Gross margins were 58.4 per cent for the half, slightly down on the prior corresponding period of 60.4 per cent due to the increase in proportion of transactional revenue, – but still well within our expected gross margin range at this point in the company’s growth cycle.

“Whispir enters the second half of FY22 in a strong financial position with cash of $38.1m and no debt, and line of sight to cash flow break-even within the next two years.”

The company’s share price was trading 5.25 per cent lower in early afternoon trade on Tuesday at $1.90. This compares to a 1.5 per cent slide across the broader share market.

For Whispir, however, it has found itself struggling to ascend from the rout plaguing tech stocks. But Shaw and Partners analyst Jules Cooper said Whispir was a “top pick” and “a bargain trading on an FY22 EV/Revenue multiple of 3.0x”.

“Recent local M&A has transacted at between 5-9x revenue and Whispir’s similarly exposed US peers are trading on multiples ranging between 4.4-8.0x,” Mr Cooper wrote in a note to investors.

“We continue to view WSP as a quality business, that is executing strongly, that has now substantially de-risked its path to cash break-even.”

During the half year, Whispir signed a three-year deal with Singtel, which Mr Wells said was “transformational”.

“The Singtel contract provides a cost-effective route to market and validated industry benchmark from which to further develop telco partnerships in the region,” he said.

“The Company will begin to recognise revenue from this contract in the second half of FY22, with the majority of the contract value contributing to revenues in FY23 and beyond.”

“In addition to Singapore, Indonesia and the Philippines present opportunities for growth and Whispir is investing in localised marketing content in multiple languages to drive digital direct growth in these countries. The increased local workforce presence in Asia supports existing customers and positions the business for further expansion.”

Its Australia and New Zealand business did the bulk of the revenue lifting, contributing $35.2m, a near 86 per cent jump on the previous corresponding period.

“Performance was boosted by significant pandemic-related transaction revenue as Whispir partnered with major healthcare providers to deliver personalised communications during Australia’s Covid response,” Mr Wells said.

North America also started to gain traction, with revenue leaping nearly 61 per cent to $1.1m. But Asia recorded a 9.2 per cent fall to $3.2m, with Mr Wells attributing the decline to “negative business sentiment surrounding the pandemic with existing customers electing to defer campaigns.”