2019 was a year of hits and misses for IPOs. There were some successes, but there were also some epic failures. Who can forget the Latitude float that failed to fly?
As we head into the home stretch we take a look at 3 IPOs that outperformed in 2019.
Sezzle Inc (ASX: SZL)
Sezzle Inc debuted on the ASX in July at an issue price of $1.22. It closed the first day of trade nearly double that at $2.20 and currently trades at $2.25 a share. The fintech company operates in the buy now pay later sector which has boomed in 2019. Although ASX listed, Sezzle is focused on the North American market and operates from Minneapolis.
Sezzle makes interest free loans to end consumers who purchase goods from affiliated merchants. It pays retail merchants the value of the underlying sales net transaction fees charged by Sezzle. Merchant fees as a percentage of merchant underlying sales were 4.8% in FY18. The company also makes some income from reschedule fees from end customers where the customer requests to shift their instalment schedule, as well as from failed payment fees.
Sezzle’s growth potential
Sezzle reported strong growth in the September quarter. The number of active merchants grew to 7,507 compared to 5,408 at 30 June 2018. Active customers reached 644,509, up 49.9% from 429,898 at the end of June. Underlying merchant sales increased 64.2% quarter on quarter to $68.8 million, while underlying merchant fees totalled $3.6 million, an increase of 68.9%.
On 2 December Sezzle announced it had secured US$100 million in debt funding to support future growth. Sezzle uses debt funding to advance funds to merchants when customers make transactions. The new debt facility, which will be provided by a syndicate of lenders, triples the size of the company’s existing debt facility. The new facility will allow Sezzle to take advantage of growth opportunities in the North American buy now pay later market.
Black Friday boosts Sezzle sales
Sezzle reported strong YoY sales growth for the Black Friday / Cyber Monday event in North America. Underlying merchant sales for the period increased 400% compared to the previous year and 36,000 new active customers were added. Underlying merchant sales across the period were US$11.3 million, which compares favourably to Sezzle’s total underlying merchant sales of $157.5 million for the 12 months to 30 September 2019.
Nuchev Limited (ASX: NUC)
Nuchev Limited listed on the ASX on Monday with a listing price of $2.60 and finished its first day as a public company up 24.6% to $3.24. It is currently trading at $3.79, up 45% from its listing price.
What is Nuchev?
Nuchev produces, markets and distributes a range of goat milk infant formula products to consumers in Australia and Asia under the Oli6 brand. Oli6 products are manufactured in Victoria using goat milk imported from the Netherlands. Goat milk has higher levels of certain vitamins and minerals than standard cow’s milk, as well as higher levels of prebiotics that may aid the digestion process.
The company reported an almost threefold increase in revenue in FY19 with plans to continue its rapid expansion. In Australia Nuchev’s Oli6 products are available online, in chemists (including Chemist Warehouse stores) and Coles Group Ltd (ASX: COL) supermarkets. CEO and founder Ben Dingle has extensive experience in the dairy industry – he co-founded New Zealand’s Synlait Milk Ltd (ASX: SM1), which manufactures the A2 Milk Company Ltd’s (ASX: A2M) infant formula.
The opportunity in Asia
Nuchev initially launched in China in late 2016 so has had to comply with China’s new, more stringent regulations. Nuchev believes these regulations work in the company’s favour, however, by weeding out less credible brands. The company is in the process of expanding its distribution footprint across China, currently focusing on e-commerce platforms. China’s infant formula market is worth $22 billion and growing, driven by increasing disposable income.
Nuchev launched in Hong Kong in June, its first move beyond Australia and China, which should further strengthen its brand position in the eyes of Chinese consumers. Nuchev is also considering expanding to Taiwan, Japan, South Korea, Malaysia, Indonesia, Thailand and Singapore.
Whispir Limited (ASX: WSP)
Whispir Limited listed in June this year in an oversubscribed $47 million IPO consisting of a primary raise of $27 million and secondary sell down of $20 million by existing shareholders. Shares were issued at $1.60 each and reached a high of $1.99 in October before trending down to trade at $1.67 currently.
Whispir provides a SaaS communications workflow platform to enterprise customers. The platform is used by more than 500 organisations globally to automate interactions between businesses and people. Telstra Corporation Ltd (ASX: TLS) uses the platform to communicate rapidly with customers and staff, Qantas Airways Limited (ASX: QAN) to manage critical incidents, and New Zealand police to engage with the hearing-impaired community. Key markets are Australia, New Zealand, Asia, and the United States.
Whispir met or exceeded the financial targets set out in its prospectus for FY19. Revenues increased 20% to $31.1 million in FY19, driven primarily by strong growth in Australia, New Zealand, and the United States. Average customer annual recurring revenue increased 10% to $63,000, 5% ahead of the prospectus forecast. Recurring revenues represent 94% of total revenues.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) were negative $11 million in FY19, beating the prospectus forecast by $900,000. The net profit after tax (NPAT) loss was $23.3 million, $800,000 ahead of the prospectus forecast.
At the end of FY19, Whispir reported a balance of $26.8 million in cash and no debt, leaving it well positioned to execute its growth strategy. This revolves around winning new high-value customers and driving increased revenue from existing customers. Market expansion in Asia and North America is targeted.
In 1QFY20 Whispir reported annualized recurring revenue had reached $34.5 million while the lifetime value of the customer base was $222 million. Customers have a recurring revenue retention rate of 115.5% as their use of Whispir’s software tends to expand over time as it becomes embedded in workflows.
The ANZ region is already profitable and is on track to hit $28.5 million in revenue in FY20, which will be 79% of revenue across the group. In Singapore, Whispir is accelerating from last financial year’s 31% growth to nearly 50% growth this year. There are also plans to expand into the Philippines and Thailand. In North America, new initiatives have been announced partnering with Amazon Web Services in order to leverage their Partner Network.
As of late November, Whispir was on track to meet FY20 prospectus forecasts. These include annualized recurring revenue of $42 million, pro forma revenue of $37.8 million, customer recurring revenue retention of 121.5% and the lifetime value of the customer base reaching $237 million.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Sezzle Inc and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019