Moatable (MTBLY) investment thesis
Profitable US SaaS company at 0.2x revenue
Description
How much would you pay for a mission-critical, best-in-class SaaS company growing at impressive rates year-over-year? Moatable Inc. (MTBL), with a market cap of approximately $11 million and revenues of more than $50 million, is significantly undervalued considering its growth potential and current transition to SaaS. As the company leverages its innovative solutions in the real estate and trucking sectors, it is poised for significant expansion and profitability.
Thesis Summary
Moatable operates two primary SaaS platforms, Lofty and Trucker Path, catering to the real estate and trucking industries, respectively. We believe Moatable offers 100% upside over the next three years through:
Sustained revenue growth driven by an increasing number of clients and market penetration.
Improving margins and a swing to profitability from cost optimizations and the sales mix shifting from hardware to SaaS.
Market revaluation as the business model stabilizes and demonstrates consistent performance.
Stock repurchase program indicating management’s confidence in the company’s future prospects and a commitment to enhancing shareholder value.
Potential listing in a more liquid market as the OTCQB or OTCQX marketplaces as it currently trades in Pink market after NYSE delisting back in April.
Business Model
Launched in 2016, Lofty is an all-in-one CRM (Customer Relationship Management) and sales acceleration platform designed specifically for real estate professionals. It helps real estate agents and brokers manage leads, conduct marketing campaigns, and close deals efficiently. The platform offers various features including:
Lead Management: Automatically imports and categorizes leads from various sources.
Marketing Automation: Executes targeted marketing campaigns using email, SMS, and social media.
AI-Driven Tools: Provides AI-based responses and customer engagement tactics to streamline operations.
Property Data Integration: Integrates with IDX websites to display real-time property listings and market analyses.
Team Collaboration: Facilitates communication and collaboration among team members to manage transactions effectively.
Economies of Scale and Growing Customer Base: Lofty has witnessed substantial growth in its customer base, driven by the increasing digitalization of the real estate industry. Real estate professionals are increasingly adopting digital tools to enhance efficiency and competitiveness. Lofty’s integrated approach provides a comprehensive solution that reduces the need for multiple disparate systems, making it an attractive choice for real estate agents, teams, and brokerages. As of the end of 2023, Lofty serves over 5,000 active users, with a projected growth rate of 25% annually.
Acquired in 2017, Trucker Path is a trip planning and transportation management system tailored for the trucking industry. It is a critical tool for truck drivers and fleet managers, offering features such as:
Navigation and Trip Planning: Provides truck-specific navigation, helping drivers find truck stops, parking, weigh stations, and more.
Load Boards: Connects truck drivers with freight brokers and shippers to find loads efficiently.
Community-Driven Updates: Real-time updates from a community of over 800,000 active users.
Fleet Management: Enables fleet managers to track, dispatch, and communicate with drivers seamlessly.
Marketplace: Offers discounted products and services tailored to truck drivers’ needs.
Economic Impact and Customer Growth: The trucking industry is a cornerstone of the U.S. economy, and the need for efficient logistics solutions is ever-increasing. Trucker Path addresses this need by providing a robust platform that enhances operational efficiency for drivers and fleet managers. The platform’s active user base has grown significantly, with nearly 95,000 paid subscriptions by the end of 2023, representing a growth rate of 20% annually. This growth is fueled by the industry’s shift towards digital solutions and Trucker Path’s superior functionality.
Competitive Advantage
Moatable’s competitive edge stems from its comprehensive product offerings that cater to niche markets with high growth potential. Both Lofty and Trucker Path offer integrated solutions that streamline operations for their users, enhancing productivity and reducing costs. This integration, combined with continuous innovation and customer feedback, positions Moatable ahead of competitors who offer more fragmented or less specialized services.
Financials/Valuation
Financial Performance:
Revenue Growth: Moatable has seen its revenue increase from $45 million in 2022 to $52 million in 2023, a 15% year-over-year growth rate. In the first quarter of 2024 revenue has increased to $14 million.
Operating Costs: The company has successfully reduced its capital expenditures by 15% over the past year, focusing on cost-effective growth strategies.
Profitability: Moatable is on track to achieve positive earnings next year, with projected EBITDA of $2 million in 2024, up from a loss of $10.7 million in 2023.
Leverage: the company has no long term debt and current assets of $46 million with current liabilities of $21 million.
Valuation Metrics:
Market Cap: $11 million, trading at nearly 1x projected 2026 earnings. The current valuation is around 0.2x expected revenue for 2024. In Q1 2024 the net cash position of the company was $25 million.
Price-to-Earnings (P/E) Ratio: At current valuation, the P/E ratio is projected to be around 1 by 2026, indicating significant upside potential.
Growth Prospects: The real estate and trucking SaaS markets are expected to grow at 20-30% annually, providing a solid foundation for Moatable’s future revenue streams.
Operating Leverage and expenses: Most of Moatable’s expenses are fixed, which, combined with growing revenue, is a strong catalyst for share price appreciation. For instance, Sales, General, & Administrative expenses have remained relatively stable, they currently are around $31 million and decreasing. Research & Development costs have also stabilized at approximately $18 million. This consistency in fixed costs, along with recent profitability, underscores the potential for significant operating leverage as revenues continue to grow. The company has around 80% gross margin. Additionally, past non-operating losses were partly due to non-recurring bad investment decisions, which the company has since addressed and should not recur.
Stock Repurchase Program: Moatable has initiated a stock repurchase program, reflecting management’s confidence in the company’s future and a commitment to enhancing shareholder value. The repurchase program is expected to provide support for the stock price and improve per-share metrics over time.
Industry Context
Real Estate Market: The real estate market is currently at a cyclical low, with decreased inventory levels, fluctuating mortgage rates, and economic uncertainties impacting growth. However, this presents a significant opportunity for Moatable’s Lofty platform. As the market recovers, real estate professionals will increasingly rely on digital tools to manage leads and close deals. Lofty is well-positioned to capitalize on this recovery, driving substantial revenue growth as the market improves. As evidenced by the Home Ownership Affordability Monitor (HOAM) Index from the Atlanta Fed (https://www.atlantafed.org/center-for-housing-and-policy/data-and-tools/home-ownership-affordability-monitor), we are currently at the lowest point of affordability. Despite this challenging environment, Moatable has demonstrated resilience by continuing to grow their revenue and reduce costs. Should affordability improve, their performance is poised to significantly accelerate.
Trucking Industry: The trucking industry remains a critical component of the U.S. economy, with increasing demand for efficient logistics solutions. Trucker Path’s comprehensive platform addresses key challenges faced by truck drivers and fleet managers, including navigation, load management, and real-time updates. With a growing user base and expanding market reach, Trucker Path is set to drive Moatable’s revenue growth in the coming years.
Insider Ownership and Financial Stability
CEO Ownership: Moatable’s CEO owns more than 50% of the company’s stock, aligning his interests with those of shareholders and demonstrating strong confidence in the company’s future.
Cash Reserves: Moatable holds substantial cash reserves, providing a significant margin of safety against temporary financial challenges. This financial cushion allows the company to weather economic downturns and invest in growth opportunities without compromising its financial stability.
Risks
Key risks include:
Economic downturns affecting the real estate and trucking markets.
Increased competition in the SaaS sector.
Execution risks related to scaling operations and managing costs.
Dependence on third-party data and integration partners.
Conclusion
Moatable is a compelling investment opportunity with significant upside potential. The company’s strategic focus on high-growth SaaS platforms, combined with its innovative approach and expanding customer base, positions it well for future growth. As the real estate market cycle improves and the trucking industry continues to digitalise, Moatable is expected to capitalize on these trends, driving revenue growth and profitability. The stock repurchase program further indicates management’s confidence in the company’s prospects and enhances shareholder value. Additionally, the CEO’s substantial ownership stake and the company’s strong cash position provide additional assurance of management’s commitment to success. We recommend considering Moatable as a valuable addition to any growth-focused investment portfolio, given its potential to double in value over the next three years.
Catalyst:
Achieving profitability.
Continued growth in user base and market penetration.
Potential for U.S. relisting in OTCQB or OTCQX marketplaces and acquisition interest.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I and/or others I advise hold a material investment in the issuer's securities.