Hey Folks, big day for quis today. They halted trading in the late afternoon and announced an acquisition that sets the launch for LedgerPay. Below are notes and they are rough, I’m not exactly speakin tha queens mate. there may be gaps here and thats cause i was likely sipping on one of the cold ipa’s i was having during the call.
Mike starts call off saying this is a Transformative acquisition to help scale and grow payment solutions business.
Noted line of what revenue would be as at if BankCard was part of quis already Sept 30th: $71 mil rev quis and bankcard, not full Menlo or mazik included here (menlo Jan 2020 ac Mazik earlier this month)
over 360 employees in the business now.
Really robust relationship with Microsoft-> key component.
Two elements to business: cloud solutions business centrered on partnership with Microsoft
Completed with strong M&A for cloud solutions.
Unique product in ledgerpay, first cloud based azure built payments solutions.
Accelerate transition to true global payments solutions provider
Notes on BankCard USA
All in one strong payments solutions provider
Insale sales direct selling promotion. Strong volume of business. 3 bill in payments value. Strong recurring revenue model. Transaction and product capabilities have recurring rev. platform to build on for ledgerpay.
Company does Card present and card not present. Present is brick and mortar, not present is shopping online – cart and basket.
Strong set of support services,
White glove approach – leadership and thought process for high customer satisfaction model, take great care of that customer.
Have different products- age tech (ID 19/21 in US I guess), saas based revenues. Top 55 ISO in US for payment volume. 31% increase in payment volume. Over 7000 merchants. $29 mil in rev, 37% ebitda adjusted, that’s sept 30 data.
The model – bank card leadership team has built a strong inside sales team that has direct relationship with customer, create compelling customer experience, inside sales model is differentiator.
Leadership have been doing this for 25 years, strong risk management- Important for onboarding merchants. Back office functions -> bring value to merhants.
On acquisition:
$100 mil in cash
$50 million in quisitive shares -> aligned interest between company and shareholders, a lotta shares doe. These shares are locked up from what I read in the NR but Mike mentions lockup with banks (see below) I wanted to ask for clarification on this as a question lol.
$20 mil earnout, driven on high annual growth -> need 20% annual ORGANIC growth from BankCard.
Great synergies to come from activating ledgerpay in this merchant portfolio.
15x earnings for buy of company. Mentioned the trading price in the industry for valuation is 20 to 25x earnings
Debt facility extended to $50 mil (from what I can remember from DD but could be wrong on is their debt is with Scotiabank, they were part of the bought deal as well here)
$50 mil Canadian sub receipt bought deal financing. – 24 month lockup- point noted above, typing up live made me trip
5 million cdn more from FAX. LFG
Transaction to close in Q2.
Acquiring processes, issuing processing, connect into merchant gateways, power of data unlocked with ledgerpay.
How do we make money? Per transaction fees, for both Card not Present and CP. Unique ability to capture real time identity of the customer without having to be in a loyalty program. Form of payment and details of transaction.
Transitions to speak about Quisitive as a Whole
Continuing to build this powerful cloud innovation solutions, help customers understanding starting point of their journey in the cloud. How to apply the data insights to their own customers, the value of quis.
Quis is paid by Microsoft to go and build this business. 15 to 30% margin contribution from recurring rev.
Rich first party offerings, CRB acqusitions is helping them do this. emPErform mentioned, 200 customers using this and growing.
Large enterprise customers
Microsoft sellers are incented to bring ledgerpay to their own customers now because of Microsoft co-sell status.
On activating LedgerPay making it a player in the market
Mike says Differentiating features from incumbent, layers to offer on top of payments intelligence, different features to isos and merchants, differentiating from incumbent, additional cost savings, no people takeout,
o Who is the incumbent in this space that he is referring to. Mike has on earnings calls before taken questions on what ledger pay would be against square, and he mentioned being different from them because of how much they can offer. Not saying that is the incumbent, just typing my thoughts here.
Still looking to grow sales team
Great cross-selling opportunities.
Their Goal for organic growth has been and is 15% and they are thus far beating that goal.
Continue acquiring businesses that makes sense to bring in to the quisitive family.
Activating unique disruptive program in ledgerpay
Bankcard is transformative for company.
Want to be a company with Recurring revenue, strong cash flow will build -> pay debt mentioned, to me this needed to be addressed. Quis has material debt already.
Q&A
How many of these merchants can get on ledgerpay like how soon we talkin?
-> didn’t really answer still awaiting official LedgerPay bank sponsorship announcement
What is the Mix of merchants that BankCard has business with? & % of Card not present?
-> bankcard team has leveraged growth models of e-commerce, robust margin. 70% card not present bizz, capture business in shopify. They have great connections. Variety of merchants, tabacco, direct consumer marketing business- health and beauty products, sporting goods, good/holistic blend mentioned twice. Great job of managing portfolio.
1% rev for BankCard 27 mil on 3 billion in transactions asked about those numbers. 70/30 question again
Mike expects this to be relatively stable. 20% growth target mentioned, they have been in e-commerce for alongwhile. Some industries shifted to online-experience due to the pandamic, they helped customers shift to this, was seen as a positive by quis. Shift back when world gets to normal for some of these businesses for some they stay operating as e-commerce.
Sellers at bankcard will have different value proposition with ledgerpay now. value of payments intelligence, very differentiated from whats available right now.
Thoughts on scaling?
A lotta work to put this deal together, contemplating this, going to activate this on a deep introspective level for synergies to unlock. Q2, Microsoft likely going to want in on this more than they are now.
Essentially mapping out growth targets, there is a lot to consider and give weight to. Whats the velocity of LedgerPay rev?,When does rev from ledgerpay really start hittin the books? that’s what I hope they can help us quantify in an investor deck or something of that nature.
Opportunity to grow ebitda 30% over the couple years. Organic business. + synergistic effect as well.
Has bank card talked to their customers about switching to ledgerpay?
Mike says with a sorta laugh no ofcourse not, would be insider information is what hes implying. Quisitive’s focus is to have no impact on customers in terms of burdens to bear, only positive impact. References that White glove experience and great customer service that BankCard brings.. Prioritizing that customer relationship while deploying a powerful technology to build strong business over time over forcing ledgerpay right away to make a quick buck. Do things right not do things fast.
Independent 20% organic growth KEY QUESTION regarding earnout to BankCardand how the 20% ebitda growth is determined
It is derived only from BankCard Rev, they themselves need to build that 20%. Align their goals with quis. Ledgerpay will no doubt be part of pitches.
$100 mil question, goes through breakout of cash on hand ($25 mil)
Beacon securities question $3 billion on transactions what does that mean for ledger pay:
hard to quantify atm i felt, mike gives an answer but they are still working to quantify potential rev. 25% growth on recurring revenue they believe for BankCard
Age Checker represented 7% of revenue for Bankcard.
Customers are all US based for BankCard. US domestic.
ENDING
We really believe that quis, ledgerpay and bankcard bring together a powerful platform. Cloud solutions business, payment solutions company, 50% of rev is now payment solutions, scale and grow that organically. 100 million in ebitda, 250 mil in rev that is the goal and vision. Be a very meaningful company in the Microsoft ecosystem. A company that employees are proud to work at.
He spoke for a bit longer finishing the wrap up but that was the end of my notes. This call was amazing to be on. Mike Reinhart has a great command while on call. His flow is great. Love him as the CEO for Quis. Strong focus in questions on trying to get valuations on what this all means for LedgerPay.
Disclosure: I own shares of Quisitive and I am long on Quisitive. Please do DD before buying. I was crushing a couple cold ones while listening to this call so I did not capture each and every word our boy Mike said on this call. There will most certainly be a recording of the call available on the companies website to listen to it completely.
Cheers,
Luke