BeWhere Holdings Inc
BEW-TSX.V / BEWFF: OTC
Current Price: $0.19
52 Week Hi/Low: $0.08 / $0.24
Average Daily Volume (3month): 80K
Issued and Outstanding: 87,888,039
Options: 2,780,750
Warrants: 11,614,473
Fully Diluted: 102,283,262
Market Capitalization: $16.7M
Insider Ownership: 37% - 32,741,964
Institutional Ownership: 5.9% - 5,263,158
TTM Net Loss: $442K
TTM Revenues: $6.1M
TTM Recurring Revenues: $2.78M
TTM Adj. EBITDA: $2.7K
P/S: 2.7x
P/Recurring Revenue: 6x
Debt: Zero
Cash: $2.4M or $0.027 per share
Working Capital: $3.85M
Last Financing: 2019 - $4,025,000 units at $0.19 with ½ warrant at $0.35 for a five-year period
Highlights:
- Three consecutive quarters of Adj. EBITDA profits
- Four consecutive years of high growth
- Reached an inflection point with recurring revenues
- Insiders are buying
- Have grown from $0 sales to $6.1M since 2014 – A CAGR of 1,252%
- Strong working capital with a cash-flow positive business
What is BeWhere Holdings?
BeWhere is a Canadian Mobile Internet of Things ("M-IoT") solutions company, based in Ontario and founded in 2014. BeWhere designs and sells hardware with sensors and software applications to remotely track real-time information on non-powered fixed and movable assets, as well as remotely monitor environmental conditions. The company develops mobile applications, middle-ware and cloud-based solutions that stand-alone or that can be readily integrated with existing software. BeWhere's solutions are cutting edge, using the latest available cellular technologies (LTE-M and NB-IoT) and offering customers low-cost sophisticated technology to implement a new level of visibility to their businesses.
What's the business model and how does it work?
BeWhere is an internet provider of real-time information on equipment tools, and inventory in transit and at facilities serving the emergency service, construction, utility, and transportation industries.
Think, “Slap and Track”, and that’s exactly what BeWhere’s business model is focused on.
The Company provides a fully integrated end-to-end solution for their B2B customers, enabling them to “Slap” on a low-power and low-cost asset tracking device, and then “Track” or monitor the device through BeWhere’s proprietary software portal.
Using Bluetooth, BeWhere beacons are transmitting data, in real-time, 24x7 to the cloud and the data is displayed directly on BeWhere’s web portal or can be seamlessly integrated into its customers platform via API integration.
Their beacons are rugged, waterproof, have a two-year battery life, up to 250 metres range and can be easily located by light & sounds notifications. These tracking devices are measuring temperature, light exposure, proximity, impact, and battery life of the beacon.
These beacons are providing customers a real-time location of inventory, containers, equipment, and tools. Providing their customers with logistics solutions to cost-effectively manage their assets, increase their return on investment and be more efficient.
Global asset tracking is a large total addressable market with vast commercial applications expected to reach $32B by 2024, growing at 14.9% CAGR.¹
BeWhere’s solutions are sold business-to-business and the Company is focused on targeting industry partners and resellers to establish channel sales for growth. They have landed multiple marquee carrier partners including Bell, AT&T, and T-Mobile, in addition to technology resellers including, FleetComplete, Geotab, Tenna and SecureQuip. Bell, Canada’s largest communications company, has announced their LTE-M expansion plans and BeWhere’s involvement in their long-term strategy. Furthermore, Bell has reinforced their commitment in partnership with BeWhere by investing $1 million into the Company in 2019.
These established telecom partners own broad communications networks and have partnered with BeWhere to expand their service offerings for their existing clients. And for BeWhere, as an extension of these partners, is endorsed and marketed by these established partners creating synergies whereby BeWhere attains access to a global customer base for channel sales with no additional marketing expenses – A key challenge for SAAS growth companies.
BeWhere’s solutions translate into a combination of hardware sales and software sales. Core to the Company’s growth thesis, is overlooking the opportunity to make strong margins, and occasionally in strategic scenarios, even sell the hardware at a loss. The true value is from the long-term value or life-time value of the recurring software sales. BeWhere does not sell a hardware unit without a recurring revenue plan.
As for pricing, BeWhere beacons are sold to distribution partners starting at $35 per beacon in small quantities and provide monthly subscription service with a cost of approximately $0.50 per month or $5 annually, paid in advance. Alternative arrangements have been made for distribution partners who choose to pay an upfront licensing fee. BeWhere distribution partners are free to set their own pricing and terms to their clients
BeWhere Beacons are contract manufactured with suppliers in China with final testing, quality assurance and shipping from the Mississauga, Ontario offices.
What’s changed? Why now?
In its infancy, the dilutive risk as an equity owner in BeWhere was quite high. Given their strategy of selling low-margin hardware, sometimes at a loss, the Company’s timeline to cash-flow profitability was unpredictable and required strong executional success.
BeWhere has now reached an inflection point, whereby their cost structure and recurring revenues have created cash-flow profitability, greatly diminishing the dilutive risk. Moreover, the recurring revenues are the higher-margin segment and what drives the Company’s profits and future earnings.
Supported by their financial statements, BeWhere has now achieved three consecutive quarters of Adj. EBITDA profitability, demonstrating a consistent and repeatable trend that we expect to continue.
This is a critical inflection point for BeWhere, as the Company will no longer be reliant on the capital markets and dilutive financings to operate its business. With the cost structure in balance and the business operating off its own cash-flows, the Company can continue to focus on growth objectives with less time requirements on capital raising initiatives.
BeWhere is showing signs of innovation and is working to bring new products to market. As an example, one of their latest new products is the BeMini – Which leverages the latest lower power, Wide-Area Cellular Networks into a smaller, energy efficient and affordable GPS tracker. They are testing the product for commercial use in a variety of different applications and has recently been tested for drone applications. With an expanding customer base, multiple partnerships, and new products, BeWhere is aptly positioned for future growth.
Share Structure
BeWhere currently has 87,888,039 shares issued and outstanding and 102,283,262 on a fully diluted basis. The insiders own 32,741,964 or roughly 37% of the Company. The two co-founders are the largest shareholders:
Owen Moore, CEO and Director – 9.95% or 8,753,343
Chris Panczuk, President, COO and Director – 9.78% or 8,602,443
BeWhere does have institutional ownership, although not reported as an insider, Bell owns roughly 5.2M shares.
It should also be highlighted that multiple insiders have been actively buying shares in the open market -since 2019 insiders have purchased roughly 1.94M between $0.15 and $0.20.
Dilutive Securities
BeWhere has 2,780,750 options and 11,614,473 warrants for a fully diluted outstanding of 102,283,262.
We would like to note a few issues given the current share structure:
Firstly, BeWhere has breached over 10% of its issued and outstanding in dilutive securities. Generally, we are looking for companies with a lower share count and strong control over options and warrants. Ideally, dilutive securities at or less than 10% of the issued an outstanding.
Secondly, the bulk of dilutive securities are warrants from the last financing in 2019. Most of these warrants (10.5M) are exercisable at $0.35 with a long period before expiration. Without a force conversion clause, these warrants may cause prolonged selling as they become in the money.
While we recognize BeWhere has a higher share count than we typically like to see, we are willing to look past these issues based on the fact that the Company, for the first time in its history, is finally in a position to no longer dilute. Most of these share structure issues are historical and representative of non-profitable, early growth companies.
Valuation
BeWhere is a high-growth Company with a high-growth valuation. This is not a Company trading at discount to book value or a cheap price to earnings multiple. However, we recognize the Company is at an inflection point with its cost structure, whereby its recurring revenues and hardware sales are covering their operating expenses, driving cash-flow and future earnings.
Since it was founded in 2014, BeWhere has grown their revenues from $0 to $6.1M TTM – A CAGR of 1,252%. BeWhere has achieved three consecutive quarters of positive Adj. EBITDA – Albeit very small ($56K).
Moreover, given their SAAS business model, we recognize cash-flow from operations is showcasing a strong trend with Q1 providing $172K cash from operations and Q2 providing $369K cash from operations – Combined $541K.
We expect these strong cash-flow trends to continue and are carefully monitoring additions to deferred revenue and growing cash on the balance sheet. As earlier noted, the recurring revenues are driving these cash-flows and future earnings – highlighted below:
Recurring revenues have been consistently growing each quarter since 2017. BeWhere now has a recurring revenue base of $2,778,490 (TTM). For each additional unit of hardware sold, there’s additions to annual recurring revenue (ARR) and the long-trailed trend depicts a strong graphical representation of where the ARR is likely to keep trending.
It should be noted that a single large hardware sale can distort the quarterly or yearly financials, but the net outcome will be an increasing ARR and ultimately a stronger core business. Moreover, as the Company grows there is likely to be years of higher or lower growth depending on sales from the hardware segment.
Annual growth in revenues will not be the only guide for measuring the success and value of BeWhere stock. The Company’s ability to convert its annual hardware growth into successive growth in ARR will ultimately be our barometer for measuring the Company’s success.
With no debt, and a profitable SAAS engine, BeWhere is in a strong liquidity position with $2.4M in cash, to not only manage its operations, but accelerate its growth. Surviving off its own cash-flows and removing the need for outside capital, BeWhere has never been in a stronger position since it went public. As for the valuation, BeWhere shares are near historical lows and the valuation is almost at its cheapest levels.
Presently, the Company is trading at a price-to-sales of 2.7x. On a recurring revenue basis, BeWhere is trading at 6x. Through the first six months of Fiscal 2020, BeWhere has grown its recurring revenues at a rate of 71% compared to the previous year. Given the accelerated rate of growth in recurring revenue, we think the Company is trading at a fair price, and quite cheap if the growth rate can stay at a similar pace.
BeWhere has a book value of roughly $5.8M, including zero debt and roughly $2.4M in cash. Currently trading at 2.87x book value with roughly $3.85M in working capital, the Company is sufficiently capitalized to manage its operations and pursue growth objectives without dilution.
What to look out for?
Growth & No Growth:
As earlier noted, we do not expect growth to be consistent. We recognize that one-time hardware sales can potentially spike the revenues. Moreover, this could lead to years with higher or lower growth comparatively. However, we are focused on the growth in recurring revenues and understand that growth in the hardware segment will not be as linear as the software, but they will be correlated.
Increasing Executive Salaries:
Executive compensation has grown every year since the Company went public. Currently, the CEO and COO are compensated $203K per annum. While executive compensation has been trending higher, these salaries are not egregious and not a concern. However, given the historical trend since the Company went public, we are closely monitoring the growing executive compensation for any potential red-flags.
Barriers to Entry
The business model is predicated on selling hardware at or below cost, enticing new sales. Which means that if another company were sufficiently capitalized, they could potentially target and penetrate the same customer base BeWhere is focused on. With relatively limited barriers to entry, we recognize there are risks from increased competition.
Final Thoughts
BeWhere has done an exceptional job growing their business from $0 in sales in 2014 to a healthy $6.1M, in a very short timeframe, bolstered by strong recurring revenues now reaching $2.78M.
Since the business model is predicated on selling hardware products at or below cost, there is a high degree of risk from dilutive financings as they undercut the market with a long-term focus on the follow-on recurring revenues.
With the Company finally reaching cash-flow profitability, driven by a strong SAAS growth engine, we think the opportunity has never been more compelling.
While we acknowledge the fundamental success of the core business, the Company has experienced a couple false starts from a capital markets perspective and has consequentially been punished.
The opportunity to buy BeWhere, a high-growth Company, near its lowest valuation with a strong core business we believe is a great risk to reward situation.
With the majority of the risk eliminated by partnering with premium partners and resellers, achieving cash-flow profitability, while maintaining at best, a satisfactory capital structure, we think management has executed on multiple key metrics.
At today’s valuation, we recognize there’s slightly more downside potential if the Company does not execute, but believe the multiples are fair given the high rate of growth exemplified by management.
The balance sheet is healthy, with no debt and adequate cash for management to focus on increasing the recurring revenue through new partnerships and hardware sales.
With insiders owning 37% of the Company, and continued insider buying, we believe their vested interests are aligned with shareholders. While salaries for key insiders have been trending higher, at this point, executive compensation is not egregious or alarming.
BeWhere is a fast-growing SAAS business, with strong recurring revenues, that has reached a financial inflection point. By eliminating the need for outside capital to operate, BeWhere has significantly reduced its risk for equity owners who are able to purchase a Company that has demonstrated a track-record of exponential growth backstopped by recurring revenues as downside protection.
As the Company continues to innovate and expand, we think BeWhere has the potential for multi-bagger returns. Now that the Company does not have to dilute, on a per share metric, incremental growth should translate to strong bottom-line earnings, driving new interest in the shares for the foreseeable future.
We believe the timing has never been better for BeWhere and this relatively undiscovered microcap is a strong buy up to $0.25
Recent Headlines
2020 - BeWhere Holdings Inc. Reports First Quarter Financial Results of Fiscal 2020
2020 - BeWhere Holdings Inc. and Tenna LLC Launch New Construction Focused Solutions
2020 - BeWhere Holdings Inc. Reports 2019 Fiscal Year-End Financial Results
2020 - BeWhere Holding Inc. Announces Plans to Repurchase Common Shares
2019 - BeWhere Holdings Inc., Astron and Gurtam Announce Partnership
2019 - BeWhere Holdings Inc. Reports Third Quarter Financial Results of Fiscal 2019
2019 - BeWhere Holdings Inc. and Tenna LLC Partner on Initial 10,000 Unit Order
2019 - BeWhere Holdings Inc. to Present at MWCA Los Angeles
2019 - BeWhere Holdings Inc. Reports Second Quarter Financial Results of Fiscal 2019
2019 - BeWhere Holding Inc. Launches Suite of M-IoT Connected Sensors Solutions
2019 - BeWhere Holdings Inc. Reports First Quarter Financial Results of Fiscal 2019
2019 - BeWhere Holdings Inc. and Trakopolis Partner on Integrated M-IoT Solution
2019 - BeWhere Holdings Inc. Presents Intelligent Water on CNBC Interview
2019 - BeWhere Holdings Inc. Partners With Fleet Hoster on Integrated M-IoT Solution
Financing History
2019 – 21,184,210 units at $0.19 units with a ½ warrant at $0.35 for a total of $4.025M
2017 - 7,165,000 shares at $0.30 -for a total of $2,149,500
2016 - 8,533,332 units at $0.15 with a ½ warrant at $0.25 for a total of $1.28M
2016 - 13,563,003 units at $0.15 with a ½ warrant at $0.25 for a total of $2,034,450.45
