Selling Bigtincan Holdings Ltd (ASX:BTH)

I read an article yesterday which prompted me to rethink my investment in Bigtincan Holdings Ltd (ASX:BTH). In May I wrote about the company for Ethical Equities. Today I sold my shares for the following reasons.
  1. BTH is dependent on Salesforce, the dominant global CRM platform, as many organisations store their sales data within Salesforce. Salesforce acquiring a competitor of BTH would spell trouble and there are plenty to choose from.
  2. BTH has over 185 competitors. Of these, Highspot and Showpad have raised US$60 million and US$70 million respectively last month. Both claim to be growing revenue 100% per year. Highspot is backed by Salesforce Ventures. In December 2018 Seismic, also growing revenue 100% per year and the market leader, raised US$100 million. I suspect these growth rates include acquisitions and all are private companies so are not obliged to report this information.
  3. The sales enablement market is currently worth US$890 million and BTH has annualised recurring revenues (ARR) of about AU$25 million by my estimates (less than 2% market share). The company is loss making and organic revenue growth is about 30% per year. Customer retention is in the 80% to 90% range and its market cap is $135 million. It is hard to see how BTH can become a dominant sales enablement software vendor in light of the aggressive competition described above. I think the stock is fully valued at over five times ARR.
  4. I think we are near the peak of this particular tech cycle and although BTH is far from the most optimistically valued software company, it will get hit along with the rest when sentiment turns.