SiteMinder was started in 2006 by Michael Ford and Mike Rogers to make life easier for hotels and other places like bed and breakfasts, motels, and vacation rentals etc.
In November 2021, SiteMinder went public on the Australian Stock Exchange with a market valuation of about $1.4 billion. From 2021 to 2024, the company nearly doubled its revenue and is currently at an inflection point of nearing operational self-sufficiency.
Given it is serving the growing travel industry and at an inflection point we thought it would be worth considering if this can be a multiyear compounder as an investment.
SiteMinder Business Model
SiteMinder focuses on helping small and medium-sized businesses (SMBs) in the hotel and accommodation industry like lodges, bed and breakfasts, motels, and vacation rentals. These accommodation businesses around the world get bookings through a mix of online and offline channels, from big names like Booking.com and Expedia to smaller, regional players, their own website, phone calls and even walk-ins.
Many of these businesses still use outdated methods like pen and paper, Excel, or a mix of different software tools like Property management systems (PMS), and haven’t fully tapped into the power of cloud native technologies.
Their existing systems make it hard to scale and integrate operations, and also create risks around double booking. There’s a lot of potential for growth and better technology use in this market. SiteMinder is trying to solve that gap in the market.
Siteminder offers a platform that supports many aspects of hotel management, from online sales and guest communication to business insights. It is designed to work seamlessly with existing PMS systems and improve efficiency. Siteminder operates globally with multilingual support and local currency billing.
How Does Siteminder Make Money?
SiteMinder’s revenue comes from two primary sources: subscription and transaction-based products.
Subscription Products
These include:
- Channel Manager: Synchronizes room availability and bookings across multiple platforms in real-time.
- Online Booking Engine: Facilitates direct bookings via hotel websites and social media.
- Hotel Website Builder: Offers tools to create professional, easy-to-manage websites.
- Hotel Business Intelligence: Provides analytics to aid strategic decision-making.
- Little Hotelier: A property management system tailored for smaller properties.
- SiteMinder Exchange: Connects over 100 hotel apps for enhanced functionality.
- Multi-Property: Helps hotel groups manage operations across various locations effectively
Transaction Products
These products integrate SiteMinder into the booking and payment processes and include:
- Global Distribution System (GDS): Connects travel products with agencies, providing real-time inventory updates.
- SiteMinder Pay: Facilitates secure, contactless online payments from guests.
- Demand Plus: A metasearch tool that aggregates rates and availability from various booking sites.
With the upcoming launch of Channels Plus and Dynamic Revenue Plus in mid-2024, SiteMinder will further enhance its service offerings. These products are designed to optimize and automate critical aspects of revenue management and distribution strategy, making operations even smoother, and ideally more profitable, for hoteliers. These kind of products have the potential to bring more transaction based revenue growth.
Currently, (at the end of 3Q 2024) Siteminder is serving over 41,500+ properties in more than 150 countries, and it employs staff across 20+ countries. According to their market research, over 1 million SMB properties are available globally which makes lot of untapped market for Siteminder.
Siteminder Leadership
Michael Ford and Mike Rogers (Co-Founders)
Michael Ford and Mike Rogers founded SiteMinder in 2006, and listed it on the ASX in 2021. Michael Ford transitioned from CEO to NED during the ASX listing and retired in February 2023. Mike Rogers continues to serve as CTO (according to his LinkedIN profile) but he isn’t listed as KMP in any of the annual reports.
Sankar Narayan (CEO)
Sankar Narayan is the current CEO of SiteMinder. He joined the board on January 31, 2019. He has over 20 years of experience, including senior roles at Virgin Australia, Vodafone Australia, Fairfax Media, and Foxtel. Notably, he also served as Chief Operating and Financial Officer at Xero. Sankar holds 7,095,320 ordinary shares, which is roughly around ~$34m at the current price of $4.79 per share.
Pat O’Sullivan
Pat O’Sullivan is the Non-Executive Chairman of SiteMinder, having joined the board on October 15, 2021. He has served as the Chief Financial Officer of Optus and as the Chief Operating Officer and Finance Director of Nine Entertainment Co Pty Limited. Currently, he also serves as the Non-Executive Chair of carsales.com Limited (ASX:CAR) and Chair of Technology One Limited (ASX:TNE). Pat holds 65,976 ordinary shares in SiteMinder.
Paul Wilson (Bailador)
Paul Wilson is a Non-Executive Director at SiteMinder and the co-founder and Managing Partner of Bailador Technology Investments. Back in 2012, Bailador invested $5 million in SiteMinder, and while they sold some shares during the IPO, they still hold a significant portion today. Paul brings a wealth of private equity experience to the table and personally owns 49,407 ordinary shares. Additionally, he has an indirect interest in 16,711,400 shares through Bailador. Paul’s deep involvement with Bailador highlights his strong connection to and substantial stake in SiteMinder’s success.
Leslie (Les) Szekely
Les is a Non-Executive Director at SiteMinder, having joined the board on March 26, 2012. He is currently the Non-Executive Chairman of Microequities Asset Management Group Limited (ASX: MAM) and has significant indirect interest in 15,549,072 ordinary shares through Bellite Pty Ltd as trustee for the Meyer Family Trust.
Site Minder’s Financial Performance
Let’s take a closer look at SiteMinder’s financial performance over recent periods.
Revenue
Revenue has been steadily increasing, indicating strong business performance and growth over time. From 1H2021 to 1H2024, revenue has nearly doubled, reflecting an upward trend. Even Though Siteminder is right in the Travel sector, Covid didn’t affect them too badly. This probably indicates how sticky their products are with their customers.
Annualized Recurring Revenue (ARR)
SiteMinder calculates ARR by taking the prior month’s recurring subscription revenue and multiplying it by 12, then adding the prior quarter’s transaction revenue multiplied by four. This gives an estimated annual revenue from recurring sources, assuming no changes in subscriber numbers, transaction volumes, pricing, or exchange rates.
Obviously, because it includes transaction revenue, it is not truly recurring in nature, but merely quite likely to recur.
The graph below illustrates SiteMinder’s revenue and ARR trends from 1H2021 to 1H2024, focusing on total revenue, subscription ARR, and transaction ARR.
Both subscription ARR and transaction ARR contribute to Revenue’s growth, with subscriptions remaining the larger portion but transactions increasing at a faster rate. The linear trend lines for subscription and transaction ARR indicate steady growth in both areas, reflecting SiteMinder’s expanding customer base and enhanced monetization of their services. Overall, the positive trends highlight the company’s successful efforts in scaling their recurring revenue streams
SiteMinder’s Balance Sheet
At the end of Q3 FY24, SiteMinder had $72.2 million in liquidity, which includes $39.5 million in cash, $2.1 million in term deposits, and $30.6 million in unused debt facilities.
With no debt, this strong capital base supports the company’s strategic goals as they approach a free cash flow positive situation. I think that it is highly unlikely they will need to seek additional funds from the market for their current operations – and if they do need capital raising to sustain their current operation that, would lead me to question my current thesis.
SiteMinder’s Profitability Metrics
Siteminder isn’t profitable and is still losing money at this stage. I look at EBITDA and EBIT profitability metrics to judge it’s profitability performance. The graph illustrates SiteMinder’s EBITDA and EBIT from 1H2021 to 1H2024. There is a visible improvement over time, with the negative EBITDA and EBIT figures gradually decreasing, suggesting the company is reducing its operational losses and moving towards breakeven.
Operating Cash Flow
Operating cash flow represents the cash generated or used by SiteMinder’s core business operations. The chart below shows it is improving.
However I note:
- Initial Negative Cash Flow: In early periods (Q2 2022 to Q1 2024), SiteMinder’s operating cash flow was negative.
- Improving Trend: There’s a noticeable improvement in operating cash flow over time. The linear trend line shows a steady increase, culminating in a positive cash flow in Q3 2024. This suggests that SiteMinder is getting closer to reaching a sustainable level of operational profitability.
Free Cash Flow
Free cash flow measures how much cash is generated by the company after accounting for capital expenditures (investments in property, equipment, etc.)
The chart shows:
- SiteMinder’s free cash flow remains deeply negative, However, Similar to operating cash flow, there’s an improving trend in free cash flow. The linear trend line shows a move towards less negative and the Company is guiding that it will reach positive territory by Q4 2024.
The improvement in operating cash flow and free cash flow suggests that SiteMinder is effectively managing its capital expenditures and starting to generate more cash from its operations than it is spending on investments. I believe that the market tends to pay more attention to businesses when they prove that they are cash flow positive.
Why Should SiteMinder Be on Your Watchlist?
SiteMinder has around 278 million shares, each priced at about $4.80, giving the company a market value of roughly $1.334 billion . It currently generates $187 million in annual recurring revenue and is close to becoming free cash flow positive. Its market capitalisation is about 7.13 times its ARR.
Although its valuation isn’t cheap by traditional standards, the company’s sustained growth makes it interesting prospect. Additionally, the management team has significant personal investments in SiteMinder, indicating their confidence in the company’s future. This makes SiteMinder a stock worth keeping an eye on.
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Disclosure: The author of this article owns shares in SDR and will not trade SDR shares for at least 2 days following the publication of this article. The editor does not own shares in SDR and will not trade SDR shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Equity Story Pty Ltd (ABN 94 127 714 998) (AFSL 343937).