In February hotel booking software provider SiteMinder (ASX: SDR) reported its H1 FY 2025 results. Revenue was up 13.9% to $104.5 million and the loss before tax decreased slightly from $14.36m to $13.31 million. Free cash burn was about $8.5 million, if you calculate it by subtracting lease liability payments and investing outflows from the positive operating cash flows of about $5.8m.
Siteminder finished December 2024 with just over $34m in cash and has a market capitalisation of about $1.3 billion at the current SiteMinder share price of $4.60.
Back on June 13th, 2024, when their share price was $4.80, I wrote an introductory article about SiteMinder. I explained its business model and why I thought it is worth watching. You can check that out here.
After SiteMinder released their results for the 2024 financial year, I followed up with another article, this time focusing on their “Smart Platform” technology and why I’m excited about their strategy. SiteMinder’s share price was $5.20 when I wrote that piece, which you can find here.
SiteMinder’s share price has been a bit of an adventure! Even though it is below where it was about a year ago, it actually went way up to $6.85 at some point before coming back down. Now, let’s pop the hood and see what’s going on in there!
SiteMinder Financial Performance after 1H FY25 results
SiteMinder’s financial performance is driven by two key factors: the number of properties (customers) using its services and the average monthly revenue generated per customer. The trend is positive because SiteMinder is growing its customer base while also increasing product penetration among existing customers.
The chart below shows this positive trend, demonstrating steady growth in both SiteMinder’s customer count (left axis) and its average monthly revenue per customer (ARPC, right axis) over recent reporting periods.
With a mix of subscription and transaction-based revenue, SiteMinder’s income grows when its existing customers purchase add-on services, or, in the case of transaction revenue, when their Gross Booking Value (GBV) grows. This dynamic allows SiteMinder to generate more revenue as its customers grow without additional sales efforts. However, SiteMinder’s revenue is also influenced by the cyclical nature of the travel industry. As of 1H FY 2024, subscription revenue made up 63.5% of total revenue, while transaction revenue made up the remaining 36.5%.
The chart below highlights SiteMinder’s revenue breakdown over time, showing steady growth in both subscription and transaction revenue streams, as well as a consistent increase in total revenue.
SiteMinder isn’t yet profitable, so tracking trends in EBIT and EBITDA provides the best proxy for assessing business performance.
The chart below illustrates SiteMinder’s EBIT and EBITDA trends over time, showing a clear improvement as losses narrow. The dotted line highlights the upward trend in EBIT, reflecting the company’s progress towards profitability (on an EBIT basis).
Siteminder took a $4.9 million hit on restructuring this half, impacting EBIT and EBITDA margins. Management views this as an investment in long-term growth. The plan involves integrating the tech and data teams to improve efficiency with AI and automation, doubling down on high-value hotel customers, and expanding the data division in India – half the workforce is now in Asia and Latin America.
In the short term, these changes are dragging on margins, but if successful, it should lead to efficiency gains and stronger margins over time. Of course, execution is key. As an investor, I’ll be watching closely – by 1H FY 2026, we should start to see margin expansion. (Note to future me: If there’s another excuse for stagnant margins next year, that might be an ‘orange flag’.)
Annual Recurring Revenue Trends
While revenue trends reflect past performance, Annual Recurring Revenue (ARR) gives more of a hint at future revenues over the next 12 months. SiteMinder calculates ARR by multiplying last month’s subscription revenue by 12 and adding four times the previous quarter’s transaction revenue (assuming any promotions have ended).
The chart below illustrates SiteMinder’s ARR growth over time, highlighting a consistent upward trend. This suggests strong underlying momentum in recurring revenue reinforcing its potential for continued revenue growth in the near term.
ARR in Australian Dollars doesn’t factor in currency fluctuations, making it important to track ARR Growth on a constant currency (cc) basis for a clearer picture of underlying performance.
The chart below shows SiteMinder’s year-on-year ARR growth in constant currency, highlighting trends in organic revenue expansion while removing the impact of exchange rate fluctuations.
As you can see, ARR grew by 22% in 1H25, while revenue increased by only 17.2%. Management pointed to two key reasons for this gap:
- Short-term incentives – SiteMinder offered temporary incentives to attract larger hotel customers. ARR strips out the impact of these incentives, making growth appear stronger.
- Smart Platform monetization – The new revenue streams from the Smart Platform kicked in later in the half, meaning their full impact on revenue growth will be more visible in future periods.
Cash Flow
Since Q3 FY24, SiteMinder hasn’t been required to report quarterly cash flow, so I’ve adjusted my cash flow graph to reflect half-yearly reporting instead.
The chart below shows free cash flow, which I’ve calculated as net cash increase/decrease, adjusting for loan drawdowns/repayments and cash received from share issues. However, I haven’t factored in the impact of employee share-based payment expenses in this graph.
This approach is a bit more conservative compared to how the company presents underlying free cash flow in their reports—but I prefer this method for a clearer picture of the actual cash movement.
To be honest, SiteMinder’s cash flow situation has been a bit of a bummer. It feels like they’ve taken a step back. I don’t have the specific numbers for Q1 and Q2 separately, but if we spread out the total cash flow for the first half of 2025 across those two quarters, it’s easy to see why I’m a little disappointed. Just take a look at the graph below.
Here’s the thing: compared to the first half of 2024, they’ve actually improved. But if you look at how they were doing in the second half of 2024, it seems like they’re losing momentum.
Now, the company mentioned spending about $5.2 million on restructuring, and even if we take that into account, it still doesn’t explain the slowdown. It looks like it’s going to take them longer to become free cash flow positive than I initially expected.
Fingers crossed that their investments in future growth will pay off and make up for this delay! While SiteMinder is not performing as well as I had expected it to, the underperformance is not yet a thesis breaker for me.
Outlook for FY25 and Beyond
SiteMinder has reaffirmed its medium-term guidance of achieving 30% organic annual revenue growth and expects to be both underlying EBITDA and underlying free cash flow positive in FY25.
As I’ve mentioned before, I’m not a big fan of underlying metrics, so I’ll set that aside. What is really important is the 30% revenue growth target. Given that revenue grew by 17.2% in the first half and ARR by 22%, the second half will need to do a lot of heavy lifting to hit that mark.
In my view, SiteMinder is likely to fall short of its 30% growth target, but management remains confident that growth will accelerate, driven by contributions from the Smart Platform. It’ll be interesting to see how that plays out.
That said, the language around this guidance is a bit unclear to me. When they mention “medium term,” is the 30% target for this year, or is it something they expect to achieve over the next couple of years? It’s not entirely clear to me, which makes it harder to set expectations. Despite this uncertainty, it’s safe to say that management anticipates revenue growth to accelerate in the future.
Valuation
SiteMinder has around 278 million shares, each priced at about $4.60, giving the company a market value of just under $1.3 billion. It currently has $216 million in annual recurring revenue (ARR). Therefore, its market capitalization is about 6 times its ARR.
ARR multiples are not a great way to value a company, but given the uncertainty about when Siteminder will become free cash flow positive, I’m not sure a discounted cashflow model is too good either.
Either way, it is fair to say that this company is expected to become very profitable in the future, though it is not there yet. I still believe it is close to becoming free cash flow positive, but as mentioned above, the exact timing is not certain.
In theory, SiteMinder is building a scale advantage in terms of access to data, and is also expanding its moat with smart platform technology. The upcoming couple of years will decide if it is a genuine compounder or just another business with high promises that cannot ultimately maintain growth and profitability.
Nonetheless, it is interesting to see that market expectations have come down if you consider the multiple of trailing revenue Siteminder currently trades at. The market was willing to pay quite a high multiple of trailing revenue in 2021, but that was a different time, and we are now much closer to the lows of 2022.
At this stage, I still believe the company has plenty of long term potential and I think it definitely deserves a spot on your watchlist.
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Please note the author owns shares in SDR at the time of publication and will not trade SDR shares for at least 48 hours after the publication of this article. The editor does not own shares in SDR. The author has not considered your investment objectives and this is not personal advice. This article is not intended to form the basis of an investment decision. 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 Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 343937).