- TOP IDEAS: More and more Fortune 500 Companies are subscribing to Digital
Ledger Blockchain Technology developed by Boardwalktech Software (TSXV: BWLK)
as a Platform-as-a-Service to gain efficiencies and security for
mission-critical business applications. The stock is now on the list of Top
Ideas for Investorfile.
Despite the reference to the term Blockchain, this blog post has nothing to do
with Bitcoin or Cryptocurrency.
refresher, blockchain is a
transaction ledger that maintains identical copies across each member computer
within a network. The fact that the ledger is distributed across each part of
the network helps to facilitate the security of the blockchain. The basic advantages of
blockchain technology are decentralization, immutability, security and
transparency, which allows for verification of data without having to be
dependent upon third-parties.
Ledger (blockchain) technology remains a quickly expanding area of growth
for companies across a host of industries. That
said Boardwalktech Software Corp. becomes our newest Small Cap Value stock on
Investorfile’s list of Top Ideas.
Based in Cupertino, California,
Boardwalktech Software Corp. (TSXV: BWLK - C$0.52) has developed and patented a
Digital Ledger Blockchain Technology Platform that is in use today by a growing
number of Fortune 500 Companies for a variety of mission-critical applications.
Big companies today are subscribing
to Boardwalktech’s software technology to resolve key enterprise business
problems by connecting multiple users in the enterprise value chain. This is to
improve planning and results with the alignment of data from various/multiple
enterprise systems of record used in the information exchange processes. By
deploying a blockchain-based solution, multiple users can secure simultaneous
access to the same data in a relational database environment, which supports
concurrent access to record objects while being edited. As such, the Boardwalk
Enterprise Digital Ledger Platform is a complete enterprise platform that
resolves trust and collaboration issues that large companies face when working
with multiple parties.This enables customers to automate manual business
processes and then turn "digital” to run mission-critical applications managing
the digital exchange of information internally and with customers, channels and
is on forefront of the paradigm shift in Enterprise Planning Process (ERP) from
manual to digital. Its solution targets processes for large businesses that include:
Inventory and Order Management, Product Planning, Demand Planning &
Forecasting, Risk Management, Reconciliation/Tax, Supplier Collaboration, Price
Quote Management, and Track & Trace. It also enhances ERP and Microsoft
Excel-based solutions with proprietary, time-stamped management solution at the
"cell level”. The Boardwalktech solution can quickly align structured and
unstructured data from all sources to enable better and faster planning
decisions, creating what the Company says is an "Ecosystems of Efficiency.”
According to the Company, the Boardwalk Ledger Technology
Platform is in use by 26 of the Fortune 500 Companies. Last year, Boardwalktech
transitioned to a direct sales team and the Company offered its Boardwalk
Enterprise Digital Ledger Platform, based on annual subscriptions, to
enterprise customers with pricing built around multiple digital applications
and scale/size of data. In July 2019, the Company closed on its first US$1
million subscription license with a Fortune 50 financial services company.
There is robust growth in subscription sales for
Boardwalktech’s Platform-as-a-Service (PaaS) and Software-as-a Service (SaaS)
offerings. Such revenues are recurring and which are comprised of annual
platform /application software licenses and ongoing professional services fees.
The Company reported that its Annualized Recurring Revenue ("ARR”) base as of
Q3-Fiscal 2020 (December 31, 2019) was at US$3.7 million, which is up 25% from
the same quarter in fiscal 2019 and up 32% year-to-date versus the comparable
nine-month period from the prior fiscal year. The Company reports all of its
financial results in US
service fees generate high gross margins at 85-90% but, today, the Company is
still not profitable. It reported an adjusted EBITDA loss of about US$0.6
million in Q3 Fiscal 2020. There is no doubt that the Company will report a
sizable net loss for fiscal 2020 which ended on March 31. However,
there is a silver lining. In the last two consecutive quarters, Boardwalktech
generated positive cash flow from operations, and there is significant
operational leverage potential going forward as the Company scales. We also
note that Boardwalktech’s Management had publicly stated that the financial
goal for the Company is to generate positive adjusted EBITDA prior to exiting the
first half of fiscal 2021 (which ends September 30). According to Management,
the plan to profitability will be achieved by converting on a portion of its
sales pipeline (last reported at US$5.7 million) in conjunction with the
implementation of a $US1.2 million annual cost savings program which is already
For us, the
"white elephant” for this Company is its net debt financial position, currently
at about US$4 million. Generally, Investorfile does not recommend buying the
stock of a small company that has net debt. That said, Boardwalktech’s debt is
not owed to a bank but, rather, to a controlling shareholder, the SQN Venture
Income Fund LP, thus providing some flexibility. This debt matures in June
2022. We note that SQN has participated in the Company’s recent rounds of
equity financings, too.
Investorfile is recommending the shares of Boardwalktech
Software because we believe they are near a financial inflection point which
should see the Company generate positive adjusted EBITDA as recurring revenues
continue to increase from new annual software license fees. This could cause a
positive rerating for the stock price.
Boardwalktech’s stock can be purchased for about C$0.52 per share on the TSX
Venture Exchange. This stock price equates to a market capitalization today for
the Company of approximately C$10 million. At this valuation, the stock trades
at about two times Boardwalktech’s current AAR base, on a currency adjusted
basis (US$1.00 = C$0.74). We feel that a revenue multiple of two times is not
unreasonable for a SaaS company with a growing recurring revenue base. Our
recommendation also advises investors to accumulate the shares of Boardwalktech
Software from its current trading levels to a
high of C$0.75. At C$0.75, the shares trade less than the average exercise
price (of C$0.93) for the 4.5 million share purchase warrants that the Company
has outstanding to date.
Looking forward, we forecast
that Boardwalktech Software will be able to grow its AAR base to
US$12 million (C$16.2 million) exiting fiscal 2022 and earn 15% EBITDA margins
at such sales levels. Based on our forecast, investors who accumulate shares of
the Company at an average cost base of C$0.65 will have investment valuation
less than 1.25 time revenues and about 8 times Enterprise Value (EV)/EBITDA.
Such multiples are inexpensive for a SaaS company. Our valuation model assumes
there will be 30 million shares outstanding (all of the Company’s outstanding
warrants become exercised) and all the outstanding debt is paid back from
warrant proceeds and cash generated during our forecast period.
Investorfile acknowledges that
Boardwalktech is still a very small company today and new investors in this
stock should have at least a two to three year investment horizon.
We note that our financial forecast
does not factor the upside potential of the Company’s newest data management
technology release. Earlier this year, Boardwalktech launched The Network of
Words (NOW), a patent-pending technology that
converge structured and unstructured data such as SQL, bill of materials,
documents, videos and images to enable multiple functional and vertically
focused customer applications.
Boardwalktech says NOW offers a new
approach, which perfectly mirrors the original document/information source and
correlates the information without any transformation. In an application
example cited by the Company, NOW can correlate an influencer social media post
to the warehouse inventories across the world on how to replenish product
quantities. Boardwalktech says NOW is currently being evaluated by prospective
Management, insider and beneficial
ownership currently own 43% of the Company’s outstanding shares, of which the
Company’s CEO has approximately a 10.7% stake.
At present, Boardwalktech Software Corp. has approximately 19.5 million shares outstanding.
Company’s website: www.boardwalktech.com
Author Ownership Disclosure: TSXV: BLWK - Yes
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no responsibility
to update the information contained in this article. The information contained
within this article should not be construed as offering of investment advice.
Those seeking direct investment advice, should consult a qualified, registered,
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Investorfile.com is not engaged in an investor relations agreement with Boardwalktech Software Corp. nor has it
received any compensation from Boardwalktech
Software Corp. for the preparation or distribution of this article.
The author of this article has acquired and may trade shares of Boardwalktech Software Corp. through open
market transactions and for investment purposes only.