I think you must have misunderstood something. Comerzzia, the retail solution, is a omnichannel solution, which means it focuses on an array of different offerings.
"Included solutions: scan and go, ERP system, inventory management, e-commerce (great to have an e-commerce and Inventory management in one solution) and many more"
Regarding the international expansion, this might be a good point.
A thing to note though is that the competition everywhere is quite high and in my view its all about finding Sales partners / channels, doesn't really matter where you find them.
And its not like costs would increase drastically due to the international expansion, the Brazil and USA operations are still very small and the expansion via Retex won't require any Capex...
Thank you, great insights. I own some shares and really like the case, just trying to see if there is anything I'm missing :) Haven't done as much DD as you yet. But I have a call with mgmt in a few weeks - let me know if there's anything you think I should ask.
On your first point, I know they say this but given the company's size they can't possibly have a full solution for all of this (ERP, inventory mgmt etc.) that they have sold and deployed for a large retail chain, the revenues would be higher. Unless they are underpricing themselves (which they might to raise prices over time, could be a good strategy if they also give customers more and more value by adding functions). But my guess is they probably have a good solution for omnichannel retailers of a certain size and can possibly expand to other customers through further development (either in house or by implementation partners). Or do you think I'm way off the mark there? Would be interesting to know any large clients of theirs, or like what type of core clients they target with the POS.
Thank you for a good write up, very interesting company! Wouldn't it be better in the long term if they optimized for growth of the Comerzzia POS? Cancel the dividend and run for a 0% EBITDA for a few years to gain scale? Or is it not as good a product as they say.
As far as I am concerned they don't have the need for more capital. (except maybe for M&A someday). They currently spend c. half of Net income on Divi's, 1/3 on Capex and the rest on M&A. (Net income equals more or less FCFE)
The thing that stops them from selling more is the amount of firms being able to implement the software and the Sales network... The product today is already good enough. And the c. 2,5% of revenues spent on further development of IT (most of which I believe can be attributed to comerzzia), I think should be sufficient to continuously enhance the product further.
Understood, thank you. So the current focus of the mgmt team is on adding more partners to sell and implement the POS?
I don't understand how more development spend is not a good strategy. A POS is the perfect starting point to sell other software to integrate with the POS, e.g. ERP, warehouse/inventory management, customer loyalty solutions, gift cards, payment solutions etc. why not develop an ecosystem of products to create a platform company? Perhaps there are already modern SaaS solutions for most of these in place at the customers, while POS systems are old and needs replacement?
Another thing I am concerned about is why they are expanding beyond Spain when the revenue base is so small. Shouldn't there be tons of customers to win inside Spain first? Is the product only targeting a specific small niche or is it not competitive? Or is it just that the sales cycles are so long and they want to onboard international partners early?
Hi. How do you get comfort with the company with most of their material in Spanish? Is there a workaround you’ve found for this or are you perhaps a Spanish speaker?
Here its harder due to the format, but I know what parts of the annual I am looking for, so I translate those most important parts by just typing each word I don't know into google translate. (I speak some Spanish so this helped a lot)
I think you must have misunderstood something. Comerzzia, the retail solution, is a omnichannel solution, which means it focuses on an array of different offerings.
"Included solutions: scan and go, ERP system, inventory management, e-commerce (great to have an e-commerce and Inventory management in one solution) and many more"
Regarding the international expansion, this might be a good point.
A thing to note though is that the competition everywhere is quite high and in my view its all about finding Sales partners / channels, doesn't really matter where you find them.
And its not like costs would increase drastically due to the international expansion, the Brazil and USA operations are still very small and the expansion via Retex won't require any Capex...
Thank you, great insights. I own some shares and really like the case, just trying to see if there is anything I'm missing :) Haven't done as much DD as you yet. But I have a call with mgmt in a few weeks - let me know if there's anything you think I should ask.
On your first point, I know they say this but given the company's size they can't possibly have a full solution for all of this (ERP, inventory mgmt etc.) that they have sold and deployed for a large retail chain, the revenues would be higher. Unless they are underpricing themselves (which they might to raise prices over time, could be a good strategy if they also give customers more and more value by adding functions). But my guess is they probably have a good solution for omnichannel retailers of a certain size and can possibly expand to other customers through further development (either in house or by implementation partners). Or do you think I'm way off the mark there? Would be interesting to know any large clients of theirs, or like what type of core clients they target with the POS.
Thank you for a good write up, very interesting company! Wouldn't it be better in the long term if they optimized for growth of the Comerzzia POS? Cancel the dividend and run for a 0% EBITDA for a few years to gain scale? Or is it not as good a product as they say.
As far as I am concerned they don't have the need for more capital. (except maybe for M&A someday). They currently spend c. half of Net income on Divi's, 1/3 on Capex and the rest on M&A. (Net income equals more or less FCFE)
The thing that stops them from selling more is the amount of firms being able to implement the software and the Sales network... The product today is already good enough. And the c. 2,5% of revenues spent on further development of IT (most of which I believe can be attributed to comerzzia), I think should be sufficient to continuously enhance the product further.
Understood, thank you. So the current focus of the mgmt team is on adding more partners to sell and implement the POS?
I don't understand how more development spend is not a good strategy. A POS is the perfect starting point to sell other software to integrate with the POS, e.g. ERP, warehouse/inventory management, customer loyalty solutions, gift cards, payment solutions etc. why not develop an ecosystem of products to create a platform company? Perhaps there are already modern SaaS solutions for most of these in place at the customers, while POS systems are old and needs replacement?
Another thing I am concerned about is why they are expanding beyond Spain when the revenue base is so small. Shouldn't there be tons of customers to win inside Spain first? Is the product only targeting a specific small niche or is it not competitive? Or is it just that the sales cycles are so long and they want to onboard international partners early?
Hi. How do you get comfort with the company with most of their material in Spanish? Is there a workaround you’ve found for this or are you perhaps a Spanish speaker?
I typically translate everything I need.
Here its harder due to the format, but I know what parts of the annual I am looking for, so I translate those most important parts by just typing each word I don't know into google translate. (I speak some Spanish so this helped a lot)
But its definitely a lot of work