More than 170 million registered users, interacting 41 million times every day. These are not numbers normally associated with your average New Zealand company. But then again, Plexure would hardly describe itself as merely "average". It's the great little Kiwi company you've never heard of.
Craig Herbison, former BNZ-banker-turned-Plexure-CEO, is a busy man these days. He's happy to chat, to add a bit of colour and energy to this column. It turns out that "energy" is a good word to use.
"We've grown revenue something like 40-50 per cent each year, and we're not about to slow down yet."
He's not wrong – from $7.3 million revenue in 2017 to an expected $24.5m-$25m this year is outsized growth in anyone's book. Plexure has moved well beyond its "startup" label to build a track record of cashflow, revenue and earnings growth, including a move to underlying profitability for the year-ended March 2019. In November last year, it was added to the MSCI World Micro Cap Index.
What does Plexure actually do?
"We're a bridge between the old bricks-and-mortar world of consumer retailing and the new digital environment," explains Herbison.
"Plexure creates the ability to create personalised offers for individuals, to bring them into the physical store. We represent the next era beyond mass marketing techniques."
No small aim. In a world full of Amazons, Plexure is out to disrupt the disrupters.
If that's the strategic outcome, then the technology behind it forms the core of Plexure's underlying value. McDonald's has long been a major customer, and they were keen to cement the advantage that Plexure offered them. In April 2019, in exchange for exclusivity in the "quick-serve restaurant" market and a 9.9 per cent shareholding, they invested a further $5.4m in Plexure.
This investment not only reduced the "concentration risk" associated with McDonald's share of Plexure's revenue but also ensured that Plexure's offer continues to scale throughout the remainder of the McDonald's network.
Growth
Even if McDonald's remained the only major customer, a quick analysis shows that Plexure can still grow revenue – both by extending the functionality of its platform within the quick-service category and continuing to grow its user base.
For example, Plexure has developed a mobile "order and pay" solution for McDonald's in Japan, covering 2745 stores to date, and already serving 35,000 people daily.
Herbison is clear that there is more growth to come from McDonald's but is coy on timing and eventual coverage. Plexure disclosed 110 million users in 44 countries in May 2019, compared to today's number of 170 million users in 61 countries (McDonald's operates in approximately 120 countries).
McDonald's has long been a major customer of Plexure's. Photo / AP
New customer announcements have continued. A deal with White Castle, a US-based fast-food chain, was inked in July 2019 (the one exclusion to the prior McDonald's exclusivity clause) and a recent announcement on February 20 saw the addition of Indonesian grocery chain Super-Indo, with its 170 stores, with deployment to be underway in March.
This last announcement highlights Plexure's next phase of growth. Plexure has developed its technology platform to cover a new category (grocery), that could potentially scale-up to Super-Indo's parent company (Ahold Delhaize, with 6500 stores across the US, Europe and Indonesia). The company itself is not pulling any punches. Herbison again: "We see the Super-Indo deployment as a proof of concept for a wider rollout in the grocery category."
All this is a long way from where Plexure was in 2017. A share price of $0.11 has turned into $0.80 (even after taking a coronavirus hit), while 30 staff have increased to 120.
Herbison is candid about the change. "We've only retained about six staff of that original 30. We look for our people to do something special, to support the positive energy culture we've created."
Internal change
That culture is critical in maintaining Plexure's growth - a focus on the pace and quality of delivery will continue to underpin success.
The strategy for Plexure has evolved across four distinct phases since 2017. The first was to provide stability, achieved by delivering positive cashflow in 2018. The next priority was to provide a solid foundation for future growth.
Plexure has grown both capacity and capability in its core business, with a heavy focus on user experience development, data privacy and data security. It also offers "follow-the-sun" technical support for its customers.
The third phase is all about delivering growth – something it has achieved through new customers and expanded offerings. Right now, it's on the fourth phase of its strategy - "investing for growth".
Investment in customer-facing sales and business development teams is increasing, and Plexure is investing in its technology platform to cater for 500 million users. Put another way, Plexure expects that 7 per cent of the world's total population will be registered on their platform (NZ population: 0.1 per cent).
Risks and opportunities
Lest all this sound like an advertisement, there are real risks to overcome - firstly, the sustainability of current growth rates and secondly, their capability to deepen and extend the functionality of their technology platform (underpinning said growth), without incurring costs at the same rate. Investors will expect to see the right level of return for a company investing heavily in new staff and technology capability.
Immediate growth prospects are likely to be underpinned by expansion within the existing categories they can now service (eg, grocery, quick-serve restaurant). Longer-term growth is likely to come from expansion into new categories.
It's worth noting that Plexure's revenue model is partly "user-based", which provides additional support for growth – it means Plexure benefits from their customer's efforts in promoting offers to new users.
In terms of their technology, the company states that it configures solutions for each customer. That's both an opportunity and a risk. The opportunity is to deeply embed Plexure's tools inside a customer organisation, to work seamlessly with their own systems. The risk is the proliferation (read, complexity) of solutions maintained by a stressed-out product development team.
Plexure's approach so far seems pragmatic – a core platform, with different "flavours" to support different consumer categories followed by configuration (ie, not re-design) for a specific customer.
Nonetheless, it will be interesting to see how both IT development and staff costs show up in their P&L and Capex in the next set of financial reports.
From an investor perspective, it can be difficult to get professional broker or analyst research on Plexure, something that bedevils other small-caps listed on the NZX. That places a lot of onus on individual investors (like this one) to create their own valuation models and assumptions. For a company like this one, it's been worth the effort.
Disclosure: Oliver Mander is a long-term holder of Plexure shares.
