Textura Corporation Investor Meetings Reinforce Sizable Market Opportunity

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Last week we hosted investor meetings with Textura’s chairman and chief executive officer, Patrick J. Allin, and chief financial officer, Jillian Sheehan, and came away more confident that the company can deliver more than 60% revenue growth and material cash-flow upside in fiscal 2015.

While we understand that some investors remain wary given the short report published in December, the company has delivered on top-line expectations and accelerated the growth in construction value that is being run through its systems. Further, we remind investors that given the high visibility of the model, it is rather unlikely that the company will materially beat any given quarter. Still, we believe that the commercial construction market can support growth of Textura’s construction payment management (CPM) offering at roughly 50% for the next several years, with incremental growth coming from the cross-sale of the mobile (Latista), bid qualification, and bid submittal offerings.

Given the high visibility and projects currently on the system, we are quite confident that the company can reach a quarterly revenue run-rate of roughly $18 million by the September period. This would mean that Textura would end fiscal 2014 (ending September) at about $60 million in revenue (the Street consensus is $59.5 million). While the company may exceed this slightly, if we assume that it meets the Street estimate, the exit recurring-revenue run-rate would be roughly $18 million, which without any growth throughout fiscal 2015 would mean an incremental $12 million in revenue in fiscal 2015 versus 2014; this is the beauty of the SaaS model.

Textura implemented a price increase in February for all new projects added to the system. Given that the life of a project averages 12-18 months, the complete impact of this price increase would fully take effect by July 2015, which we believe should add $10 million-$12 million in fiscal 2015.

Because of purchase accounting rules, Textura wrote off the majority of Latista’s deferred revenue balance, which had bookings of roughly $5 million and was growing in excess of 80%. Assuming no growth in Latista and $1 million recognized this year, we could add $4 million in revenue from Latista in fiscal 2015.

Combining these factors and not accounting for any incremental growth in the organic business or Latista business, the company can add $28 million to the top line, or 48% growth. The Street is looking for 55% growth, an achievable number in our opinion, given the growth in construction value on the system and minimal competition in the CPM market.

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