The Bigtincan Holdings Ltd (ASX: BTH) share price is up more than 7.5% after announcing contract news.
Bigtincan helps sales and service teams increase win rates and customer satisfaction. Some major businesses use Bigtincan including AT&T, Thermo Fisher and Merck.
Bigtincan’s contract extension
It announced it has signed a contract extension agreement with existing US customer, T-Mobile, to extend its contract by $6.3 million of total contract value over two years. This means the total contract value will be $18.4 million since the initial deployment of the contract.
The initial contract with T-Mobile was won by competitive tender in August 2017. Bigtincan said this involved a deployment at scale of the Bigtincan Content Hub application to 5,500 retail stores on up to 23,000 mobile devices, and has expanded to include the use of the Bigtincan Learning Hub across customer facing sales users.
The operating model
As part of the update, Bigtincan explained why what it’s doing is working.
It said the model of “land and expand” is designed to enable the company to achieve long-term growth through contracts that are underpinned by strong unit economics, created through investment in the core technology platform coupled with smart tech focused acquisitions.
Bigtincan explained the strong unit economics are underpinned by the cost of acquisition (CAC) (winning a customer) is lower than the high customer lifetime value of a contract like what was announced today.
The business is seeing its lifetime value (LTV) and the ratio of LTV compared to CAC.
At the end of December 2020, it had reached LTV of $363 million and has achieved an LTV/CAC of between 3.5x to 4.5x since the first half of FY18.
Summary thoughts on Bigtincan and the share price
Bigtincan has been generating growth for a few years now. Its share price and LTV is higher than it was in 2018 and 2019.
The FY21 half-year result showed revenue growth of 33% to $18.4 million. Longer-term customers are now paying more for the service.
The trends are going in the right way, but I don’t know enough about the business to know if today is a good price for the long term.
I have my eyes on other ASX growth shares that are already making profit.