Company Interview / Bailador Technology's 280% profit boost

Key points:

Bailador Technology (ASX: BTI) Investment's net profit rises by over 280%, leading to higher shares. Co-founder Paul Wilson discusses the three newest investments: Up Doc Technologies, OnDash, and Habana. The company operates based on a conservative valuation approach and continues to look at large-scale tech businesses for investments.

The shares of Bailador Technology Investments are escalating after the company records a more than 280% rise in net profit, stopping just short of $21 million. Co-founder Paul Wilson articulates satisfaction over the result, considering the tumultuous few years in the tech sector. Despite some private companies holding on to bloated valuations, Paul lauds Bailador's successful results. The company has invested over 50 million in 3 new ventures in the past three months and declared a dividend lending to a 7.8% grossed-up yield as part of the impressive feat.

Paul Wilson provides some insight into the three fledgling investments; Up Doc Technologies, OnDash, and Habana. Up Doc is a telehealth platform granting consumers access to registered health professionals for basic medical needs. It aligns with their investment strategy, having previously sold similar venture, Instant Scripts, to Wesfarmers. OnDash provides financial advice and investment management software targeting the mass affluent, helping guide financial advisors. Lastly, Habana offers a software service for gyms and fitness boutiques addressing a burgeoning market currently unsatisfied by leading worldwide player, Mind Body.

With portfolios at site miner and Access Telehealth performing strongly, Paul indicates the possibility of other advanced opportunities, looking particularly at tech businesses aiming to scale vastly. He describes the quality of their portfolio with a combined revenue at a whopping $457 million, growth rate of 47%, recurring revenue 91% and high-quality gross margin of 67%. Paul says Bailador's conservative valuation approach will likely shield investments from sudden market economic shifts. Although tech sector valuations are on the rise, he believes now is an excellent time for Bailador to invest more.

Full unedited transcript:

0:00

Let's get into the smaller caps now. And the tech sector investor Ballard or Technology Investments shares tracking higher today after the company posted a more than 280% rise in net profit, reaching just shy of $21 million. Ballon d'Or has declared a final dividend of 3.4 cents a share.

0:18

Let's get some further detail now. As co-founder and managing partner Paul Wilson joining us, Paul, welcome to Osiris. Thanks for joining us. Uh, those numbers look, uh, look very impressive. How would you describe the result?

0:32

Well, thanks. We're very happy with the result. Uh, it's been an interesting few years in tech. Uh, things got pretty heated in 21. Uh, came off heavily in 22. And, uh, there's been a lot of private companies holding on to some inflated valuations for a period. Um, but we've seen that largely flow through now. And, uh, Ballydoyle has been able to produce a nice result while deploying over 50,000,000 in 3 new investments over the last three months. And also, as you mentioned, declaring a dividend, which implies a 7.8% grossed up yield.

1:11

Actually, you mentioned those three new investments there. Can you talk us through that and why you've chosen this? Well, so it's up Doc Technologies and Habana. That's right. So it's really straight down the middle of the fairway with our investment approach and thesis. These are high growth private companies uh, each with more than $10 million of revenue, established product market fit, established unit economics. And they're really just looking for some additional capital to accelerate that growth and become much larger companies. And that's exactly what we help these businesses do. Uh, Up doc is a digital health platform. It allows consumers to, uh, access registered health practitioners via our telehealth offering. Uh, it's really suited to basic needs, medical certificates for paid scripts for referrals for specialist specialists in pathology, and we've had strong success in this area through our involvement in incident scripts, which we sold to

2:10

Wesfarmers. And uh, we're going again on up doc. Great team, growing even faster and we're super excited about its prospects.

2:20

Uh, on Dash, it's a software platform for financial advice and investment management used by financial advisors. It's really designed to cater to the mass affluent. There's a lot of people these days who have investable sums and aren't getting any form of advice, and this platform really helps financial advisors serve that part of the market. Uh, and then finally, here are the most recent one is, uh, software to service gyms and fitness boutiques. And, uh, it's addressing a huge and fast growing market that the leading player worldwide mind body, it's fair to say, is not loved by the industry. So Japan is often pushing on an open door. And, uh, we've seen some great names, uh, take up the Habana platform and, and really endorse it, uh, names like Body Fit Training, Pilates, and others. Uh, so, um, I've joined the board there, and we're looking forward to, uh, growing with Jaron and the team. So Paul's fair to say, the real performers in your portfolio at the moment have been site miner and Access Telehealth.

3:20

Yeah that's right. So Site Mine is an interesting one. It's one that I've been involved with for a number of years since it had revenue of $5 million. It's now listed on the ASX. It's in the ASX 200. We still have a substantial shareholding and mark that to market. And so it's very much just automated by what the market says with the remainder of the portfolio. We've we've taken the opportunity to be very conservative in the valuations. We've taken up site mine that had such a strong performance, the overall portfolio, net tangible assets were up, and we feel that we position the portfolio, uh, to have built in upside as an example of that. We'd like to be conservative on the value of these private assets that were starting to the ASX every month. Uh, we've had 35 third party transactions in the portfolio. Every single one of those has been at or above our carrying value, and we've had 12 partial or full cash realizations. All of them

4:20

have been above our carrying value by an average of 39%. Uh, we've set the portfolio up to keep achieving that outperformance on realizations.

4:30

So net cash of 52 million. Um, what are you looking for? How are you going to likely to deploy that when you pick these investment vehicles?

4:41

Uh, so we've got another opportunity that, uh, is pretty well advanced that we're conducting diligence on. And, uh, as I alluded to before, we're really looking for, uh, tech businesses that can scale very well into very large markets. They typically have revenue of $10 million or above. They're often found to lead, and we're helping them attract exhibitors to your on that next stage of the journey. but you can see from our portfolio statistics the quality and the nature of these businesses. We don't publish the financial data for underlying companies, but we do publish the portfolio revenue of $457 million. Growth rate 47%. Recurring revenue 91%. So high quality gross margin of 67%. So you can see the nature of the business is that you're getting exposure to here is very strong. Paul, you say you take a conservative approach. I'm just wondering how you're viewing the broader macro picture at the moment about how that may actually

5:41

influence those those that will affect those companies that you're invested in, given the economy is obviously weakening. Um, and looks as though those those interest rates remain will remain at elevated levels. So what's your outlook? So there's a few factors here. First of all, we're tending to invest in companies that are taking advantage of industry structural shifts. And you can see that average growth rate, there are 47%. They're growing so quickly based on the structural shift that, uh, tweaks up and down in the broader economy tend to not affect their growth rates very much. Uh, when it comes to our portfolio, a lot of it is business to business as well, which tends to be a longer cycle and a subscription revenue that doesn't rely on purchase decisions from the consumer, uh, day by day. And so there's there's a fair degree of shielding from that aspect. And then, uh, probably a better guide

6:41

for us is what's happening to tech sector valuations. And, uh, we stayed on the sidelines for quite a long time with over $100 million of cash available. When we felt that the tech valuations were just too high and the opportunities weren't compelling enough. But we are seeing the strongest opportunities now that we've seen in some time, which is why, uh, we've been deploying capital and expected to deploy more. It's a it's a very good time for us to be getting set.