More Than Grain Grows in Saskatchewan as Vendasta Technologies Prepares for IPO

eResearch| Saskatchewan might be known for more than berries and melonheads if Vendasta’s impressive growth continues.

Vendasta is riding the software-as-a-service (SaaS) tsunami created by COVID-19 and plans to list on the TSX exchange under the ticker “VND”.  Vendasta provides digital solutions for small and medium-sized businesses (SMBs).

Vendasta intends to raise C$100 million as part of the public offering, targeting a share price between C$14-C$16.  Funds raised will be used to improve the financial position and grow revenues.

The most recent funding round raised C$40 million in July 2019, valuing the company post-money at C$200 million, according to Crunchbase.

The current issuance price range pegs the market capitalization after IPO around C$660‑C$750 million. A healthy return for early investors like BDC and Canadian Business Growth Fund.

Revenue growth, not profitability or cash flows, provides the basis for Vendasta’s valuation.

Vendasta’s product mix had healthy gross margins of 55.3% in 2020, but marketing and R&D expenses led to losses and are likely to continue as the Company captures market share and develops the product portfolio.

Funds raised will give Vendasta a healthy runway.  Last year they recorded a C$16.6 million loss from operations, more than double compared to 2019.  At that rate, the cash raised could support growth for six years.

SaaS Gets a COVID Jolt

COVID-19 changed the business world as social distancing requirements and government orders saw many companies adopt digital solutions.

SaaS (“Software-as-a-service”) offers customers digital solutions for monthly fees, enabling many businesses to quickly launch eCommerce stores or seamlessly manage customer relationships without going into the office.

The market has taken off.  In 2020, Statista estimated the SaaS market was worth $157 billion, having grown at a 27.9% CAGR over the past decade.

Major SaaS companies include Salesforce (NYSE: CRM | BMV: CRM | ETR: FOO | FRA: FOO), ServiceNow (NYSE: NOW | BMV: NOWW), Shopify (TSX: SHOP | NYSE: SHOP), and Workday (NASDAQ: WDAY | BMV: WDAY | BVMF: W1DA34 | FRA: W7D) represent some of the most valuable companies.

FIGURE 1: Vendasta Dashboard Helps SMBs Manage Digital Solutions

About Vendasta

Vendasta was co-founded in 2008 by Brendan King, the current President and CEO.  Headquartered in Saskatoon, it provides SaaS digital solutions and tools for SMBs.

Vendasta creates a platform that enables customers to select and integrate digital solutions (CRM, Customer Support, eCommerce, etc.) from a network of channel partners. Data integration if often timely and expensive; its platform reduces the integration headache by providing a common data platform.

Vendasta differs from competitors by creating a product mix that focuses on SMBs and enables SMBs to compete with larger competitors using similar digital tools.

Recent media suggest that Vendasta is finding placing its C$100-million IPO challenging and the Company might drop the offering price or pull the deal amid a softening in the Canadian technology IPO market.

Like many SaaS companies, Vendasta has had remarkable growth over the past two years, and in 2020, revenue grew 23.3% to C$42.6 million. The types of numbers should help with finding investors.

FIGURE 2: Vendasta Growth is Impressive

Notes: All numbers in USD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the management of the Company as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eReserach’s full disclaimer.