1/🧵
Imagine an exceptional healthcare SaaS company with…
-Revenue growth >30%
-Gross margin >90%
-Net margin >40%
-Return on assets (excl. cash) >100%
-Incredible operating leverage
-No debt
Let’s take a closer look at Semler Scientific $SMLR
Imagine an exceptional healthcare SaaS company with…
-Revenue growth >30%
-Gross margin >90%
-Net margin >40%
-Return on assets (excl. cash) >100%
-Incredible operating leverage
-No debt
Let’s take a closer look at Semler Scientific $SMLR
2/🧵
My Finnish followers may recognize the company as I wrote about it earlier in Nov’20.
This is a retake on the company, now in English 🇬🇧
My Finnish followers may recognize the company as I wrote about it earlier in Nov’20.
This is a retake on the company, now in English 🇬🇧
https://twitter.com/hkeskiva/status/1326918784758800391?s=20
3/🧵
In 2015, $SMLR received FDA clearance for its only patented product, QuantaFlo, that saves significant time in testing for Peripheral Arterial Disease (PAD) to prevent potentially deadly strokes.
The test is faster, cheaper, and more accurate than incumbents.
In 2015, $SMLR received FDA clearance for its only patented product, QuantaFlo, that saves significant time in testing for Peripheral Arterial Disease (PAD) to prevent potentially deadly strokes.
The test is faster, cheaper, and more accurate than incumbents.
4/🧵
$SMLR business is easy to understand.
QuantaFlo equipment is sold mainly to health insurance plans and risk assessment companies that provide a stable flow of revenues with 2/3 being fixed and 1/3 being variable fees for the use of this proprietary software and analysis.
$SMLR business is easy to understand.
QuantaFlo equipment is sold mainly to health insurance plans and risk assessment companies that provide a stable flow of revenues with 2/3 being fixed and 1/3 being variable fees for the use of this proprietary software and analysis.
5/🧵
These are the early innings for the company; QuantaFlo’s market penetration is currently 5%, growing at a high pace.
Moreover, $SMLR has made a few investments into promising technologies/products that could be distributed via their existing sales channels and personnel.
These are the early innings for the company; QuantaFlo’s market penetration is currently 5%, growing at a high pace.
Moreover, $SMLR has made a few investments into promising technologies/products that could be distributed via their existing sales channels and personnel.
6/🧵
$SMLR is flying under the radar for most mainly for three reasons:
(i)It’s small cap at < $1 BUSD
(ii)It trades on the OTC (over-the-counter) markets
(iii)It’s not part of FAANG 😉
$SMLR has recently been adding independent board members to qualify for Nasdaq listing.
$SMLR is flying under the radar for most mainly for three reasons:
(i)It’s small cap at < $1 BUSD
(ii)It trades on the OTC (over-the-counter) markets
(iii)It’s not part of FAANG 😉
$SMLR has recently been adding independent board members to qualify for Nasdaq listing.
7/🧵
What about the numbers?
$SMLR has some years ago turned profitable, but oh my, the profits are now coming in. As capital expenditure is steadily increasing, growth in operating cash flow is through the roof.
My earlier thread on capital allocation:
What about the numbers?
$SMLR has some years ago turned profitable, but oh my, the profits are now coming in. As capital expenditure is steadily increasing, growth in operating cash flow is through the roof.
My earlier thread on capital allocation:
https://twitter.com/hkeskiva/status/1347884842298580992?s=20
8/🧵
In the previous quarter/year, $SMLR added:
-+$2.9/+5.8 MUSD of revenue
-+$3.5/+5.8 MUSD of pre-tax income
The business scales wonderfully; its incremental return has been 100%!
More on the concept of incremental returns
In the previous quarter/year, $SMLR added:
-+$2.9/+5.8 MUSD of revenue
-+$3.5/+5.8 MUSD of pre-tax income
The business scales wonderfully; its incremental return has been 100%!
More on the concept of incremental returns
https://twitter.com/hkeskiva/status/1350426393675526144?s=20
9/🧵
Such scalability earns a proper visualization.
See how $SMLR revenues expand without costs of goods sold (COGS) and operating expenses (OPEX) catching up – quite the contrary, they’re being left behind.
That widening gap there, that’s pure operating profit. I’m in love.
Such scalability earns a proper visualization.
See how $SMLR revenues expand without costs of goods sold (COGS) and operating expenses (OPEX) catching up – quite the contrary, they’re being left behind.
That widening gap there, that’s pure operating profit. I’m in love.
10/🧵
How about the valuation?
When dealing with uncertain future, it makes sense to use scenarios. Here’s sensitivity analysis for the next 5y so that 0% represents the low end and 100% the high end of these ranges:
- Rev. growth 5-40%
- Incr. margin 50-100%
- EV/EBIT 15-40
How about the valuation?
When dealing with uncertain future, it makes sense to use scenarios. Here’s sensitivity analysis for the next 5y so that 0% represents the low end and 100% the high end of these ranges:
- Rev. growth 5-40%
- Incr. margin 50-100%
- EV/EBIT 15-40
11/🧵
In other words, if we'd assume...
- revenue growth of 20% (has been growing >30% recently)
- incremental profit margin of 75%
- EV/EBIT 30 in 2025
...we'd get $1,700 MUSD for enterprise value, more than double the current valuation.
In other words, if we'd assume...
- revenue growth of 20% (has been growing >30% recently)
- incremental profit margin of 75%
- EV/EBIT 30 in 2025
...we'd get $1,700 MUSD for enterprise value, more than double the current valuation.
12/🧵
Balance sheet is as clean as it gets.
$SMLR has $22MUSD of net cash (64% of total assets) that would run the company for a year with zero revenues.
Note that assets excl. cash is only 12 MUSD, i.e. $SMLR earns 133% (16 MUSD / 12 MUSD) on its assets – simply spectacular!
Balance sheet is as clean as it gets.
$SMLR has $22MUSD of net cash (64% of total assets) that would run the company for a year with zero revenues.
Note that assets excl. cash is only 12 MUSD, i.e. $SMLR earns 133% (16 MUSD / 12 MUSD) on its assets – simply spectacular!
13/🧵
Currently I reckon there are various catalysts for the company to reach “next level”
(i)Uplisting to Nasdaq (months)
(ii)Investments to new products lead to accelerated revenues (months to years)
(iii)Continued growth and profitability (years)
Currently I reckon there are various catalysts for the company to reach “next level”
(i)Uplisting to Nasdaq (months)
(ii)Investments to new products lead to accelerated revenues (months to years)
(iii)Continued growth and profitability (years)
14/🧵
There’s always risks:
(i)Markets throw small caps around like a plastic bag in tornado (see last week)
(ii)Two largest customers account for 70% of total revenues
(iii)Incumbents may come up with competing tech (no signs today)
(iv)Valuation expects continued growth
There’s always risks:
(i)Markets throw small caps around like a plastic bag in tornado (see last week)
(ii)Two largest customers account for 70% of total revenues
(iii)Incumbents may come up with competing tech (no signs today)
(iv)Valuation expects continued growth
15/🧵
Further reading on $SMLR:
-Investor presentation ir.semlerscientific.com/static-files/6…
-Value Investor Club valueinvestorsclub.com/idea/SEMLER_SC…
-A Deep Dive medium.com/@brett.schafer…
-Dom’s Stock Deep Dive rinaldi-dominic.medium.com/doms-stock-dee…
-Thread by @CollegeInvestr
Further reading on $SMLR:
-Investor presentation ir.semlerscientific.com/static-files/6…
-Value Investor Club valueinvestorsclub.com/idea/SEMLER_SC…
-A Deep Dive medium.com/@brett.schafer…
-Dom’s Stock Deep Dive rinaldi-dominic.medium.com/doms-stock-dee…
-Thread by @CollegeInvestr
https://twitter.com/CollegeInvestr/status/1355862319583043587?s=20
16/🧵
This was the pitch for $SMLR Semler Scientific!
Other followers include @BrianFeroldi, @LSValue, @CollegeInvestr, @MattG5289, @Matt_Cochrane7, @CCM_Ryan
It’s high conviction holding for me with 20% weight. Happy to hear Twitterverse shoot holes into the thesis 🙏🙂
This was the pitch for $SMLR Semler Scientific!
Other followers include @BrianFeroldi, @LSValue, @CollegeInvestr, @MattG5289, @Matt_Cochrane7, @CCM_Ryan
It’s high conviction holding for me with 20% weight. Happy to hear Twitterverse shoot holes into the thesis 🙏🙂
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