Textura’s post-IPO Prospects: Building Collaboration

October 16 2013

Textura (NYSE: TXTR), a provider of on demand, software solutions to the commercial construction industry, is a new addition to our Battle Road IPO Review software coverage. The company recently completed its IPO in June, and executed a secondary stock offering September. With projected revenue of $35 million in 2013, and $56.7 million in 2014, the company serves the construction industry with a series of products primarily for construction payment management. Textura claims that over 3,000 general contractors, owners, developers, and architects have deployed its software, and that 62 of 100 largest general contractors in North America are customers. The company, based in Deerfield, IL, delivered its first software in 2006, and launched its IPO on the NYSE through the issuance of five million shares on June 7, 2013, priced at $15.00 per share, in a transaction led by Credit Suisse, JMP Securities, Barrington Research, Oppenheimer, and William Blair. Consensus estimates call for a loss of $1.54 in 2013, and a loss of $0.52 in 2014.

Textura’s core software product, Construction Payment Management (CPM), is its most widely used solution, and accounts for over 90 percent of revenues currently. The software provides a collaborative platform to generate, collect, review and route invoices, as well as business processes to support legal documentation. The company also provides software for project management, including daily reports, drawings and specifications, as well as supplementary architectural information. Additional software packages help to manage the bidding process, as well as compliance with environmental certification.

Textura generates revenue from monthly fees, subscription fees, as well as fees driven by construction activity. 90 percent of sales are generated by a direct sales channel, and roughly 90 percent of revenue comes from the US, with 10 percent from Canada. Textura has created a joint venture to penetrate the Australia and New Zealand markets, and has created an indirect channel to sell its PlanSwift software, which focuses on the preparation of construction bids, as well as the process of documenting a subcontractor default insurance claim.

Against the backdrop of rising economic growth, favorable demographic trends, and environmental awareness, coupled with a trend toward cloud-based software, Textura has done an admirable job of reaching its addressable market, which consists of office buildings, factories, warehouses, schools, hospitals, multi-family residential complexes, as well as infrastructure relating to roads, bridges, tunnels and other projects. In support of its addressable market opportunity, Textura cites statistics from the US Census Bureau which state that the value of commercial construction in place was $740 billion, which excludes single-family residential construction, which is not a part of Textura’s market.

Though Textura doubled in revenue between 2011 and 2012, the company’s operating losses barely declined from a loss of $18.9 million to a loss of $18.8 million, according to the company’s S-1 filing.

Principal risks to Textura, as we see them, include the company’s lofty $1 billion plus stock market capitalization, which makes for a rather rich EV/Sales value on projected 2014 revenues of $57 million; reliance on its CPM software package for over 90 percent of sales; the constraints on commercial credit which continue in many markets as the world emerges from a general recession, and the over supply of office space which exists in many US regions currently. To see how Rally Software Developments screens against its software peers within the Battle Road IPO Review software coverage universe, please contact: [email protected].