Text S.A. (TXT.WA) | Investment Case

1. Company Snapshot

1.a. Company Description

Text S.A. develops and distributes communication software for businesses worldwide.It offers LiveChat, a tool that allows to communicate between Website visitor and its owner; ChatBot, which allows the creation of conversational chatbots for customer service teams that automates corporate communications; KnowledgeBase, a platform that lets companies to create knowledge bases for employees and clients; and HelpDesk, an application that enables companies to simplify team efforts for customer service via email.The company was formerly known as LiveChat Software S.A. and changed its name to Text S.A. in September 2023.

The company was founded in 2002 and is based in Wroclaw, Poland.

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1.b. Last Insights on TXT

Text S.A.'s recent performance was impacted by unfavorable market conditions, with the pan-European STOXX Europe 600 Index experiencing stability amid interest rate policy assessments and trade uncertainties. The company's dividend appeal may be affected by investors' cautious stance on European markets. Moreover, no recent earnings release data is available. Additionally, there are no disclosed short-term negative news items specifically mentioning Text S.A. However, investors are focusing on companies with consistent earnings and robust cash flow to ensure stability during economic fluctuations.

1.c. Company Highlights

Last Price	40.02
Change Percentage	-0.30%
Open	40.14
Previous Close	40.14
Market Cap ( Millions)	1031
Volume	88325
Year High	71.5
Year Low	39.9
M A 50	48.31
M A 200	53.12

FCF Yield	12.66%
Dividend Yield	15.14%
ROE	110.86%
Debt / Equity	0.00%
Net Debt / EBIDTA	-54.28%
Price To Book	6.16
Price Earnings Ratio	6.8
Price To FCF	7.9
Price To sales	2.93
EV / EBITDA	4.88

2. Text Q4 2024-25 Earnings Update

Text delivered a mixed performance in Q4 2024-25, with notable growth in key metrics offset by challenges related to customer churn and elevated cloud infrastructure costs. The company reported a 6.9% year-over-year increase in Monthly Recurring Revenue (MRR), driven by strong adoption of HelpDesk and ChatBot products, which grew 126% and 26%, respectively. However, the sunsetting of the LiveChat ticketing system led to a loss of some customers, contributing to a rise in churn rates. Despite this, revenue retention remained robust, reflecting the company's ability to upsell and cross-sell within its customer base.

Publication Date: Apr -09

                                    📋 Highlights
                                    LiveChat Sunset Impact:
                                                - Loss of some LiveChat customers due to system sunsetting, but HelpDesk uptake increased.
Cloud Infrastructure Costs:
                                                - Costs peaked this quarter, with expected savings next quarter.
Revenue Retention and Growth:
                                                - Strong revenue retention, with HelpDesk up 126% and ChatBot up 26% YoY.
Churn Increase:
                                                - Churn rose partly due to ticketing system changes, but larger customers remain loyal.
Dismissal of Tariff Concerns:
                                                - Text dismissed worries about potential tariff impacts, focusing on other priorities.

                                

Financial Performance

Financially, Text demonstrated resilience despite headwinds. The company's revenue retention rate was a standout, highlighting the effectiveness of its customer engagement strategies. However, the increase in churn, partially due to the transition away from LiveChat, raised concerns about customer loyalty. Management noted that while some customers left due to the system change, larger enterprises remained more committed to the platform.

Key Developments

Management emphasized that while the transition period may cause short-term disruption, the long-term benefits of HelpDesk adoption are significant. The company is focusing on enhancing customer support and product integration to mitigate churn and ensure a smooth transition for existing customers.

Q&A Highlights

During the Q&A session, management addressed concerns about the potential impact of tariffs and currency fluctuations, reassuring investors that these factors were not expected to materially affect the business in the near term. The introduction of crypto payments was also discussed, with management noting that this was a response to customer demand rather than a strategic pivot. Importantly, the company's plans for share buybacks were deferred, with management indicating that this decision would be revisited based on future cash flow and strategic priorities.

Valuation Metrics

Overall, Text's Q4 performance highlights the company's ability to navigate transitions and maintain strong growth in key product lines. While near-term challenges related to churn and cloud costs remain, the long-term outlook appears positive, with a focus on innovation and customer retention driving future success.

3. NewsRoom

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.00%)

6. Segments

Software Solutions

Expected Growth: 7%

Text S.A.'s Software Solutions segment growth is driven by increasing demand for digital transformation, adoption of cloud-based services, and rising need for data analytics. Additionally, the company's strategic partnerships, innovative product offerings, and expanding presence in emerging markets contribute to its 7% growth rate.

7. Detailed Products

Text Analytics

A natural language processing (NLP) solution that enables businesses to extract insights and meaning from unstructured text data.

Language Translation

A machine translation solution that enables businesses to translate content in multiple languages and reach a global audience.

Content Generation

An AI-powered content generation solution that enables businesses to automate the creation of high-quality content.

Chatbots and Conversational AI

A conversational AI solution that enables businesses to build custom chatbots and virtual assistants.

Sentiment Analysis

A sentiment analysis solution that enables businesses to analyze customer opinions and sentiment from text data.

Entity Extraction

An entity extraction solution that enables businesses to extract specific information from unstructured text data.

8. Text S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes is moderate due to the presence of alternative products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the availability of multiple options and the ability to switch to competitors.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's strong relationships with suppliers and the availability of alternative suppliers.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry, such as high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of multiple competitors and the need to differentiate products and services.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	0.52%
Debt Cost	7.32%
Equity Weight	99.48%
Equity Cost	7.32%
WACC	7.32%
Leverage	0.52%

11. Quality Control: Text S.A. passed 9 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Text

A-Score: 6.0/10

Value: 5.4

Growth: 8.3

Quality: 8.4

Yield: 8.1

Momentum: 2.5

Volatility: 3.0

1-Year Total Return ->

Sword

A-Score: 5.9/10

Value: 4.0

Growth: 5.7

Quality: 5.4

Yield: 9.4

Momentum: 4.0

Volatility: 6.7

1-Year Total Return ->

Quadient

A-Score: 4.7/10

Value: 8.6

Growth: 3.3

Quality: 4.1

Yield: 5.6

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

Sapiens

A-Score: 4.5/10

Value: 1.3

Growth: 6.2

Quality: 7.6

Yield: 3.8

Momentum: 7.0

Volatility: 1.0

1-Year Total Return ->

Media and Games Invest

A-Score: 4.3/10

Value: 5.3

Growth: 8.2

Quality: 4.2

Yield: 0.0

Momentum: 7.5

Volatility: 0.7

1-Year Total Return ->

Admicom

A-Score: 4.1/10

Value: 0.2

Growth: 5.6

Quality: 8.0

Yield: 3.8

Momentum: 3.0

Volatility: 4.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-7.28%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.32%

Text S.A. - PLLVTSF00010

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on TXT

1.c. Company Highlights

Higher Yield

Better Quality

Higher Growth

Revenues Miss

Weak Momentum

Revenues Beats

Lower Growth

2. Text Q4 2024-25 Earnings Update

Financial Performance

Key Developments

Q&A Highlights

Valuation Metrics

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.00%)

6. Segments

Software Solutions

Expected Growth: 7%

7. Detailed Products

Text Analytics

Language Translation

Content Generation

Chatbots and Conversational AI

Sentiment Analysis

Entity Extraction

8. Text S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Text S.A. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

40.02$

Current Price

40.02$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA