IPO Preview: Textura

Jun. 6.13 | About: Textura Corp. (TXTR)

Based in Deerfield, IL, Textura (NYSE:TXTR) scheduled a $56 million offering with a market capitalization of $294 million at a price range mid-point of $14 for Friday, June 7, 2013.

Three other IPOs are scheduled for this week. The full IPO calendar is here.

  • S-1A filed May 28, 2013
  • Manager, Joint Managers: Credit Suisse; William Blair
  • Co Managers: JMP Securities; Oppenheimer; Barrington Research

SUMMARY

TXTR provides 'SaaS' on-demand software to the construction industry. Top line revenue increased 110% for the fiscal year ended September 2012 over 2011, and 58% for the six months ended March 2013, over 2012. TXTR has been losing about $19 million per year over the past 2 ½ years.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing March qtr

Cap (NYSE:MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Textura

$294

9.8

-13.4

5.0

9.2

19%

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Glossary

OBSERVATIONS
As an on-demand, SaaS company providing software solutions, TXTR's top line revenue rate of increase is attractive to investors.

A potential negative is that TXTR's collaboration solutions have been used by more than 3,000 general contractors, owners/developers, and architects, including 41 of the 100 largest general contractors in North America.

Given the scope and reach of TXTR on-demand software, it seems their yearly losses should be decreasing, which they are not. However the construction industry is not known to be populated with 'early adopters.'

CONCLUSION

TXTR looks like a buy on the IPO based on top line revenue growth, but longer term their losses are going to have to decrease if TXTR is going to do well in the IPO aftermarket. To put the above conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced earlier:

BUSINESS

TXTR is a leading provider of on-demand business collaboration software to the commercial construction industry. Solutions are focused on facilitating collaboration between owners/developers, general contractors and subcontractors.

SOFTWARE PRODUCTS

TXTR's collaboration solutions support several mission-critical business processes at various stages of the construction project lifecycle:

•Construction Payment Management ("CPM") enables the generation, collection, review and routing of invoices and the necessary supporting documentation and legal documents, and initiation of payment of invoices.

•Submittal Exchange enables the collection, review and routing of project documents.

•GradeBeam supports the process of obtaining construction bids, including identifying potential bidders, issuing invitations-to-bid and tracking bidding intent.

•Pre-Qualification Management ("PQM") supports contractor risk assessment and qualification.

•Greengrade facilitates the management of environmental certification processes.

In addition, TXTR offers PlanSwift, a take-off and estimating solution used in preparing construction bids, and Contractor Default Claims Management, which supports the process of documenting a subcontractor default insurance claim.

TXTR does not customize solutions for any client. TXTR's technology platform is designed to be highly configurable, scalable, reliable and secure.

SCOPE

TXTR believes the construction industry represents a large and growing market for technology solutions of all types.

The industry, TXTR believes, is especially attractive for TXTR's solutions and growth because it is underpenetrated by technology solutions that enable construction industry participants to more easily collaborate and operate more effectively.

As of March 31, 2013, since the date of launch or acquisition of TXTR's solutions, clients have used one or more of our on-demand collaboration solutions to help manage over 13,000 commercial construction projects representing more than $125 billion in construction value as reported by clients. TXTR's collaboration solutions have been used by more than 3,000 general contractors, owners/developers, and architects.

This includes 41 of the 100 largest general contractors in North America, ranked as of May 2012 by Engineering News-Record based on annual construction revenues.

In addition, based on management estimates, 300,000 subcontractors were active on TXTR's solutions during fiscal 2012. TXTR solutions are used on construction projects of all sizes, from small remodels or renovations to multi-billion dollar developments.

INDUSTRY

Construction is a major global industry and consists of building new structures, making additions and modifications to existing structures, as well as conducting maintenance, repair and improvements on existing structures.

Worldwide construction spending was $7.2 trillion in 2010, according to "Global Construction 2020," a study produced by Global Construction Perspectives, an industry research provider. A total of $97.7 trillion will be spent on construction worldwide during this decade, and by 2020 construction is expected to reach more than $12 trillion in annual spending and account for 13.2% of world GDP, according to the same study.

CUSTOMER CONCENTRATION

Revenue derived from TXTR's ten largest client relationships, collectively, accounted for 41.5% of revenue in fiscal 2012. The largest client relationship accounted for 10.8% of revenue in fiscal 2012.

INTELLECTUAL PROPERTY

TXTR holds 40 granted patents and allowed applications in the United States and internationally. Patents cover systems and methods relating to various aspects of document generation, transfer and storage as well as the management of payments for construction projects in a computer-based system.

Among other things, patents address document storage and access, management of invoicing and direct payment in hierarchically tiered projects, single system-level user and organization registration, automated alerts and notification-based workflow process management.

Although originating in a web-based construction project payment management context, several of TXTR's patents contemplate and extend to other technologies (e.g., handheld devices), customized user/organization environments and even some non-construction project situations.

TXTR has 52 additional patents pending with the United States Patent and Trademark Office and international patent offices.

COMPETITION

Currently, the largest source of competition for CPM is from existing manual processes or internally-developed systems that potential clients have been using for a long period of time and from which they may be reluctant to change.

The industry is highly fragmented, and TXTR believes it is likely that some of the existing competitors will consolidate or will be acquired.

Current principal competitors include:

•CPM. TXTR believes it faces limited competition due in large part to the complexity of the required solution, the specific needs of the construction industry and the absence of third-party solutions that provide TXTR's lien waiver functionality.

Competitive solutions that may address part of TXTR's functional capabilities include GC Pay in the North American market and ProgressClaim.com in Australia; enterprise resource planning solutions both specialized to the construction industry such as Viewpoint, the Sage family of products, CMiC Open Enterprise and eCMS and other non-specialized solutions, such as JD Edwards Enterprise One, and various solutions offered by Oracle and SAP; and document management solutions such as Aconex.

•Submittal Exchange. competitors include Meridian Systems, Newforma and Procore Technologies.

•GradeBeam. Competitors include invitation-to-bid systems for commercial construction, including iSqFt and SmartBidNet. Certain project management and enterprise resource planning solutions also have invitation-to-bid or bid management functionality.

•PQM. PQM is most often being used to replace paper-based processes or to establish prequalification processes that do not currently exist. Available alternatives include in-house solutions using online form submission tools, invitation-to-bid systems and vendor review and verification services.

•Greengrade. TXTR faces competition from other LEED submission management technology solutions including LoraxPro and GreenWizard. Greengrade also faces competition from services provided by many specialized consulting firms, architecture firms and construction management consultancies.

EMPLOYEES

As of March 31, 2013, TXTR had 287 employees, including 62 in client services and support, 91 in sales and marketing and 88 in technology and development.

USE OF PROCEEDS

TXTR expects to net $50 million from its IPO. $8.1 million is allocated to repay debt. The balance is for working capital and general corporate purposes.

Disclaimer: This TXTR IPO report is based on a reading and analysis of TXTR's S-1A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.