Disclosure: Sekur Private Data Ltd. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
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Customer Acquisition Costs (CAC) fell from US$85 in Q2-2023, to US$30 in Q3-2023. Although Sekur does not disclose revenue/user or user-count, we note that the annual pricing for its solutions/services ranges between US$84 and US$264 per user. The significant decline in CAC was a result of the company’s shift towards in-house SEO marketing, and efforts to attract resellers and distributors, while cutting back on initiatives involving social media influencers. Last month, Sekur announced multiple distribution agreements in the Middle East.
Management is aiming to slash G&A/marketing expenses by over 50% in 2024. As a result, we are revising our 2024 revenue forecast lower, while simultaneously raising our EPS forecast, as the positive impact of reduced expenses should outweigh the negative effect on the topline.
In the coming months, the company plans to launch new services including enterprise solutions for businesses, as well as encrypted calls, and video conferencing, to increase revenue per user.
According to Verified Market Research, the email encryption market should grow from US$24B in 2021, to US$167B by 2030, reflecting a CAGR of 24%. We believe this growth is indicative of the rising demand for secure email services.
We believe businesses operating with sensitive and confidential information (such as medical, financial, and real estate) are ideal targets for Sekur.
Management is following through with their plans to uplist shares to the NASDAQ.
Q3 revenue and EPS missed our expectations
Revenue was up 7% YoY, but flat QoQ
EBITDA was down 14% YoY amid higher G&A, and marketing expense
EPS remained negative
Revenue continues to be driven by individual users in the U.S.
Source: Company / FRC
Sekur has been able to reduce its CAC significantly
Source: FRC / Company
Reasonably healthy balance sheet
In-the-money options can bring in $0.49M
Source: FRC
As Q3 revenue fell short of our estimate, we are lowering our near- term and long-term revenue forecasts
We are lowering our 2023 EPS forecast, but raising our 2024 EPS forecast, based on reduced CAC, and management’s cost cutting initiatives
Source: FRC
As a result of our lower long-term revenue forecasts, our DCF valuation decreased from $0.68 to $0.61/share
As Sekur does not have any publicly traded comparables, we are continuing to not use a comparables valuation model. That said, we note that Sekur is trading at 2.6x revenue (based on the present value of our 2026 revenue forecast) vs the Application Software sector average of 6.8x (Source: S&P Capital IQ).
We are maintaining our BUY rating, and lowering our fair value estimate from $0.68/share to $0.61/share. We believe the stock will react positively if Sekur achieves QoQ revenue growth while maintaining CAC at or below levels attained in the last quarter. A successful uplisting to the NASDAQ would significantly broaden its investor-base.
