Director, RaaS Advisory, Research as a Service (RaaS)

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Director, RaaS Advisory

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<h2>CV Check Ltd (CV1)</h2>
<h3>Checked-in for RegTech SaaS transition</h3>
<p>CV Check Ltd (ASX:CV1) is a RegTech company providing workforce compliance monitoring and management technology and services (i.e. ‘Know Your People’ services). It is a key player in Australian pre-employment screening and verification (SaV) (~11.5% market share) reflecting a 39% revenue CAGR since its 2015 listing. CV1 has been operating cashflow positive for the past seven quarters ($2.1m FY22 to date) and is well capitalised with $12.3m cash. Following the April 2021 strategic acquisition of Bright People Technologies with its SaaS workforce compliance platform (‘Cited’) and Michael Ivanchenko’s appointment as CEO in August 2021, CV1’s key focus is to substantially grow SaaS revenues (from $2.4m). This would transition CV1 from predominantly transaction-based SaV revenue (~90%) towards high-margin (~85%) SaaS subscription revenue with its attendant operating leverage. Cross-selling to existing corporate SaV customers in ‘compliance heavy’ sectors is a key strategy and international opportunities are also being assessed. CV1 is also a potential beneficiary of structural tailwinds of increasing workforce complexity, compliance and ESG. Moreover, it is well placed for M&amp;A (bidder or target).</p>
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<h3>Business model</h3>
<p>CV1 has two core offerings: (1) Screening and verification (SaV) services via its CVCheck platform (91% FY22f revenues); and (2) A Software-as-a-Service (SaaS) real-time workforce compliance monitoring and management platform. SaV services generate transactional revenues with fees charged per check on a PAYG basis. They are targeted at business, skewed to police checks, and somewhat leveraged to the employment market. For SaaS, customers (employers) pay a fixed monthly fee plus transactional fees for SaV and other services. CV1 is now moving its SaaS pricing to a simple monthly all-in fee per worker of $15-$30 (inclusive of transactional services, minimum 12-month subscription term).</p>
<h3>Key inflection point for SaaS transition strategy</h3>
<p>CV1’s key strategic and operational focus is to substantially grow its industry and jurisdictionally agnostic SaaS platform’s subscriber base over the next three years. Having integrated the Bright acquisition and appointed a new CEO in 2021, and recently recruited a new sales director, it is now at an inflection point as the SaaS sales growth strategy commences in earnest. CV1 has ~500 large corporate SaV customers and cross-selling to those in ‘compliance heavy’ sectors (e.g. healthcare) is a key objective. On CV1’s analysis, there are 3.6m Australian workers with recurring compliance monitoring requirements in its target markets. In tandem, CV1 is assessing cost-effective international opportunities (e.g. licensing, JV) and enhancing its offering (e.g. imminent ‘Digital Credential Passport’ app launch). Moreover, CV1 is operating and free cashflow positive (buoyed by strong SaV revenue growth in FY21/FY22), well capitalised with $12.3m net cash, and operating in industries and a market environment which could be conducive to M&amp;A.</p>
<h3>DCF valuation of $0.26/share or $112m market cap</h3>
<p>Our CV1 DCF-based valuation is $0.26 per share. This implies EV/Revenue multiples of 3.8x for FY22 and 3.3x for FY23. As a cross-reference, CV1 is trading at a 56% discount to its ASX- listed peers on FY22f EV/Revenue (1.3x vs. 2.9x) with more pronounced discounts to its closest peers [Xref Ltd (ASX:XF1) at 4.7x and IntelliHR Ltd (ASX:IHR) at 4.6x]. Relative to the US-listed SaV pure-plays (First Advantage, Sterling and HireRight), CV1 is trading at a 51% discount to their average 2.6x CY22f EV/Revenue.</p>
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CV Check Ltd (CV1)
Checked-in for RegTech SaaS transition
CV Check Ltd (ASX:CV1) is a RegTech company providing workforce compliance monitoring and management technology and services (i.e. ‘Know Your People’ services). It is a key player in Australian pre-employment screening and verification (SaV) (~11.5% market share) reflecting a 39% revenue CAGR since its 2015 listing. CV1 has been operating cashflow positive for the past seven quarters ($2.1m FY22 to date) and is well capitalised with $12.3m cash. Following the April 2021 strategic acquisition of Bright People Technologies with its SaaS workforce compliance platform (‘Cited’) and Michael Ivanchenko’s appointment as CEO in August 2021, CV1’s key focus is to substantially grow SaaS revenues (from $2.4m). This would transition CV1 from predominantly transaction-based SaV revenue (~90%) towards high-margin (~85%) SaaS subscription revenue with its attendant operating leverage. Cross-selling to existing corporate SaV customers in ‘compliance heavy’ sectors is a key strategy and international opportunities are also being assessed. CV1 is also a potential beneficiary of structural tailwinds of increasing workforce complexity, compliance and ESG. Moreover, it is well placed for M&amp;A (bidder or target).



Business model
CV1 has two core offerings: (1) Screening and verification (SaV) services via its CVCheck platform (91% FY22f revenues); and (2) A Software-as-a-Service (SaaS) real-time workforce compliance monitoring and management platform. SaV services generate transactional revenues with fees charged per check on a PAYG basis. They are targeted at business, skewed to police checks, and somewhat leveraged to the employment market. For SaaS, customers (employers) pay a fixed monthly fee plus transactional fees for SaV and other services. CV1 is now moving its SaaS pricing to a simple monthly all-in fee per worker of $15-$30 (inclusive of transactional services, minimum 12-month subscription term).
Key inflection point for SaaS transition strategy
CV1’s key strategic and operational focus is to substantially grow its industry and jurisdictionally agnostic SaaS platform’s subscriber base over the next three years. Having integrated the Bright acquisition and appointed a new CEO in 2021, and recently recruited a new sales director, it is now at an inflection point as the SaaS sales growth strategy commences in earnest. CV1 has ~500 large corporate SaV customers and cross-selling to those in ‘compliance heavy’ sectors (e.g. healthcare) is a key objective. On CV1’s analysis, there are 3.6m Australian workers with recurring compliance monitoring requirements in its target markets. In tandem, CV1 is assessing cost-effective international opportunities (e.g. licensing, JV) and enhancing its offering (e.g. imminent ‘Digital Credential Passport’ app launch). Moreover, CV1 is operating and free cashflow positive (buoyed by strong SaV revenue growth in FY21/FY22), well capitalised with $12.3m net cash, and operating in industries and a market environment which could be conducive to M&amp;A.
DCF valuation of $0.26/share or $112m market cap
Our CV1 DCF-based valuation is $0.26 per share. This implies EV/Revenue multiples of 3.8x for FY22 and 3.3x for FY23. As a cross-reference, CV1 is trading at a 56% discount to its ASX- listed peers on FY22f EV/Revenue (1.3x vs. 2.9x) with more pronounced discounts to its closest peers [Xref Ltd (ASX:XF1) at 4.7x and IntelliHR Ltd (ASX:IHR) at 4.6x]. Relative to the US-listed SaV pure-plays (First Advantage, Sterling and HireRight), CV1 is trading at a 51% discount to their average 2.6x CY22f EV/Revenue.







CV Check Ltd (CV1) - Checked-In for RegTech SaaS Transition

Australia

CPT Global Limited provides IT consulting and training services to businesses in Australia and the UK. The Group provides clients with IT solutions, which aim at enhancing the efficiency, control, stability, reliability and cost effectiveness of Unix and Windows NT platforms, and Internet-based applications. CPT also offers customers capacity planning, and performance tuning and testing services.

Appen Ltd is a language, search, and social technology company. The Company provides solutions to improve internalization of products, management of data, and project management for companies.

DigitalX Ltd operates as a software solutions company. The Company operates in the global digital payments systems industry through disruptive fintech solutions in the remittance and value chain sectors, and allows consumers to make secure and cost-effective money transfers worldwide..

Adacel Technologies Limited is a developer of complex, real-time automation, communications, and simulation software and systems. The Company's software is primarily utilized by air traffic controllers and satellite-based air traffic automation systems.

Adveritas Limited operates as a software company. The Company develops mitigation software which detects, mitigates, and reports on digital advertising fraud. Adveritas serves customers worldwide.

Reckon Limited distributes, publishes, supports and markets financial management software in Australia.  The Company's products are developed locally by the Group or republished under license from Intuit.  The Company's software targets personal financial management, SME financial management and financial planning and are sold under the "Quicken" brand.

PharmX Technologies Limited provides software solutions. The Company develops and markets health care solutions.

Orcoda Limited provides logistics services. The Company offers fleet management, goods distribution, supply-chain, delivery, and other mobility solutions. Orcoda serves customers in Australia.

XREF Limited is a human resource technology company focused on candidate referencing. The Company utilizes a cloud-based system that automates the process for obtaining and checking candidates' references, helping compliance with privacy regulations, reducing fraud, and enabling employers to obtain detailed references anonymously and directly.

K2fly Limited operates a software-as-a-service business that is involved in the enterprise asset management sector. The Company offers an integrated software ecosystem for the management of physical assets in asset-intensive industries. K2fly serves customers worldwide.

ManagePay Systems Bhd is an investment holding company.  The Company, through subsidiaries, provices payment services, terminal services, loyalty management services, business process outsourcing, and software, security, and ICT services.

Techfirm Holdings Inc. designs, develops, integrates, markets, and supports wireless solutions for mobile communications applications.  The Company also develops server network and provides support.

FSBM Holdings Berhad distributes computers, computer related products, education related products and provides installation and maintenance services. Through its subsidiaries, the Group develops software applications and systems integration, provides data warehousing systems, and smart community solutions. FSBM also has operations in multimedia production and communication services.

DaiShin Information & Communications Co., Ltd. is a systems integration company and a finance-related software developer.  The Company's business includes frame relay service, development and sale of mid and large-sized printers.

ODK Solutions Company, Ltd. provides outsources information services mainly for school and financial companies.

Diversified Gateway Solutions BHD, through subsidiaries, offers computer hardware and software consulting services. The Company also provides telecommunication solutions.

K Way Information Corp. leases computer hardware and software.  The Company also provides information network services to clients in the brokerage, banking, and finance industries.

HIP CORPORATION provides personnel services by providing technicians for machinery. The Company also offers design and development of electricity and electronic instrument on contract basis.

Zungwon En-Sys Inc provides system integration (SI) services for Unix and Windows-NT systems by planning, installing, and maintaining from software to hardware.  The Company also sells laser printers and provides glass work construction services.

GTL Ltd. offers computer and communications network services.  The Company offers enterprise network engineering, networked applications and infrastructure management, network services integration, and process implementation and fulfillment services.

Kinatico Ltd operates as a technology company. The Company offers platform which helps employers to manage their workforce and meet their regulatory compliance needs. Kinatico serves customers worldwide.

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CV Check Ltd (CV1) - Checked-In for RegTech SaaS Transition

CV Check Ltd (CV1) Checked-in for RegTech SaaS transition CV Check Ltd (ASX:CV1) is a RegTech company providing workforce compliance monitoring...

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