AP Automation Provider Glantus Goes Public in UK

As the folks at Spend Matters point out, the AP automation market is attracting attention and capital.

• Bill.com has a $12 billion market cap and sports a Price to Sales ratio of 57x.
• Stampli raised $50 million from Insight Partners, bringing its total capital haul to $87 million.
• An AP automation company called Glantus went public in the UK this week.

Any time a company in a market I follow goes public, I’m excited to see the resulting bonanza of information. It’s even more exciting because I have never heard of Glantus.

Who is Glantus?

It turns out I had not heard of Glantus for several reasons:

1. The company is headquartered in the UK.
2. Glantus is a roll-up of four smaller companies:  Software Dimensions, Dynistics, Total Audit Solutions, and most recently, JPD financial.
3. The company is still very small.  Glantus had revenues of €8.1 million for the year ended 2020.
4. To date, the company is more of a recovery audit business than an AP automation business, as we shall see.

Of the €8 million in revenue, €5.9 million came from the latest three acquisitions.

Glantus Topline and Bottomline

So far, the company has proven the ability to acquire companies and take out costs.  Its ability to grow organically is not yet proven.

As you can see, the company has great inorganic growth on the top line, but not on a proforma basis.  Appropriately, the term “organic growth” appears in the company’s admission document (like an S-1), only in reference to future plans!

What does Glantus do?

Glantus competes in three markets:  AP Audit and Recovery, AP Automation, and Spend Analysis.  The company provides a nice graphic to capture the competitive set in each market:

If you dig into the financial notes, you will find that nearly two-thirds of revenue is in the recovery audit business.  This is transactional revenue based on a percentage of the revenue recovered for Glantus’s clients.  (Glantus provides an example of a 30% recovery fee.)  At this point, only about 30% of the company’s revenue comes from subscription software.

Valuation

Glantus has a market cap of approximately €42 million.  That’s 5x revenue and 20x Adjusted EBITDA.  This is a modest valuation relative to revenue for a SaaS company these days.  On the other hand, for a recovery audit firm, it is much more aggressive. The largest player in recovery audits in the US (PRGX) sold at the end of 2020 for about 1.3x revenue and 7x EBITDA.

Summary

If you think Glantus will continue to acquire and integrate companies to crank up the EBITDA and/or upsell its customers into subscription software for AP automation and spend analytics, you might be inclined to nibble at this one.  If you think the company remains largely a recovery business, you might stay on the sidelines.  Which is it?