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2015 EBITDA
2016 Est EBITDA
2017 Est EBITDA
EV/EBITDA 2015
EV/EBITDA 2016
EV/EBITDA 2017
$
$
$
43.0
45.0
48.3
14.3x
13.7x
12.7x
Prior to the spin, I dont believe the equity market ascribed a fair value to CHUBK inside the broader LVNTA
corporate structure. Once it reached scale, it is my understanding that Liberty management felt it was time to spin
out CHUBK as a stand-alone business it was not getting enough credit inside LVNTAs structure.
As per the CHUBK S1 filing, it is important to note that CHUBK is not a traditional Liberty tracking stock, but rather
a hard spin, resulting in the outright ownership of the business vs. reference entity with credit risk to Liberty. Thus,
on July 22nd 2016 shareholders of LVNTA received common voting shares of the new separate entity
CommerceHub, Inc. Malone still has control through a supermajority voting class of shares as per the CHUBK initial
filings.
Share Count - Pro forma for the spin (before future stock compensation incentives and management options)
there were 42.6 mm shares of CommerceHub outstanding.
Following the consummation of the Spin-Off, Mr. Malone is expected to beneficially own shares of our common stock
representing less than 1% of CH Parent's Series A common stock, approximately 94.3% of CH Parent's Series B common
stock, approximately 5.4% of CH Parent's Series C common stock and approximately 33% of CH Parent's voting power,
based upon the distribution ratios for the Spin-Off and his beneficial ownership of LVNTA and LVNTB as of April 30, 2016.
*Source: CHUBK S1
Business Description
CHUBK is a cloud-based e-commerce fulfillment and marketing software platform of integrated supply, demand
and delivery solutions for large retailers, online marketplaces and digital marketing channels, as well as consumer
brands, manufacturers, distributors and other market participants. The companys solutions combine supply,
demand and delivery over a single platform. The software platform acts as a hub that allows trading partners to
maintain an omni-channel relationships in consumer and B2B e-commerce markets.
CHUBK has approximately 9,500 customer or trading partners with access to the platform daily to exchange critical
information with each other, including orders, invoices, product information and other electronic documents.
Collectively, the trading partners constitute a vibrant network of the largest retailers, marketplaces and brands in
North America that use the platform to interact with one another to more efficiently manage and orchestrate
sophisticated supply-chain strategies.
Key Partners & Strategic Positioning
Revenue Drivers
Per the S1, CHUBK derives 68% of its revenue from usage fees that are based on the retail volume of activity (% of
GTV ~ Gross Transaction Value) that its customers process. The balance of the revenues include recurring
subscription fees and non-recurring installment charges.
According to eMarketer, e-commerce sales are expected to more than double on a global basis to $3.6T by 2019
vs. 2015. This could provide CHUBK with a multi-year term secular growth story with limited competition based on
our due diligence.
History
The company was founded in 1997 by Frank Poore and Richard Jones, and was acquired by QK Holdings, Inc. in
August 2006 and later by Liberty in May 2010.
CHUBK provides solutions to an affiliate company, QVC, which is a wholly owned subsidiary of Liberty. For the
three months ended March 31, 2016 and 2015, revenue from fees paid by QVC, together with revenue from fees
paid by QVC's suppliers, collectively accounted for approximately 8% of total revenue. For the years ended
December 31, 2015 and 2014, revenue from fees paid by QVC, together with revenue from fees paid by QVC's
suppliers, collectively accounted for approximately 8% and 10% of total revenue, respectively.
*Source CHUBK S1
Competition
CHUBK competes primarily with other SAAS providers servicing the e-commerce industry; however, the
competitive dynamics of the market are unpredictable because it is fragmented and rapidly evolving. Due to the
nature of the business and the variety of products the company offers, CHUBK does not believe there is one pure
competitor, but rather different competitors across CHUBKs product offerings.
The company splits out its business into 3 different segments, as follows:
Supply Solutions
Similar offerings include VendorNet (which is owned by eBay Enterprise) and SPS Commerce in
North America and VirtualStock and Kewill, among others, in Europe. Additionally, it also faces
competition from in-house developed solutions used by retailers that choose to build and
maintain their own proprietary integrations to online channels, using a combination of order
management, custom written software and value-added networks.
Demand Solutions
Competitors in this segment are highly fragmented, including Channel Advisor, Merchant
Advantage and various advertising and digital marketing agencies.
Delivery Solutions
Competitors include the major shippers (UPS, FedEx) and logistic companies.
* Source CHUBK S1
$
$
$
$
$
$
45.0
9.5x
427
50.0
20.0
397
44.5
8.93
$ 45.0
11.5x
$ 517
$ 50.0
$ 20.0
$ 487
44.5
$ 10.95
$ 45.0
13.5x
$ 607
$ 50.0
$ 20.0
$ 577
44.5
$ 12.97
$ 45.0
15.5x
$ 697
$ 50.0
$ 20.0
$ 667
44.5
$ 15.00
$ 45.0
17.5x
$ 787
$ 50.0
$ 20.0
$ 757
44.5
$ 17.02
**adjusted EBITDA reflects add back of historical stock compensation for management.
Comparable Companies
One important aspect of understanding CHUBKs cash flows and the quality of its EBITDA is its stock compensation.
While stock-compensation add backs are a debated issue with SAAS based companies, the historical financial
results for CHUBK as provided in the Liberty Interactive Investor Day slide presentation from November 12th 2015
show that almost all of the companys adjusted EBITDA is generated from an add back of stock compensation. This
makes the companys stock compensation look massive on both an absolute basis and on a relative basis when
compared to other software companies. However, CHUBKs large stock compensation expense was driven by the
companys accounting policies that will no longer be available now that it is a public company.
As a private company, stock compensation, related expenses and related liabilities were derived from a process of
having third parties value the company and a cash settlement accounting technique to account for stock
compensation. With public companies, the majority of stock compensation is accounted for as stock settled
awards which can result in significantly smaller stock compensation add backs to adjusted EBITDA and the
appearance of a more robust cash flow as a result. Going forward, I believe this should result in considerably lower
amounts of stock compensation imbedded in CHUBKs operating expenses bringing the company more in-line with
other publicly traded software companies.
For details regarding the equity compensation program please see the CHUBK S1 filed 7/14/16.
SAAS Comps
BRIGHTCOVE
BAZAARVOICE INC
CARBONITE INC
CORNERSTONE ONDEMAND INC
CHANNELADVISOR CORP
FIVE9 INC
JIVE SOFTWARE INC
MARIN SOFTWARE INC
SERVICENOW INC
PAYCOM SOFTWARE INC
PAYLOCITY HOLDING CORP
PROOFPOINT INC
QUALYS INC
RINGCENTRAL INC-CLASS A
INCONTACT INC
SPS COMMERCE INC
WAGEWORKS INC
Average
Median
BCOV
BV
CARB
CSOD
ECOM
FIVN
JIVE
MRIN
NOW
PAYC
PCTY
PFPT
QLYS
RNG
SAAS
SPSC
WAGE
MRKT
CAP (mm's)
$390
$335
$356
$2,457
$310
$746
$341
$105
$11,744
$2,940
$2,206
$3,162
$1,232
$1,674
$865
$1,110
$2,226
2015
EV/EBITDA
52.7x
NA
17.7x
170.2x
NA
NA
40.4x
NA
76.2x
60.2x
309.5x
686.2x
18.9x
261.7x
71.8x
44.5x
18.7x
140.7x
60.2x
2016
EV/EBITDA
41.0x
557.8x
10.3x
78.3x
99.0x
154.2x
15.8x
66.2x
45.5x
34.2x
79.9x
124.1x
15.8x
75.3x
41.2x
37.2x
16.0x
87.8x
45.5x
2017
EV/EBITDA
31.9x
41.4x
9.6x
45.0x
47.3x
77.7x
13.0x
44.0x
29.6x
26.6x
55.2x
70.1x
13.1x
48.2x
29.7x
28.7x
13.5x
36.7x
31.9x
2017 Est
2017 Est
Rev Growth EBITDA Margin
10.5%
6.9%
2.0%
3.4%
3.4%
15.8%
22.3%
10.3%
14.3%
4.1%
17.7%
5.1%
-5.5%
9.5%
1.9%
1.5%
29.6%
21.6%
29.0%
25.8%
30.2%
12.9%
28.5%
9.5%
18.6%
33.0%
23.7%
6.9%
15.5%
9.4%
18.9%
14.8%
11.5%
32.1%
16.0%
13.1%
17.7%
9.5%
RH
WSM
AEO
ANF
URBN
PVH
OXM
LULU
MRKT
CAP (mm's)
$1,382
$4,706
$3,352
$1,500
$4,316
$8,669
$1,061
$10,973
2015
EV/EBITDA
8.4x
7.1x
9.1x
3.2x
8.0x
9.6x
9.9x
24.7x
10.0x
8.7x
2016
EV/EBITDA
6.3x
6.9x
6.4x
4.0x
8.2x
10.6x
9.0x
24.2x
9.4x
7.6x
2017
EV/EBITDA
9.0x
6.8x
5.8x
4.4x
7.7x
10.9x
9.9x
20.9x
9.4x
8.3x
2017 Est
2017 Est
Rev Growth EBITDA Margin
-0.2%
8.9%
4.2%
13.2%
3.6%
14.6%
-1.9%
8.9%
4.2%
14.6%
2.3%
12.9%
6.3%
11.8%
14.5%
21.2%
4.1%
13.3%
3.9%
13.0%
614
14.3x
13.7x
12.7x
Retail Comps
RESTORATION HARDWARE HOLDING
WILLIAMS-SONOMA INC
AMERICAN EAGLE OUTFITTERS
ABERCROMBIE & FITCH CO-CL A
URBAN OUTFITTERS INC
PVH CORP
OXFORD INDUSTRIES INC
LULULEMON ATHLETICA INC
Average
Median
CHUBK
15%
**Comparable company analysis sourced from Bloomberg data and proprietary calculations.
** SPS Commerces EBITDA includes add-backs
Conclusion
42%
Disclaimer:
The write up is not investment advice or a recommendation or solicitation for any investment fund or
to buy or sell any securities. The author and/or related persons may hold a position in the subject
company; however, no representation or warranty, express or implied, is being made that the author
and/or related persons will continue to hold a position in the subject company. The view expressed
on the subject company or its investment positions therein is subject to change at any time, for any
reason or no reason. This includes buying, selling, covering or otherwise changing the form or
substance of its investment. The author and/or related persons disclaims any obligation to notify the
market of any such changes. The information and analysis presented in this write up is based upon
publicly available information only. While the author has tried to present the facts it believes are
accurate, no representation or warranty, express or implied, is being made as to the accuracy or
completeness of the write up, and the author expressly disclaims any liability relating to the write up
(or any inaccuracies or omissions therein). The author undertakes no obligation to correct, update
or revise the write up or to otherwise provide any additional materials.