GetSwift: A Smart Bet On The Post-Corona Delivery Revolution

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Summary

From restaurants to grocers and dairies, the coronavirus pandemic has forced businesses across the retail industry to accelerate the transformation to a full-service delivery model - or risk losing customers to rivals who do adapt. For savvy investors, there's a smart way to bet on the technology that is helping make that evolution quick, efficient, and lucrative.

Meet GetSwift Limited (OTCPK:GSWTF), a leading last-mile Software-as-a-Service (SaaS) company based in New York with shares that trade on the Australian Securities Exchange under the ticker GSW. GetSwift's technology platform was originally designed around a liquor delivery company but its services have since been embraced around the world by heavyweights including Heineken N.V. and Yum! Brands, Inc. (YUM), along with government-backed organizations seeking efficient ways to beef up food delivery to those in need.

GetSwift has grown revenue every quarter since listing in 2016, but recently the expansion has kicked up another notch. Revenue in the March quarter quadrupled from the December quarter, reaching A$8.7 million ($5.6 million).

While it's tempting to see that performance as a one-off spike from coronavirus, there are good reasons to believe such growth can continue or even accelerate further. First, many companies that are new to the delivery game will find that customers enjoy - and now even expect - the convenience. Retailers that don't offer delivery are sure to lose business, creating a very strong incentive to build out e-commerce platforms quickly.

What's more, restaurants in particular are likely to prefer GetSwift's software so they can manage delivery operations in-house rather than outsource to partners. Many restaurants are uneasy about the likes of Uber Technologies, Inc. (UBER) and Grubhub Inc. (GRUB) because they raise prices far above normal levels and effectively control the relationship with customers. If Uber acquires Grubhub, as it is currently considering, the power could shift further in the combined company's favor, prompting restaurants to seek delivery independence.

GetSwift also benefits from ongoing consumer trends. For instance, fresh, locally-sourced items like produce and dairy have come into high demand. The company has benefitted by helping producers introduce delivery, winning contracts including a dairy that will reach all of Arizona, The NYC Farmer's Market, and a fresh-fruit delivery company in Toronto, Canada.

GetSwift is by no means focused only on food. Any company that needs to organize orders, plan deliveries, and optimize routing can take advantage of its services. Among clients in dozens of industry verticals are a billiard equipment company in Texas and a propane-tank service in California.

The company has also grown through selective acquisitions, such as the purchase of Delivery Biz Pro, a farm-to-table logistics company, and Scheduling+, a tool to manage hourly workers and payrolls. Those new services have helped the company scoop up new clients such as PODS, the nation's largest portable moving and storage company.

In February, GetSwift also took a majority stake in Logo d.o.o., a European Information and Communications technology firm. With Logo, GetSwift can offer clients a suite of complementary services in areas including data centers, communications infrastructure, and Infosec, making it a one-stop shop that can serve larger enterprise clients.

GetSwift has also been able to attract some serious talent recently. Former Governor Howard Dean, who was previously the Democratic National Committee Chairman and one-time frontrunner U.S. Presidential candidate, joined the company's advisory board. Such a Washington heavyweight could pave the way for major client wins in months ahead.

Importantly, GetSwift doesn't need to sacrifice profits for growth. The company has been forced to spend money against a couple of lawsuits that could come to a resolution in the next few months. Legal bills were one-third of total sales, general, and administrative (SG&A) costs in the six months through December 2019. As those costs fade, the company's true profit margin should become apparent.

That puts the company in a position to either achieve profitability or decide to invest in marketing. If it does the latter, GetSwift has an even better opportunity to drive revenue growth. And it can. Marketing spending need not preclude profitability within a couple of years - soon enough to give investors comfort.

GetSwift shares are also cheap, despite the recent rally. Given the company's current growth rate and tailwinds, it could reasonably reach US$100 million in revenue in 2021. That implies an enterprise valuation multiple, adjusted for cash, of just 0.6 times.

By contrast, Grubhub trades at 2.9 times while regional food-delivery outfit Waitr Holdings Inc. trades at 1.7 times. Other SaaS companies command far higher multiples: Zoom Video Communications, Inc. (ZM) trades at 53 times 2021 consensus sales.

Institutional investors have begun to take notice of GetSwift. Fidelity, which originally invested in GetSwift in 2017, has raised its stake to 9.5% of the company. Other investors who follow Fidelity's lead should expect GetSwift to deliver handsome returns - perhaps even ahead of schedule.

Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.