Founded as late as 2016, with employees in the teens, Victrix has still already reached 750 000 subscriptions, and there is a lot of more capacity on its scalable platform. We believe these subscriptions equal a market share of ~65-70% in the Spanish home market. The figure can also be compared to the 850 000 seniors above the age of 80 in Spain. However, there are 9 million Spanish seniors (age of +65), corresponding to almost one fifth of the Spanish population – a number that is growing quickly, by the way.
Victrix offers systems for extraction and analysis of data, allowing its customers to provide a proactive telecare service (outgoing calls to users), as opposed to the reactive care services across Europe. We assume algorithms scan data from various sensors etc. in order to find deviations in common patterns (there is no machine learning aspect at the moment, but we think that could be a natural evolution for the platform). Three of four calls for Victrix’s customers are outgoing and require a more advanced platform than reactive calls. These proactive calls can serve as reminders for e.g. vaccinations, heatwaves, cold spells or medical appointments. Doro makes some outgoing calls today but very few, so in essence, the company is breaking new ground.
The flexible and open platform is even compatible with e.g. analogue technology. Victrix says it has the “world’s first fully digital end-to-end telehealthcare platform”. We assume Greatcall of US might have access to a similar platform, as it has long been doing proactive calls, but we think Victrix is definitively unique in the European market.
Doro says the acquisition increases its opportunities to launch new solutions in the telecare space. We assume this primarily refers to the proactive solutions provided in Spain. However, we see Victrix as a potential three stage rocket. First, Victrix will continue to sell its solution to more new customers, just like before. Second, we think Doro can leverage Victrix to launch new services, like e.g. checkup calls etc. While this is a logical step forward for the market, we still think Doro needs to work hard to persuade municipalities etc. and promote these solutions in the preparations of new procurements. Finally, we think there is a long-term potential to merge the technological platforms, or even base future platforms on the Victrix technology. Doro’s CEO said he thinks Victrix will be a center of excellence for Doro. He added that the acquisition is an important part of executing on Doro’s strategy and ambitions within Care. While we think Victrix will be key in the long run, we assume the financial effects during the next 1-2 years are minor. We do not expect any major changes to be made in the Victrix operations.
Virtually the whole Victrix team are senior, former employees of Doro’s competitor Tunstall, meaning they not only know the tech, but also understand the industry and the customers inside out. For 20 years, the CEO, Joe Killen, worked in leadning Tunstall positions within sales, strategy and business development. Killen e.g. served nine years as Managing Director of Southern Europe, not only building up Tunstall’s Spanish operations but also overseeing subsidiaries in France and Italy.
Keeping the expertise and experience from the team around is an important objective. In this sense, we support the existence of the earn-out. However, there were no details whatsoever around the earn-out, making it impossible to evaluate the price and valuation of the acquisition (EV/S 7x, excluding earn-out). One should note that there is no dilution from issuance of new shares as Doro has earlier bought back 439 000 shares. Furthermore, in a worst case, if the acquisition completely fails, Doro will earn back the cash flows in about six weeks, judging from its historical cash flow patterns. All in all, regardless of the unknown earn-out and the minor short-term financial effects (see the tables below), we are pretty excited about the acquisition. We think the stock market will also think positively about the increased M&A activity of Doro (+5% yesterday). As mentioned above, we think the Doro stock could be about to escape the value trap.
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