Miami, FL – August 13, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on True Nature Holdings, Inc. (OTCQB: TNTY)
True Nature to begin rolling out ‘Pet Centric’ SaaS Applications.
- Positioning itself in the recession-proof $69.5B Pet Industry
- Focusing its core business on 3 overlapping segments
- Looking to acquire healthcare related businesses; May be a Target themselves
- Planning on utilizing Blockchain to provide healthcare solutions
- Launching ‘App-Driven’ Health & Wellness Website
- Qualifying as a high growth Software as a Service company (Trade at big multiples)
True Nature Holdings Inc. (OTCQB: TNTY) has been in stasis waiting for the right management team and opportunity. With the recent addition of Jay Morton as president conditions seem optimal to launch a Software as a Service (SaaS) company that caters to the recession resistant pet market. “The market for personal health records (PHR) systems is exploding with more sources of health data such as smart devices, and a new level for sharing of health records from healthcare providers as they seek to make the patient relationship more “sticky”. Our pets are a part of our family, and smart pet device growth mirrors that of the human market. The “humanization of the pet world” proves the market is ready as pets telemedicine is almost a natural progression toward the company’s goal of being a telemedicine provider.
The latest acquisition to join the True Nature family of products is “Apps for a better living.” The significance of this application is that now people that are health conscious have a myriad of apps to choose from in a healthy living app store format. The overall mission statement of the company is “Better Healthcare Through Technology”, and the team there has quickly determined that they can leverage their investment in technology for our healthcare simply by remembering to include the same functionality for our pets.
The Pet Industry Is a Growing Recession Proof Industry
In 2017, U.S. pet owners spent a whopping $69.51 billionon their beloved furry, scaly and feathered friends. According to the American Pet Products Association (APPA), who have statistically followed American pet spending since 1994, an increase has happened year over year justifying that the industry is not only growing but recession-proof. While $29.07 billion were spent on pet food, $32.18 billion were forked out for vet care, supplies and over-the-counter medicine.
Animal lovers are unafraid to open their wallets for their little ones, so it’s easy to see the rise of such stores like Petco and PetSmart who own a 52% share of all the pet supply stores in the marketplace. Even though they continue to open more stores and expand their ecommerce presence, they held a 58% share a few years ago. This tells us there is plenty of room for new players in the pet space.
PetSmart defended its position as the No. 1 chain on the Top 25 Retailers list again in 2017 by continuing to grow in diverse directions. Early in 2018, the company made a big splash in the world of ecommerce with the acquisition of Chewy.com. The deal is worth $3.35 billion and makes it the biggest e-commerce acquisition in history. The deal was a huge, even bigger than Walmart’s (NYSE: WMT) $3.3 billion deal for Jet.com last year. Putting the growth in perspective, PetSmart, was valued at only $8.7 billion when private equity investors took it over in 2015.
The deal with Chewy.com ensures that PetSmart maintains its growth in the fast-growing pet food business. Chewy.com has been one of the fastest-growing e-commerce sites on the planet, registering nearly $900 million in revenue last year, in what was only its fifth year in operation. The company had been a potential IPO candidatefor this year or next, but was taken out by its brick-and-mortar competitor prematurely. An interesting anecdote is that the store was not profitable last year. PetSmart increased the number of physical locations it operates to more than 1,600. Maintaining a physical presence remains a priority for the industry’s big-box leader but they needed to dominate the online presence.
With PetSmart growing bigger and bigger, new players will desperately need to vertically integrate themselves with not only brick and mortar stores, but online pet-related ecommerce sites, giving True Nature a golden opportunity to develop something special someone will want to acquire to stay competitive in the space.
Humanization of Pets – Unbreakable Trend
Many know that the pet industry is virtually recession proof, but they can’t place their finger on why. The answer to the question is due in part to a pet owner’s need to “humanize” their pet.
According to the American Pet Products Association(APPA) total pet expenditures in terms of pet food, services and supplies will eclipse $72.13 billion. The APPA data shows that pet spending in 2007, before the Great Recession, was $41.2 billion. That means the market has grown over 50% since then, far faster than most other sectors of our sluggish economy. APPA data also shows that pet spending has grown steadily every year for the past 2 decades. Anecdotally the decline in human births seems to be linked to increase in the growth curve of pet spending. Pet expenditures started rising as human birth rates started falling. CNBC’s Cramer has said that the humanization of petsis one of the greatest investing themes out there. The thing about Cramer is that he just didn’t say it once, he’s been saying it over and over for YEARS and on this point, he has not been wrong!
The health of one’s pet is of great concern. The increasing health conscious pet owner that eats organically and is anti-GMO, seeks quality food for their pets too. Premium pet foods like Blue Buffalo (NASDAQ:BUFF), and Freshpet (NASDAQ:FRPT) are just 2 companies that have seen strong continued growth. In 2015 past FreshpetCEO, Richard Thompson, says the fresh pet food brand still has a lot of runway to grow and can easily expand to 35,000 retail locations across the country. Freshpet’s refrigerators are already in 13,000 retailers around the United States from Kroger (NYSE: KR) to Target (NYSE:TGT) to Petsmart. Thompson said, ‘if you look at health and wellness trends and also the humanization of pets, people are taking better care of their pets. We’re at the right place at the right time with Freshpet with a healthy food.’ Thompson was right, as they now service over 1 million pet parents and their retail network of grown from 13,000 to over 19,000 fridges across North America. Other companies like Purina (a part of Nestle SA (OTC: NSRGY) and Spectrum Brands, whose United Pet Group, Inc. holds over twenty popular pet brands, have also seen growth through having premium grades of food and nutritional supplies.
Consumer’s choice to pay premium prices for their pet’s food indicates they will also be more apt to spend on healthcare and pharmaceuticals for their pet. True Nature plans on capturing this niche audience, not only for their pets, but also market their human health care related products, apps and services also.
Social Media & Pet Celebrities
Just in case you are still a non-believer that society has “humanized” their pets, let’s take a look at pets then and now. Way back in the day there were famous animals that got plenty of public attention like Mr. Ed the horse, Benji and Lassie the dog, Shamu the Killer Whale or even fictitious cartoons like Garfield the cat. In this day and age, thanks to the internet and social media to fuel our fascination with animals, people’s pets have become internet celebrities overnight on platforms such as Pinterest, Facebook, Twitter and Snapchat.
Forbes magazine recently did an article that tracked the top 10 influencers in the pet world. An influencer is a term coined by marketing specialists as a social media account who have many followers, subscribers or fans. Example, Grumpy Cat, known for his grumpy looking face due to the markings of his fur, has 2.5 million followers on instagram. The account owner can simply advertise a product or service with a notation that Grumpy Cat loves “this product” and “bam” it gets sent out for millions of people to view, the same amount as the viewership of a popular cable show during primetime. These influencers (such as Boo, Manny The French Bulldog, Doug The Pug, Grumpy Cat, Nala, Marnie, Tuna, Lil Bub, Waffles and Jiff Pom) are making tens of thousands of dollars in advertising and marketing.
The Forbes studyshowed that the TOP 10 have nearly 23 million instagram followers, 42 million facebook likes, 2.5 million twitter followers and half a million youtube subscribers, giving them a total reach of nearly 68,000,000 users.
Social Media will be key to True Nature’s marketing efforts and may just take advantage of the star power from one of these pet influencers to advertise a new app, product or service.
There are a few players in the pet online pharmacy sector, one of which is PetMed Express, who also go by 1-800-PetMeds (NASDAQ: PETS). The online pharmacy sells drugs for pets including prescriptions and nonprescription medicine along with nutritional supplements. This time 4 years ago, the company’s stock price was around $13.70/share. Today, the security trades at prices 3x that, and hit record highs of $53.24 late January of this year. This stat alone provides more proof the pet industry is booming and even outperformed the NASDAQ Composite and Russell 2000.
The Florida based company did $273.8M in revenues last fiscal year (March 31-2017 to March 31-2018). They are a true online pharmacy, licensed in all 50 states to sell pet meds and have nearly 200 full time employees.
PetSmart, the other major player, offers meds along with everyday pet products. As mentioned earlier, PetSmart used to be publicly traded under the ticker symbol “PETM” but were acquired for $8.7 billion back in late 2014. PetSmart bought online ecommerce site “Chewy.com” for $3.35 billion in 2017, another massive pet company that offered pharmacy options for customers gave PetSmart a significant piece of the pie.
With the pet market growing at a pace of $3 billion a year, there is room for newcomers to enter the space. Current retailers know it is convenient for pet owners to shop at their brick and mortar store locations but realize the shift in online sales is too great to ignore. Ecommerce retailers and especially online pet pharmacies will be prime targets in the years ahead as some of the aggressive new players will absorb smaller companies to compete with the likes of a PetSmart, PetCo or PetMed Express. If they don’t, the top 3 will eat them up to maintain their foothold on the market. Either way, if you one can be successful in this sector, you will be a target!
True Nature is Really 3 Companies in 1 Public Entity
True Nature has an excellent strategy as a related industry holdings company. By focusing on growing 3 segments of the company there is a natural overlap that can fuel growth between one another. , it will solidify and well round themselves as a healthcare related company. The philosophy of a holdings company is to have individual start-up businesses with tremendous potential and who can run on their own merit. The more you have the less risk there is of overall failure, due to the fact that if a business or two are flops, chances are (laws of statistics) one or 2 will do very well… by having multiple segments, it’s as if you’re hedging your bet in business. This strategy decreases the chances overall failure and increases True Nature’s ability to grow and sustain. These segments are:
Marketing-True Nature will grow a database of users from its software, website and online apps, that can then be marketed with both external and internal product and service advertising.
Software Development-True Nature plans on utilizing blockchain technology along with conventional means to provide software solutions for the healthcare industry. Mobile phone applications also fall into this segment.
Acquisitions-True Nature can grow very quickly through strategic acquisitions of healthcare related companies with current revenues, customer bases and/or tremendous future growth potential that will bring both instant and future value to shareholders.
True Nature is expanding its healthcare related services by adapting to today’s technology and giving internet friendly consumers what they desire. Reaching today’s modern user, True Nature has a goal to offer a multitude of apps for better living. Most of us are familiar with WebMd, as whenever we have had symptoms of a potential medical issue, we relied on the popular website to deliver a diagnosis of whatever may ail us. The site delivers great information, gets tremendous traffic, and the advertisement-driven business model is what generates revenues.
True Nature believes it can offer everything health and wellness related like a WebMed with a tweaked business model that will offer related apps rather than advertisements. Example, if Suzy homemaker was reviewing an article on the techniques and benefits of yoga, she will then see the opportunity to download an app on her mobile device that will cater to her yoga interests. According to Statista, more than half the web’s trafficis generated from individual user’s mobile devices, so offering web apps to site users is a potentially genius strategy.
Besides suggesting health related applications, the website also plans to pursue software that will users to get their health history from medical professionals and then add to a personal healthcare records app like “Simple HIPAA”. The idea to combine personal, family and pet health services such as safe record keeping for sharing is a convenient one as our pets in most households are viewed as part of the family anyways. Your Veterinarian can share your pet’s history and add it to your family records. Having all this information in one place will help simplify and maintain all your medical records at the touch of a button.
HIPAA and Blockchain…Its Simple!
Getting around HIPAA has been a recent debate, and while there have been distinctions made for “tethered vs untethered” applications to make data sharing easier for the human healthcare market. The approach adopted for the Simple HIPAA application is don’t try to skip the rules, make it easy to get and share data no matter the requirement for HIPAA or not. By doing so the applications are immediately compatible with the pet marketplace, where the rules have yet to be defined. More importantly, this new design provides for a “bolt on” application to employ blockchain technology within the healthcare world. So, in its base form, it meets HIPAA requirements, and for the more sophisticated user, or in an institutional setting, that can be taken to the next level with an upcoming blockchain encryption feature, intended to be offered on a service bureau basis, per transaction, which opens yet another revenue stream from the base level installation base. Although pet health doesn’t have to worry about violating any HIPAA laws, businesses have to be concerned with abiding with individual’s private information. True Nature’s Simple HIPAA app can be blockchain integrated, allowing the company to deliver a fast, secure and reliable service.
In order to be a successful blockchain encryption company, your technology must be something used by the masses and offer a solution to real world problem. We know that every healthcare technology solution dealing with Protected Health Information (PHI) in the US has to comply with the Health Insurance Portability AccountabilityAct (HIPAA). HIPAA enforces the patient’s right for privacy and aims at protecting sensitive health information from unauthorized disclosure and access. For a software company handling PHI, complying to HIPAA means implementing a broad set of rules encompassing both technical safeguards to be embedded in the software solution itself and administrative measures to be included in the company’s organization and processes. So, if True Nature were to build a Blockchain-based software in Healthcare, what should they do with HIPAA? One strategy is not to deal with the complexity of the HIPAA regulation and develop Blockchain healthcare solutions not dealing with PHI …in essence, Keep it Simple (think…Simple HIPAA).
Another option companies are taking are by going outside of the US, avoiding HIPAA like regulations and generating business abroad. Unfortunately, this is not a solution for companies that wish to do business in the states.
The key is to not focus on getting around HIPAA but offering block solutions that can work with HIPAA. One blockchain company, Simply Vital, who use the Health Nexxus network, plans to use Blockchain technology to create a secure audit trail for care. Health Nexxus is one of the only blockchain companies that is HIPAA compliant. They are using governance and validation protocols to ensure that only HIPAA-compliant servers are allowed in their ecosystem. HIPAA compliance is a recognized healthcare standard that assures safe adoption for app developers on their platform.
As the diagram above shows the relationship between how app developers like True Nature can work with a blockchain platform such as Health Nexxusand the healthcare industry on both a state and federal level.
The app developers will use the platform, or a related party like a Simply Vital Healthto build the software, that will work along with HIPAA and deliver a solution to a real problem in the health industry.
True Nature management has stated that they have lined up financing of up to $6 million in order to launch this acquisition strategy and plan to file a shelf registration before the end of the year. These funds can be used to acquire undervalued and under marketed pet/health related businesses. All of these new businesses when marketed correctly, will have the potential to bring in significant new revenue and growth for the company.
Targeted acquisitions will most likely range from ecommerce sites, app development, blockchain, and medical software and or services in the health and pet sector. In general, once a large base of clients exists with the Simple HIPAA and Simple HIPPA for Vets and Pets application set, incremental revenue comes from the rollout, or acquisition of “bolt on” features and vertical applications. There are three (3) ways to align these packages, for the end user think new data gathering such as additional healthcare areas such as dental records, prescription management and scheduling, men’s and women’s health, pre-natal, and geriatric applications. Secondly, add diagnostic apps that look at the data and provide advice, such as diet, diabetic, heart health, and even mental conditioning and social and emotional learning (SEL).
Then think about the healthcare provider, and how they can distribute these apps to their clients to improve the “sticky” nature of their relationship, and establish communication for medication, client visit scheduling and even diagnostic evaluations online. The US and other government related organizations is embracing this aspect by including reimbursement features for those who embrace, since it drives overall costs down and quality of healthcare up.
Amazon’s Alexa and its Alexa Show products are being tested now for implementation as a portal to the applications. With the costs of these devices dropping, and functionality growing, compatibility with those installed bases can offer incremental growth at nominal deployment costs, all the time using the Simple HIPAA base as the primary driver.
Amazon is eventually going to get into the pharmacy distribution it’s not a question of if but when. People buy so much on Amazon why not pills delivered right to your doorstep. Most people don’t realize it but there is a 1st prescription fill percentage statistic. The simple reason is that people actually debate whether or not they need the medication versus dealing with the hassle of visiting a pharmacy. People in general hate waiting on line and filling a prescription has so much red tape that the process just can’t be rushed. Now add to this the coughing and sneezing people waiting on line with you. There has got to be a better way.
Last month Amazon (NASDAQ: AMZN) bought online pharmacy PillPackwhich has a presence in all 50 states. This move definitely had CVS Inc. (NYSE: CVS) and Walgreens (NYSE: WAG) in a tizzy wondering what AMZN was going to do and how it was going to affect their business. The drug distributors like Rite Aid (NYSE: RAD), Cardinal Health (NYSE: CAH) and AmerisourceBergen (NYSE: ABC) also felt the effect. There has been more than one business that AMZN has brought to the edge of extinction.
This sector is going to consolidate first.
If AMZN enters this space, it might be hard for investors to see how this is ultimately good for TNTY. This is the beauty of TNTY’s plan which is one step ahead of AMZN. Assuming AMZN takes a couple of years to dominate the online pharmacy space they are going to look upstream. In a couple of years, the landscape of prescription writers is going to change. Do we know what it’s going to look like? Probably not but what is known is that telemedicine is more efficient and if this concept takes root this is going to be the source of many prescriptions. If this disruption happens then a revenue producing telemedicine company is just what the doctor ordered for AMZN and TNTY will be sitting in the thick of it.
Software & Private/Public Valuation for SaaS Companies
Private tech and SaaS (software as a service) companies command far higher revenue multiples than public companies. It’s an odd situation given that the latter have liquidity (ability to free up your investment by selling stock) while the former are decidedly not (stuck until company is bought out, goes public or simply participate in a revenue share).
According to Bessemer’s State of the Cloud 2018 report (here), startups are not only able to command revenue multiples (a valuation derivative) far higher than their public counterparts, but the trend is actually re-accelerating.
Indeed, as the following chart from the report shows, 2017 brought a sizable rebound in the amount of money that private investors are willing to pay for present-day startup revenue.
Now annual recurring revenue (ARR) is a good thing for a company to have. Recurring revenue is more predictable than non-recurring revenue, so investors are sometimes willing to pay more for it than other types of top line. But if investors in public companies are willing to pay around six times ARR, why in the flying heck would private investors be willing to pay nearly three times that much for privatecompany ARR? (Recall: private companies are illiquid investments.)
The simple answer is that they don’t, or at least not really. Instead, private investors are buying futureARR, looking at a combination of base (current) ARR and growth. So private companies that have higher growth rates against their current ARR can likely command a higher revenue multiple than their slower-growing compatriots. This is where aggressive management from True Nature can purchase private SaaS related companies to immediately increase both current and future revenues.
There’s nuance here (CAC payback periods, gross margin expansion or compression, LTV, and other various acronyms that are really mere revenue qualitymetrics), but in short, growth is what makes that 15.9 number is perhaps less bonkers than it looks at first read. We have seen multiples as high as 20-30x in companies with huge future potential.
Offering software as a product or service, coined software as a service (SaaS), is great news for shareholders as wall street valuations on these categorized companies have reflected a healthy trading multiple average of 7.2x ARR for the more popular 38 public companies listed below. (see chart) The top group trade at an ARR of 9-12x, but don’t forget this was a year ago.
So, what is True Nature’s ARR and where does it stand against other public SaaS companies? The answer creates a valid argument that True Nature is “undervalued” versus its peers and if the company acquires additional companies that affect the valuation formula, TNTY could be extremely undervalued and potentially a wise investment.
True Nature’s ARR Grid
True Nature seems to be reinventing itself as a niche player in the burgeoning SaaS market. The company has been quiet for a while as it needed to find its way. At this point in time, there seems to be a game plan developing and finally ready. With their centric focus on pets, there appears to be a steady recession proof market that they are targeting with a brilliant strategy to mesh both pet and human healthcare services. The fact that most pets have an owner and most people have pets, why not double your customer base at the same time. The company is clearly going to be on an acquisition binge and they appear to be using their stock as currency to buy undervalued assets related to the pet/telemedicine industry. Should they get financing, which is in the cards, then this could become a roll up play very quickly. The company looks to be going after small accretive type acquisitions and looking to grow its top line as quickly as possible. There is a lot of consolidation in this sector and should they reach critical mass they could indeed become a target themselves. If they develop a blockchain solution that takes root the valuation of TNTY could explode because this market is still in its infancy. Whether it’s mobile apps, telemedicine, SaaS, Blockchain or a combo of all 4, the investment world is loving these sectors. Having multiple businesses (holding company) is also a great insurance policy in case one company fails, essentially not all is lost. Hypothetically, based on investor consensus and projected valuation metrics, if TNTY only has revenues this year of $1 million, the stock should be trading closer to $.24 given a 6 multiple of sales. If the company can acquire companies with existing revenues and recurring sales, then its valuation and price per share (using the multiple grid graphic above) can sky rocket, making this an undervalued ground floor opportunity with tremendous near-term potential.
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