In the ever-evolving domain of customer service technologies, Text has emerged as a pivotal player. Founded in 2002 and based in Poland, Text has significantly expanded its horizons beyond its flagship product, LiveChat.
The rebranding from LiveChat to Text in January 2024 underscores the company’s ambition to encompass a broader spectrum of customer service technologies, reflecting its adaptability and forward-thinking approach.
Product Portfolio
text offers a diverse range of products, including LiveChat, ChatBot, HelpDesk, KnowledgeBase, and OpenWidget. LiveChat remains the cornerstone, contributing to 91.2% of the company’s revenue, with approximately 37,000 customers globally.
Although smaller, ChatBot, with around 2,800 customers, represents the company’s foray into AI-driven customer service solutions.
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Financial Performance and Market Dynamics
Text’s financial year 2023 saw an impressive revenue generation of $90.6 million, marking a 45.4% growth from the previous year.
Despite this growth, the company faces challenges, particularly with contracting gross margins, which decreased to 82.7% in 2023 from higher percentages in the preceding years.
This trend signals increased competition and the pressing need for strategic differentiation amidst a saturated market.
Competitive Pressures and Margin Contraction
The proliferation of chat-based customer service solutions, spurred by technologies like ChatGPT, has led to an oversupplied market.
Text’s dwindling gross margins from 86.6% in 2021 to 82.7% in 2023 highlight the intense price competition. If Text cannot distinctively position its offerings, it risks further margin erosion.
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Strategic Positioning and Growth Prospects
Despite the formidable growth of LiveChat, its customer base expansion has plateaued, with net growth stagnating around 80 clients annually.
This slowdown is indicative of a broader market shift towards AI-driven customer services, posing a challenge for LiveChat’s future dominance.
The Role of ChatBot in Text’s Future
With the global chatbot market projected to grow at a CAGR of 23.3% from 2023 to 2030, Text’s ChatBot has not mirrored this growth trajectory, increasing only by 10% from 2022.
This discrepancy raises concerns about Text’s ability to leverage ChatBot as a successor to LiveChat amidst evolving market preferences.
Valuation Concerns and Comparative Analysis
Text’s valuation, with an EV/Revenue multiple of 6.1x based on the latest OTC price, appears inflated compared to peers like Yext, which trades at a multiple of 1.6x.
This disparity warrants a cautious investment approach, especially considering Text’s competitive challenges and the inherent risks of OTC securities.
Future Outlook and Investment Implications
While Text has demonstrated significant growth and a strong dividend history, the changing dynamics of the customer service technology market necessitate a strategic re-evaluation.
The potential saturation of LiveChat’s growth and ChatBot’s underwhelming performance present critical hurdles for Text’s future trajectory.
Standing at a Crossroads
Text is at a crossroads, facing the dual challenge of sustaining growth in its flagship product, LiveChat, and catalyzing the growth of emerging products like ChatBot in a highly competitive market.
The company’s historical success and firm financial foundation are juxtaposed against the imperative for innovation and strategic differentiation.
As Text navigates this complex landscape, investors must closely monitor its ability to adapt and thrive.
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Kris is a finance consultant, content marketer, and speaker specializing in helping brands and business owners navigate complex concepts and decisions. Since earning her Finance and Accounting degree, Kris has spent over half a decade writing about financial and technological concerns of brands spanning different life cycles.