Initial take: Exsitec

Whatever digital tools you may need to grow your business, Exsitec got you covered. Founded in year 2000, Exsitec helps Nordic mid-sized enterprises to digitalize their business by combining and integrating hand-picked software solutions from well established vendors into a well-oiled entirety. The company has found its sweet spot within the value chain, being the middleman between its ~4000 customers and its 15+ software vendor partners. Acting as the extended sales organization of the software vendors, the company reaps the benefits from the software vendors large investments into R&D via a rev-share model. This allows software vendors to both scale more rapidly and to focus more on product development, while the end customer gets a single point of contact for all its digitalization needs. Hence, Exsitecs positioning within the value chain is a win for everyone involved, yielding both satisfied customers and suppliers as the company grows, a network effect hard to compete with.

The future success of the company is dependent upon the following:

1) Improved operational efficiency in certain acquired business units.
After an acquisition made in Norway of a business similar to Exsitec’s, operational inefficiencies have dampened the profitability of the entire group. However, the problem in the Norwegian business entity looks to be highly temporary, and there are already signs of a turnaround taking place.

2) Continued acceleration of software subscription revenue.
With an average rev/share of 50 %, recurring net revenue from software subscriptions have increased with a CAGR of +81 % for the past three years, both through selective M&A and by growing organically. Continued growth in software revenue is a major key in realizing the economies of scale inherent to the business model, as this revenue stream alone holds a gross margin of 100 %.

3) Skills supply.
As growth in revenue from software subscriptions is dependent on the consulting business, finding, training and retaining employees who can fulfill the needs of the customer is extremely important. Exsitec has had many successful trainee programs in the past, but the company is very reliant on being an attractive employer. The company has previously experienced bottlenecks in growth due to being understaffed.