Moated Motus Madness

Company: Motus provides end-to-end, proprietary software to simplify the reimbursement and management of vehicle, device and remote work costs, and is a pioneer of the IRS-approved fixed and variable rate (FAVR) reimbursement methodology.

Revenue Model: software licensing fees, transaction-based fees, and subscription-based pricing

Recent events: Following its acquisition by Thoma Bravo in 2018, Motus merged with Runzheimer, the creator of the flagship FAVR product and provider of data that underpins the annual Internal Revenue Service (IRS) business mileage standard.

Customers: Motus serves more than 280,000 users/ ~2000 customers including Papa John’s, Yuengling Brewery, Kellogg Company and Coca-Cola Bottling Company United

Underlyings tailwinds:

1. Employees work more flexibly than ever before. The rise of remote work and field-based operations has led to a greater reliance on vehicles for business purposes, creating a higher demand for efficient vehicle management solutions. Fleet solutions have flourished into a $2+ billion industry.

2. Cost optimization: Organizations are actively seeking ways to reduce costs, and efficient vehicle management can contribute to significant savings through optimized reimbursement, reduced administrative burdens, and improved operational efficiencies.

3. Regulatory environment: Strict tax and labor regulations governing mileage reimbursement necessitate accurate tracking and reporting, driving companies to seek automated solutions like Motus.

Thesis:

1. Motus generates annual recurring revenue of more than $120 million.

2. Motus has developed a robust technology platform that offers accurate mileage tracking and innovative features. Its advanced algorithms and integration capabilities provide a superior user experience and ensure compliance with regulatory requirements.

3. Motus' technology platform is highly scalable, allowing for easy expansion into new markets and the ability to serve larger enterprise clients.

4. Thoma Bravo’s continued stake in the business is a strong sign of confidence in the firm’s performance, ability to take on leverage, and grow.

Financing:

1. $390 million first-lien term loan (L+400, Floor 0.5%, $99.5, 7 Year, B-, 4,67% YTM,

2. $50 million first-lien revolving credit facility due 2026. The revolver will have a springing net first-lien leverage covenant.

3. Privately placed $135 million second-lien term loan due 2029.

Value creation:

1. Geographic expansion: Motus currently operates primarily in North America. By leveraging Permira's global network and resources, Motus can expand its presence internationally, tapping into new markets with similar demand drivers.

2. Product innovation: Continued investment in R&D will enable Motus to enhance its technology platform, develop new features, and maintain a competitive edge. Innovations such as integration with fleet management systems and predictive analytics can drive further value for clients.

3. Strategic partnerships: Collaborations with fleet management companies, automotive manufacturers, and software providers can open doors to new customer acquisition channels and provide cross-selling opportunities.

Risks:

1. Motus operates in a competitive industry, and there is a risk of increased competition from existing competitors as well as new entrants (Cardata, Everlance, MileIQ, Zoho Expense, Fyle, SAP Concur)

2. Changes in tax laws, labor regulations, or reimbursement policies could affect the demand for its services or increase compliance burdens for both Motus and its customers. Additionally, economic downturns or shifts in industry dynamics could impact businesses' willingness to invest in vehicle management and reimbursement solutions. (Ex GS taking away reimbursables)

3. AI Adaptability: Invest in R&D, and adapt its platform to meet changing customer needs.

Sources: CapitalIQ, Permira, Thoma Bravo, Bloomberg, WSJ