TSXV:MCLD.H - Post by User
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Tdogzz18on Apr 25, 2019 8:02am
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Event: MCLD announced Q418 revenue and announced two..
Event: MCLD announced Q418 revenue and announced two.. Pro-Forma Q418 Coupled with Sizeable Acquisitions; The Unfair Advantage Gets Better; Raising PT
Event: MCLD announced Q418 revenue and announced two acquisitions. All figures are in C$ unless otherwise noted.
Investment Thesis: We continue to forecast strong shareholder returns as mCloud gains traction and scale, over time, as a global IoT connector of assets onto the AssetCare platform. MCLD had a transformational 2018 with three acquisitions announced (nGrain, Agnity and CSA) – we expect the remaining one (CSA) to close in short order. 2019 has witnessed further strategic acquisitions (Fulcrum, Autopro) which we expect to close in July. We maintain our Spec Buy rating and raise our $0.80 12-month DCF-based price target to $1.20.
Results: MCLD announced pro-forma Q418 revenue of $3.8M vs. $3.6M q/q and our $3.9M estimate. Gross margin was ~63% vs. 68% q/q – recall Q318 results contained lesser hardware sales than normal. MCLD has 28.8K assets connected as at 2018-end, up from 6.0K in 2019, surpassing its over 28K target for the year. Full financials are to be filed on or prior to April 30.
Guidance: MCLD issued guidance on its update call and noted that excluding the Fulcrum and Autopro acquisitions, full year 2019 revenue would have been between $18.5M-$21.0M with 5-8% Adj. EBITDA margin. Including Fulcrum and Autopro, full year 2019 revenue is expected to be $55M with 15% Adj. EBITDA margin. Longer term, MCLD expects 30% CAGR growth. Also noted was seasonality of Q1 down from Q4. MCLD expects to end 2019 with over 40K assets connected, excluding oil & gas assets.
Acquisition: MCLD has agreed to acquire Fulcrum Automation Technologies and Autopro Automation in a $43M transaction that will entrench MCLD as an asset management leader in the oil and gas sector. The transaction is subject to satisfactory completion of due diligence, the entering into of a definitive agreement satisfactory to the three parties, and a management information circular prepared in connection with a meeting at which approval of shareholders will be sought and is expected to close in July 2019. Fulcrum and Autopro bring $35M in revenue and $5.5M in EBITDA on a trailing twelve-month basis as of March 31. MCLD will finance the $43M payment with the issuance of 60M common shares and $18M in cash, to be raised via debt prior to closing. The acquisition follows the announcement in February where a targeted US$15M agreement with Fulcrum was signed to penetrate the oil and gas market. Via the acquisition, MCLD has the opportunity to be a one-stop shop for oil & gas operators, providing the distribution of software and hardware, a subscription-based analytics platform and real-time decision making.
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