How Mgmt Already Told You Q4 was Going to be HUGE!!!!This has to be one of my favourite secular growth candidates in such a hot area that no one has heard/cares about. Well that’s going to change…
Things ratcheted up this week with no response from the share price so I felt it was prudent for me to comment. I am not going to pretend to be a Blockchain expert but conceptually I love the idea of secured contract exchange through blockchain and the whitepaper made a lot of sense, with the development on the Microsoft platform validates the idea to me.
Updated Q4 numbers in investors presentation
You continue to see acceleration in the growth rate across all 3 of the key metrics I am looking for (Even since the last time they updated the presentation for Q4!!!). You now will see in Q4 three consecutive Qs of accelerating metrics (one of my key things I look for) which will lead to accelerated growth in the future.
ELD Subscribers: Q4-650 (116% QoQ), Q3-300, Q2-Launch
Total Subscribers: Q4-16,000 (13.21% QoQ), Q3-14,133 (10.52% QoQ), Q2-12,788 (2.58%)
Monthly Recurring Rev (MRR): Q4-400,000 (15.18% QoQ), Q3-347,296 (13.28% QoQ), Q2-306,595 (3.61% QoQ)
With a TTM revenue now of 9.6M this makes for a Q4 Revenue figure of 1.8-1.9M est with Subscription Sales growth accelerating for the 4th consecutive Q in a row (Q4-35%est., Q3-25%, Q2-12%, Q1-5%). This recurring SaaS revenue which has been associated with margins in the 60-70% range and are so valuable the ramp in these numbers are not being respected by the market leading up and into the ELD launch.
2018 is going to be a huge year with the rollout of ELD product and you wont even need another large hardware sale to put up revenue growth on a YoY basis. The ELD regulation didn’t even go into effect until 2018 so all this growth is preceding that actual regulatory change. Pipeline of ELD business will be huge and is huge. ELD Sales funnel for 2,500+ subscribers, ELD Pilots 1,000 subscribers, Current ELD customer expansion 1,000+ subscribers.
That is an opportunity set going into 2018 of 4,500+ subscribers from its current Q4 ELD subscriber base of 650 or 7x their current subscriber base. That is an incremental MRR opportunity of $200,000/month just with that alone.
Projecting out in 2018 I am looking for 6.5M Sub Sales & 3M Hardware growing to 10M & 4M in 2019 which I think could be real conservative if the ELD rollout goes as well as I think it could. The ELD business alone I believe could be a 10M annual SaaS business in short order as the industry shifts to meet regulatory compliance.
Channel Partners and Collaborators
The ability for this small 20M market cap name to boast channel partners such as Honeywell, Telus, Bell, Microsoft all the while being selected for Microsoft Azure cloud platform/commercial partner program and a strategic investment from the Mullen Group creates an opportunity set that dwarfs the current market cap of this company.
On Valuation
Using a 5x1 Valuation (5x recurring SaaS revenue and 1x hardware) gets me to a target price of aprox 1.80/share on 2019 numbers or 120% upside from current levels. Personally I think the growth profile and enterprise IoT space is real hot and given the relationships they have already established with many large players, I believe this company could get taken out in 2018.
LONG