Q4 Preview - 180% Gross Profit Growth & Cashflow GrowthI have bounced around in my head on this one after that blowout Q3 this summer after watching the stock double just to as of yesterday retrace that entire move, I cant pass that up I have loaded the boat back up down here especially after the consistent insider buying in August and the explanation of GMV to overall business growth.
This management team has done a great job of turning around this business and getting it to a cashflow positive position in only 9 months and not sacrificing top line growth after the significant Tourbuzz acquisition and they or the stock is not getting credit for the turnaround.
Lets Dig in;
Insider Buying
Since the summer, insiders have bought a total of 814,190 shares in the open market at a price ranging from 0.06 – 0.08/share with over 700,000 shares of that being above the current market price of the stock.
They clearly have a better look at current business conditions than someone sitting on the outside like me just watching GMV tick over on a daily basis.
I got to think the take rate on higher margin mission critical services that would not show up in GMV must be continuing to gain adoption at a strong rate.
Gross Merchant Volume
I owe a Mia Culpa here, I got this one totally wrong, I got real bearish when September when negative until management came out to tell me I was dead wrong.
$2,536,000 for the Quarter up 77.12%. (July up 189.74%, August up 146.45% & September down 3.97%)
The company did a great job laying out the changes in the calculation with regards to the sun-setted line of credit services representing $1.5M of GMV in the past 12 months that brought in minimal revenue and was extremely low margin. If we look on an annualized basis this would represent close to 15 – 20% of total GMV in the previous calendar year.
Therefore, if we then normalize the September figure for the discontinued line of credit services we get to a figure of $940,000 - $998,750 or $969,375 at the midpoint or close to 16.5% YoY growth which is all organic growth. – pretty darn good.
This line of credit services changes and the misunderstanding around it is creating quite the buying opportunity IMO. I couldn’t pass up the stock <0.07/share.
Now lets get into Q4 Estimates;
Revenue
TARGET: $887,600 – This works out to the conversion on GMV of 35% on that $2,536,000 which is in line with Q3 where the GMV conversion into revenue was 35.82%.
More important here is Gross profit dollars, which takes out the line of credit services. Management has done a great job of focusing and transitioning the business model to more high margin recurring business model that is very scalable.
Perfect example is the virtual assistant service they have rolled out. $79/month and +6.5%/invoice. This style of high margin scalable with volume type of services are exactly where the business has been focusing on and what is going to drive the bottom line.
Gross Profit Target - $754,460 – this would be up 183.45% YoY. If you get that number… stock is going higher.
Profitability
TARGET: $288,931 EBITDA – The turnaround here has been strong given the acquisition in Tourbuzz and the ability to do this while still continue to grow the top line has been real impressive.
If we just look at the Operating Expenses the last 4Qs since Tourbuzz has been acquired;
Q4 FY18 - $1,023,410
Q1 FY19 - $1,180,443
Q2 FY19 - $702,689
Q3 FY19 - $554,440
Q4 FY19 - $565,529 (Estimated)
In a year they have been able to cut OpEx IN HALF all the while continuing to grow the top line. Just amazing, great example of the scalability of these SaaS based platform businesses.
Now that they have their cost structure covered with a predictable and sticky revenue stream they can focus on the next leg of growth and each incremental dollar of revenue starts to drop right down the income statement to profitability.
The company took their medicine and cut some of the lower margin part time photographers to focus on the high lifetime value full time photographers and its starting to pay off.
Down here under 0.07/share… I couldn’t pass it up
LONG