RE:RE:RE:RE:PredictionGood discussion.
Not sure how STC transitions to a 95% plus SaaS business anytime in the forseeable future when their pitch to customers is STC is a one-stop shop for clients: All needed hardware installation and set-up plus a wide array of CaaS software modules from which to choose to customize their optimal CaaS solution with customer support and troubleshooting - all provided by a single company.
STC acquires hardware components and assembles their own hardware solutions tailor-made for their clients to go along with the software modules of their choice. I suppose if they continue to grow their CaaS business, the hardware component of total revenues will strink as a % of total revenue, but the margins on their hardware sales may remain very thin and perhaps close to zero as clients pay for the hardware too. Perhaps they can set a goal to just break even on the hardware sales and installation (or use it as a loss leader) and focus their margins on the software modules, much like an ISP may offer you a free modem and free installation because they'll make their money on your monthly Home Internet charges....?
Not saying the quarter was terrible. I simply took a look at the results and tried to determine how the market will likely react, and I think it will react negatively, justified or not. STC is still paying the price for purchasing STS for top dollar at the height of the COVID small cap tech stock run-up, and it appears they paid full freight for NetFortis as well when all compensation is considered. I think Wignall sees the need to get bigger as consolidation of the CaaS sector seems to be the future of the sector and he wants STC to be one of the few big remaining players left, especially as a one-stop shop. That seems logical, but there's a lot of short-term pain being experienced by shareholders over and above what the average share price drop was for Canadian small cap tech names in general over the past couple of years.
Today's share price movement and close will be very interesting to watch. Hope it isn't too severe, and who knows. the market may read things differently that I do and surprise me, or Canadian small cap tech names could go on a big run today and blunt the impact of STC's earnings release.....?
GLTA