New post by Gerry Wimmer
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TOP IDEAS: AirIQ Inc.’s (TSXV: IQ) business operations show momentum and the numbers—both top and bottom line —prove it. The stock is up 375% and still holds value.
Over the years, if you track Investorfile’s blog posts about AirIQ, we were steadfast bullish about this Company as a small cap value investment. That said, the current stock price of AirIQ is up 375 % in value since we first recommended the Company as one of its Top Ideas (See: AirIQ is a technology company small in size but the stock is big in value). It should come as no surprise that this investment blog remains bullish on AirIQ’s prospects going forward for growth investors.
AirIQ Inc. (TSXV: IQ – C$0.38) has operated in the growing telematics industry for over 25 years, as the Company has been providing Global Positioning Service (GPS) solutions to customers throughout North America. The Company considers itself as a pioneer in IoT-based asset management solutions.
AirIQ offers an intuitive web-based platform that provides fleet operators and vehicle owners with a suite of asset management solutions to reduce cost, improve efficiency and monitor, manage and protect their assets. Services are available online or via a mobile app, and include instant vehicle locating, boundary notification, automated inventory reports, maintenance reminders, security alerts and vehicle disabling and unauthorized movement alerts. Therefore, its solutions allow commercial businesses to reliably, effectively and efficiently monitor assets in near-real time.
The Company’s solutions are mixed fleet-capable and provide fleet reporting, maintenance, compliance, safety and analytics, utilizing multiple hardware options, including a fully integrated video telematics camera solution and a battery-powered solution for non-powered assets.
Last month, the Company reported its annual financial results for fiscal 2023 (which ended on March 31st). Total revenues for the year were up 16% to C$5.05 million, of which about C$4 million is deemed recurring revenue. (It should be noted that when AirIQ wins orders for its suite of asset management solutions, it has two distinct revenue components. The hardware component is revenue which is earned on delivery, while the GPS and video surveillance monitoring is recurring revenue.) The recurring portion of revenue was up 13% from the year prior.
During 2023, AirIQ earned EBITDA margins at a rate of about 21% of revenues.
Excluding a one-time deferred income tax recovery, net income was $863,236,which was an increase of 52% from the prior year period. The net income equates to about C$0.03 earnings per share for fiscal 2023.
While our optimism about the Company’s future is partially based on AirIQ’s fiscal 2023 results, last week the Company reported Q1 results for fiscal 2024,which headlined record recurring revenue and net income. This provides us more evidence as to the momentum which is occurring in AirIQ’s business operations.
In Q1, the Company’s total revenue increased by 42% to about C$1.8 million, of which recurring revenue was C$1.1 million, up 16%. The record-setting quarterly net income for the Company was $350 thousand, or C$0.012 per share. EBITDA margins increased to 26% in this quarter.
Encouraged by Q1 results, we reconnected with the Company’s CEO to ask about the recent sales trends. We were informed by the CEO that there has been a notable increase in the number of thefts of high-value assets in recent times, which has led to an increase in investments by its customers in the asset protection solutions AirIQ offers.
While all of AirIQ’s key performance metrics showed increases compared to the year prior, the Company also continues to maintain a very strong balance sheet and working capital ratio. As of June 30, 2023, AirIQ held C$2.8 million in cash and had no debt.
Investorfile acknowledges that AirIQ’s stock price today is trading near its all-time highs. But, based on Q1 financial results, the growth in the recurring revenue base and outlook, we believe there is still value in the stock to be had. We calculate that today the stock trades at valuations that are less than 10 times earnings and 5 times Enterprise Value (EV) to EBITDA. That said, AirIQ’s stock can support even higher trading prices which is good news for small cap investors. For us, AirIQ was always a buy and still is today.
AirIQ has approximately 29.3 million shares outstanding.