Four years ago Sylogist was running about $40M in annual revenue. Today it is running about $65M in annual trailing revenue. This seems to be reasonable growth of $25M - but let’s dig a little deeper.
In the past four year Sylogist has made 4 acquisitions that, according to their press releases, added a total of $22M+ revenue. Now the organic growth doesn’t sound so great - revenue increased only by $3M or about 5% over 4 years.
During the 4 years period the company benefited from a currency tailwind of more than 10% (US dollar rising from $1.20 to $1.35 CDN) The majority of Sylogist business comes from the US. About $5M of the current $65M revenue comes from favourable exchange gains which means the organic revenue growth is actually negative. Add to that the normal pricing increases of products and services over 4 years and we find the real organic revenue growth over 4 years is actually MINUS 20%.
Four years ago SYZ, according to analysts, was growing modestly with very high profitability, a large funded dividend and a strong balance sheet. The stock price was around $11-12.
Today the company has negative organic growth, virtually no dividend or profitability and a debt encumbered balance sheet. Revenue from the large R&D spend on new product development is virtually non-existent. It is rapidly becoming a service business (staffing levels have tripled in 4 years) with some product revenue dependent on Microsoft (who will receive a large share of any new product revenue). The share price has fallen as low as $4 and has recently rallied to $9 based on analysts' hype.
The bottomline is studying the numbers over a longer period shows a different trend than the Company has claimed. The real question now is “how long will the Board keep the turnaround CEO, Wrong Way Wood, in office”?