Still looking for a double. GLTA
Desjardins Securities analyst Jerome Dubreuil sees Quisitive Technology Solutions Inc.’s (QUIS-X) valuation as “compelling,” pointing to his expectation for double-digit growth and “long-term tailwinds” in IT services.
On Monday, the Toronto-based Microsoft solutions provider and payments solutions provider reported fourth-quarter 2022 revenue of $45.9-million, narrowly below the Street’s expectation of $46.3-million. However, adjusted earnings before interest, taxes, depreciation and amortization of $8.1-million was better than anticipated ($6.6-million).
“We highlight the beat was supported by a $0.5-million one-time item, as well as by PayiQ-related expenses, which were $1-million lower than we had anticipated as management better matched the timing of PayiQ expenses with future revenue generation,” he said. “We expect higher PayiQ expenses to resume in the coming quarter.”
In a research note titled QUIS is compelling as is—PayiQ is gravy, Mr. Dubreuil said management “adopted a more cautious tone for next quarter” as it continues to ramp up PayiQ, its cloud-enabled payments solution platform. That led him to reduce his forecast for both fiscal 2023 and 2024.
“QUIS’s cloud operations generated revenue of US$32.3-million in 4Q22, missing our estimate of US$34.6-million, with organic growth of 8 per cent year-over-year,” he said. “Management also guided to cloud revenue in 1Q23 which could be weaker than we had anticipated as ‘several customers delayed projects while they evaluate the macroeconomy and their own 1Q results.’ Management nonetheless anticipates double-digit growth in cloud for 2023 as it has strong confidence in the pipeline ahead. We were expecting 14.5-per-cent organic growth in 2023 and have adjusted our forecast to 10 per cent.”
“Payments revenue of $13.6-million beat our $12.2-million, with impressive organic growth north of 30 per cent. In July, management expects to launch PayiQ with some of its clients who require only Visa and MasterCard certifications, providing an opportunity to demonstrate the platform’s payment processing capabilities on a larger scale. The ramp-up of the deployment is, however, expected later this year, with a full launch expected in 3Q23. Material revenue contribution from the platform is now expected to materialize in 2024. We have reduced our PayiQ forecast.”
To reflect his lower forecasts and that “the significant PayiQ contributions are now more distant,” Mr. Dubreuil trimmed his target for Quisitive shares to $1.10 from $1.40, reiterating a “buy” recommendation. The average is $1.51.
Elsewhere, Scotia Capital’s Divya Goyal cut her target for to $1.10 from $1.50, keeping a “sector outperform” rating.
“Quisitive released Q4/22 and F2022 results, broadly in line with our and consensus estimates,” she said. “On the conference call this morning, management provided a detailed update on the Cloud and Payments Solutions business. While both lines of business are projected to see growth in the medium to long-term, management indicated some softness in Q1/23, primarily due to current macroeconomic circumstances, which have resulted in decision delays and elongated sales cycles especially across larger projects. QUIS continues to report strong progress towards PayiQ commercialization expected to materialize in Q3/23.”