Guestlogix (GXI.V) Reports Strong Q1: Bullish Outlook

GXI reported Q1 today with revenue of $4.0 million, up 185% over Q1 2008 revenue of $1.4 million, with EBITDA of $0.8 million up from $0.1 million for Q1 2008. Total passenger trips under contract was reported at 824 million with 456 million deployed. Contracted passenger trips increased 17.1% sequentially from Q4 2008, and deployed passengers increased 15.4% over Q4 2008. Deployment is expected to accelerate over Q2 and Q3 as United, Continental, Saudi Airlines, and the undisclosed European carrier are brought online. Currently, the Company has 24 paying customers. Investors should consider Q1 results to be positive.

During the conference call, the Company disclosed that the entire $4.0 million in sales recorded during the quarter was recurring. The EBITDA margin was 21% and the Company disclosed that EBITDA margin is expected to increase to closer to 30% by fiscal year end. The Company disclosed that it expected monthly recurring revenue to increase to $2.0 million by year end, inferring that quarterly EBITDA should be in the $1.8 million range. If the Company is able to successfully conclude its ongoing litigation situation with Abanco (from Chicago), EBITDA would be positively impacted by approximately $0.25 million per quarter.

Please see my post on April 15th. The story remains fundamentally intact with possible acceleration related to future deployments, and roll-outs and adoption of merchandising programs.

The seven analysts are likely to find Q1 results and the general outlook to be positive. The Company is guiding EBITDA and sales generally higher than the mean estimate by analysts. Conservative analysts are likely to adjust forecasts upward. Bullish analysts are likely to remain bullish.

As a result, investors should see two trends occur. First, the variance among analysts is likely to tighten as some that were predicting lower annualized EBITDA and net income losses for the year are more likely to increase forecasts. This would infer that the mean target could be upgraded to a consensus target. Secondly, the mean forecasted target of $1.26 (in previous post) may increase by a few cents and become more of a consensus.

With tighter variances in forecasts by analysts, and possibly a higher consensus, investors may be more comfortable with the general direction of forecasts, and may be more inclined to buy the stock. Even with its remarkable run to todays price at $0.71 from $0.30 at the beginning of April, investors may take comfort that there is more upside in the stock.

To re-iterate: Guestlogix is positioned as the dominant platform for in-flight retailing in the North American market, and is the self-proclaimed de-facto standard. Over time, GXI could become the primary gateway to in-flight retailing for merchandisers in North America. This is a good spot to be for investors.

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