Logibec (LGI.TO) Reports a Solid Q4 and Full Year.

For the base five years, the team of Claude Roy and Marc Brunet have been quietly building a solid Canadian success story in the North American health care technology sector.


With roots in Hospital Information Systems in the Quebec market, Logibec has been making smart acquisitions in the US market over the past few years that now makes LGI a player in the American long-term/acute care facilities market. As the baby-boomers enter geriatric age over the next dozen or so years, this is a good spot to be. Management has really tried to focus on strengthening its revenue streams and leverage technology infrastructure by delivering single-platform, software-as-a-service (and related ancillary services) via long-term, multi-year contracts. The earnings performance of this stock appears to support the leverage gained from this strategy.


Because the company tends to use large credit lines to make acquisitions, there was some investor skittishness entering 2009 regarding the credit markets and Logibec's balance sheet. As a result, the stock was trading at a bargain, well below $14.00. Now it trades in a range around $18.00.

Here are some full-year performance highlights:

• Grew revenue to $73.3 m FY 2009, up 15% from FY 2008 revenue of $67.6 million.
• Operating income grew to $27.7 million up 22% from FY 2008 operating income of $22.7 million.
• Net income grew 37% to $10.3 million or $1.08 fd EPS, versus FY 2008 net income of $7.7 m or $0.79 EPS.
• Operating margins increased to 36.3% of revenue from 33.6% reported in FY 2008.
• Recurring revenue represented 90% of all sales.
• Due partly to the acquisitions made during 2008 of Achieve and QuickCare, U.S. revenue grew 30% in 2009 to $39.9 million versus $30.1 million the previous year. For FY 2009, operations in the U.S. market contributed 54% of total sales.
• Cashflow from operations totaled $22.3 million for the year.

Logibec has $1.5 million of cash on its balance sheet as at September 30, 2009. It has used most available operating cashflow to pay down debt that it used for acquistions. During 2009, the company paid down $24 million against its line of credit.

Q4 Highlights

• Revenue was reported at $18.6 million versus $17.4 million reported for Q4 2008 up 7%. During Q4 2008, there were some one-time revenue contracts during the quarter.
• Operating income was $7.6 million up 27% from $6.0 million reported for the previous quarter.
• Operating margin was 40.8%, up substantially from an already impressive 34.4% reported for Q4 2008.
• Net income was $3.0 or $0.32 EPS versus $2.4 million or $0.24 EPS, up 24% from the previous year.

The stock as reacted positively to its financial report. With highly predictable recurring revenue and high technical leverage expressed via exception earnings margins, investors should continue to see solid earnings and cash flow growth continue over the next few quarters. Institutional investors that own LGI shares tend to hold it for a long time, and with a limited float, the stock is not highly liquid. It may be a buy-forget-surprise stock.

Disclosure: I do not own shares of LGI