Guestlogix Pre-announces Record Q4 and FY2009: Margins Hint At Niche Dominance

Clearly Management is proud of its accomplishments for 09Q4. Total revenue for the quarter was reported at $5.2 million, up 86% over $2.8 million reported for 08Q4. For FY09, revenue came in at $18.6 million, a 128% improvement over $8.5 million reported for FY08. For the first time, the company reported Net Income for Q4 2009 at $0.2 million. EBITDA was reported at $1.7 million, a $2.7 million total turnaround from a loss of $1.0 million reported a year earlier.

More interestingly, 09Q4 revenue was a healthy 8.3% sequential improvement over 09Q3, inferring a steady build in revenue as the onboard solutions continue to be rolled-out and gain traction among airline passengers. With its strengthened balance sheet, via a $7.2 million bought deal earlier in 2009, the Company can begin to accelerate some of its deployments, hinting at further scaling during FY2010.

EBITDA margins came in at a record 32%, an impressive sequential improvement of 18.5% over 09Q3 margins reported at 27% (which should be considered strong, too). Without the benefit of final audited numbers, it is difficult to understand how much of the kitchen sink was thrown at the "ITDA" of EBITDA, and how much of the margins were impacted by currency fluctuations. However, recurring revenue EBITDA margins above 30% tend to re-inforce the notion that a provider is dominant in a niche, with minimal competitive pricing pressure. On the surface, it appears that GXI is beginning to head in that direction for onboard retailing systems.

It will be interesting to see if GXI's ongoing deployments can continue to offset seasonality in passenger traffic. They should. If the company can continue to demonstrate earnings leverage as it scales, them shareholders should be pleased because the company is likely to have the ability to throw off excessive cash once at maturity.

If Guestlogix continues to report high growth, high margin quarters, then investors may see some industry heavyweights begin to take notice of its dominance in the onboard retail infrastructure niche. As GXI becomes more of the "go-to" player for retail infrastructure among carriers, there is less threat of substitution as passengers become more "connected" on aircraft. As predicted by Management in the past, it is more likely that the GXI platform will become a gateway for commerce onboard. In the meantime, investors should look at getting in on the ride.

GXI is a RES Free Thinking Top 10 Tech Pick for 10

Disclosure: I do not own shares of GXI...yet :-)

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