Yesterday, Redknee announced its second major contract in two days, and the third in less than a month. See the post from June 6th.
The trend for Redknee continues to be international with the June contract located in the Middle East, Monday's multi-million dollar contract with a Tier1 operator in Europe, and then yesterday's announced contract in Pac-Asia. Investors should expect this trend to continue as operators in these regions look for mobile infrastructure and middleware solutions to support significant growing demand for mobile data services. In many parts of EMEA and Pac-Asia, wireless devices will be the dominant access point to the internet and related data. As operators expand billing to accomodate, Redknee should be among the vendors to benefit, and management at RKN appears to be executing well to capture market share.
Mobile infrastructure should continue to be a significant area of growth over the coming years as operators worldwide attempt to manage some of the emerging complexities associated with billing, provisioning, and capacity for 3.2 billion subscribers worldwide.
With that in mind, there are a handful of small-cap public Canadian companies to watch including (in alphabetical order):
Bridgewater Systems (BWC.TO)
Dragonwave (DWI.TO)
Redknee (RKN.TO)
Wi-Lan (WIN.TO)
Disclosure: I own shares of BWC. I do not own shares of DWI, RKN, or WIN.
Showing posts with label Contract Announcements. Show all posts
Showing posts with label Contract Announcements. Show all posts
6/16/09
Active Control Technologies (ACT.V) Contract Announcement
Earlier today, ACT announced that it has won a $1.4 million net new contract for two underground mines somewhere in the United States. According to management, this contract increases its current backlog, and will not be fully deployed until after its fiscal year-end (July 31). As a result, investors should expect revenue to be recognized during Q1, FY 2010.
Management believes that a small portion of the factored pipeline could turn into additional backlog before the end of its fiscal year, which is modest progress. The Company has clarified the definition of its factored pipeline as "written quotes". Management believes that "written quotes" total more than $20 million in potential contract value. However, it is difficult to understand how much of that total will actually translate into revenue during fiscal 2010.
As expected, the U.S. Federal Government has relaxed some of the guidelines for compliance to the MINER Act, allowing more time for mine operators to select vendors, and to substitute vendors later. As well, MSHA still has to approve the emergency communications and response plans submitted as of yesterday. As a result, investors should expect that a portion of quoted contracts may not be awarded for up to six months from now.
Due to the relaxation of various guidelines for compliance, competition for contracts is likely to intensify over the next few months. Although ACT appears to offer clear competitive differentiation in terms of throughput, breadth of offering, and MSHA certification, it has not yet developed local relationships (which can run generations deep). As a result, even with its technical superiority, investors should expect ACT to offer pricing discounts to win some business. As a result, gross margins may be impacted.
The value of the backlog has been clarified by management. The $6 million value cited earlier includes both contracted deployments, and future indicated deployments by current customers. As a result, prior to today's new contract announcement, the $5.2 million backlog (the company probably recognized approximately $0.8 million of the backlog since it last disclosed) was split approximately 50/50 between current and future indicated deployments. In essence, the current backlog was approximately $2.6 million prior to today. The new $1.4 million contract increases the current backlog to approximately $4.0 million. Without this understanding, expectations for near-term revenue recognition may have been too high.
For a more accurate reflection of near-term performance, investors should measure the current pipeline, and ignore/discount future indications by current clients. Analysts should continue to get clarification from Management on this measurement going forward.
The Company continues to find its footing as it begins to commercialize. The rubber is now hitting the road, and management must prove execution.
Disclosure: I own shares of ACT
Management believes that a small portion of the factored pipeline could turn into additional backlog before the end of its fiscal year, which is modest progress. The Company has clarified the definition of its factored pipeline as "written quotes". Management believes that "written quotes" total more than $20 million in potential contract value. However, it is difficult to understand how much of that total will actually translate into revenue during fiscal 2010.
As expected, the U.S. Federal Government has relaxed some of the guidelines for compliance to the MINER Act, allowing more time for mine operators to select vendors, and to substitute vendors later. As well, MSHA still has to approve the emergency communications and response plans submitted as of yesterday. As a result, investors should expect that a portion of quoted contracts may not be awarded for up to six months from now.
Due to the relaxation of various guidelines for compliance, competition for contracts is likely to intensify over the next few months. Although ACT appears to offer clear competitive differentiation in terms of throughput, breadth of offering, and MSHA certification, it has not yet developed local relationships (which can run generations deep). As a result, even with its technical superiority, investors should expect ACT to offer pricing discounts to win some business. As a result, gross margins may be impacted.
The value of the backlog has been clarified by management. The $6 million value cited earlier includes both contracted deployments, and future indicated deployments by current customers. As a result, prior to today's new contract announcement, the $5.2 million backlog (the company probably recognized approximately $0.8 million of the backlog since it last disclosed) was split approximately 50/50 between current and future indicated deployments. In essence, the current backlog was approximately $2.6 million prior to today. The new $1.4 million contract increases the current backlog to approximately $4.0 million. Without this understanding, expectations for near-term revenue recognition may have been too high.
For a more accurate reflection of near-term performance, investors should measure the current pipeline, and ignore/discount future indications by current clients. Analysts should continue to get clarification from Management on this measurement going forward.
The Company continues to find its footing as it begins to commercialize. The rubber is now hitting the road, and management must prove execution.
Disclosure: I own shares of ACT
4/30/09
Active Control Technologies (ACT.V) Begins to Burn Backlog
Tdoay the Company announced that it would begin deploying two mines next week (Kentucky and Illinois) in the wake of MSHA approval of its entire underground wireless network and peripherals. To review, the Company has indicated in past investor conference calls that it had approximately $6 million of backlog Purchase Orders pending MSHA approvals. MSHA approvals were granted last week.
We estimate that the average size of a typical deployment, measured as revenue, is approximately $400,000 with approximately 25% per year in recurring maintenance. Essentially, investors could conclude that the Company has burnt just under 15% of its declared backlog. The Company has been working diligently to structure favorable upfront payments, which could be higher than 50%, which may benefit its cash position as the backlog is deployed.
Management has aligned its supply chain to receive payments on the same terms and conditions as negotiated by ACT with its clients. As a result, the Company utilizes cash in a relatively efficient manner.
Investors should view the speed of backlog burn as positive, and the stock is likely to respond positively today.
Disclosure: I own shares of ACT
We estimate that the average size of a typical deployment, measured as revenue, is approximately $400,000 with approximately 25% per year in recurring maintenance. Essentially, investors could conclude that the Company has burnt just under 15% of its declared backlog. The Company has been working diligently to structure favorable upfront payments, which could be higher than 50%, which may benefit its cash position as the backlog is deployed.
Management has aligned its supply chain to receive payments on the same terms and conditions as negotiated by ACT with its clients. As a result, the Company utilizes cash in a relatively efficient manner.
Investors should view the speed of backlog burn as positive, and the stock is likely to respond positively today.
Disclosure: I own shares of ACT
4/15/09
Guestlogix (GXI.V) continues to make progress
Earlier today, Guestlogix announced a contract with KLM, representing 39 million passenger trips in Europe. It is part of the Air France/KLM group.
This is the most recent of a string of announcements that includes a contract with Continental Airlines in the US, a new in-flight ticketing agreement with Heathrow Express, along with an extension of its In-Flight Box Office solution to include a major theme park operator. Although the Company has not disclosed the operator, there is a possibility that it may be Disney (DIS).
After trading as low as $0.30 as late as April 6, 2009, the shareprice has shot to $0.50 over the past week. With seven analysts covering the story, investors may be taking notice of the progress. As the Company continues to rollout its contracted backlog, quarterly revenue should continue to be lumpy. Sales and earnings were below expectations for Q4, 2008 because a couple of expected roll-outs slipped into Q1, 2009. When the Company reports Q1, 2009, the slippage from Q4 may be reflected in good performance for the quarter. Quarterly performance should continue to show volatility throughout 2009 as the Company continues to deploy major airlines. Once major rollouts are completed, revenue should be easier to forecast because most revenue (starting in FY 2010) should be recurring.
With respect to the full-year, the variance among analyst forecasts is high for 2009. However, the mean forecast for sales appears to indicate more than a doubling of sales over 2008 to around $19.5 million (adjusted). EBITDA forecasts infer a mean of approximately $5.8 million, with similar high variance in estimates. With the current shareprice at $0.50, the FYE mean EV/EBITDA multiple calculates to approximately 3.8x, which is 47% below the current of the mean for the Canadian technology sector. For a high growth Company with a near regional monopoly in North America, this multiple may seem low to some investors.
Based on its current trajectory, the Company may be generating cash and net income by H2 of FY 2009. The amount of free cashflow generated would depend upon how much is re-invested by Management to extend its retail offerings, and expand its European footprint both in airlines and rail. Investors should expect Management to continue to add retail and service offerings in order to position itself as a defacto on-board retailing platform for the airline industry, starting with North America. Incredible leverage can be gained by becoming a primary gateway to airline passengers for retailers, and the primary way to do that is to deliver more retail services through the platform.
Guestlogix has willing partners among airlines because an airplane is a closed system. By controlling access to retail services through the GXI gateway, airlines should benefit from new, previously unattainable revenue streams related to entertainment, retailing, and destination services. An analogous relationship would be between mobile app stores and mobile carriers. The app stores are the gateway for developers, and the mobile carrier networks are the closed system. All parties benefit as long as the offerings are perceived as valuable by consumers.
Investors may be reticent to invest in a stock closely related to the airline industry. There is a pervasive investor fear of bankruptcy associated GXI's client base. However, most of the major American carriers have restructured through bankruptcy in the past and have maintained and even expanded operations during restructuring periods. As a result, the probability that GXI's large global carriers will cease to operate any time soon are low. Notwithstanding, GXI owns all components of its network, which means that it can reallocate assets to other deploying clients if an airline shuts down. The Company has already done this in the past.
The lowest analyst target is nearly a double from the current price and the mean is $1.26, which suggests that there is potential strong upside to the stock price according to analysts. Although there may be still be a couple of minor executional stumbles as the Company scales, Management continues to make significant progress in a tough market. Guestlogix could ultimately become to airline carriers what mobile app stores are to mobile carriers.
I do not own shares of GXI, DIS, or any airline.
This is the most recent of a string of announcements that includes a contract with Continental Airlines in the US, a new in-flight ticketing agreement with Heathrow Express, along with an extension of its In-Flight Box Office solution to include a major theme park operator. Although the Company has not disclosed the operator, there is a possibility that it may be Disney (DIS).
After trading as low as $0.30 as late as April 6, 2009, the shareprice has shot to $0.50 over the past week. With seven analysts covering the story, investors may be taking notice of the progress. As the Company continues to rollout its contracted backlog, quarterly revenue should continue to be lumpy. Sales and earnings were below expectations for Q4, 2008 because a couple of expected roll-outs slipped into Q1, 2009. When the Company reports Q1, 2009, the slippage from Q4 may be reflected in good performance for the quarter. Quarterly performance should continue to show volatility throughout 2009 as the Company continues to deploy major airlines. Once major rollouts are completed, revenue should be easier to forecast because most revenue (starting in FY 2010) should be recurring.
With respect to the full-year, the variance among analyst forecasts is high for 2009. However, the mean forecast for sales appears to indicate more than a doubling of sales over 2008 to around $19.5 million (adjusted). EBITDA forecasts infer a mean of approximately $5.8 million, with similar high variance in estimates. With the current shareprice at $0.50, the FYE mean EV/EBITDA multiple calculates to approximately 3.8x, which is 47% below the current of the mean for the Canadian technology sector. For a high growth Company with a near regional monopoly in North America, this multiple may seem low to some investors.
Based on its current trajectory, the Company may be generating cash and net income by H2 of FY 2009. The amount of free cashflow generated would depend upon how much is re-invested by Management to extend its retail offerings, and expand its European footprint both in airlines and rail. Investors should expect Management to continue to add retail and service offerings in order to position itself as a defacto on-board retailing platform for the airline industry, starting with North America. Incredible leverage can be gained by becoming a primary gateway to airline passengers for retailers, and the primary way to do that is to deliver more retail services through the platform.
Guestlogix has willing partners among airlines because an airplane is a closed system. By controlling access to retail services through the GXI gateway, airlines should benefit from new, previously unattainable revenue streams related to entertainment, retailing, and destination services. An analogous relationship would be between mobile app stores and mobile carriers. The app stores are the gateway for developers, and the mobile carrier networks are the closed system. All parties benefit as long as the offerings are perceived as valuable by consumers.
Investors may be reticent to invest in a stock closely related to the airline industry. There is a pervasive investor fear of bankruptcy associated GXI's client base. However, most of the major American carriers have restructured through bankruptcy in the past and have maintained and even expanded operations during restructuring periods. As a result, the probability that GXI's large global carriers will cease to operate any time soon are low. Notwithstanding, GXI owns all components of its network, which means that it can reallocate assets to other deploying clients if an airline shuts down. The Company has already done this in the past.
The lowest analyst target is nearly a double from the current price and the mean is $1.26, which suggests that there is potential strong upside to the stock price according to analysts. Although there may be still be a couple of minor executional stumbles as the Company scales, Management continues to make significant progress in a tough market. Guestlogix could ultimately become to airline carriers what mobile app stores are to mobile carriers.
I do not own shares of GXI, DIS, or any airline.
2/12/09
More newsflow from GXI...and implications.
Yesterday GXI announced its second rail deal and first one in North America with the Atlantic City Express Service (ACES). ACES is an express rail service offered by Ceasars Entertainment and Borgato that runs from Penn Stations in New York and Newark to Atlantic City and is operated by New Jersey Transit. Like the deal in the UK, it is small, but it is the catalyst for a couple of key developments that may have longer reaching positive impact on future performance:
1. Transactions are completed with real-time authorization for the first time. Due to current communications restrictions, all airline deployments to date have been deployed as store-and-forward transactions, executed upon landing. As a terrestial service, GXI was able to develop real-time solutions. It has been deployed in poroduction for a few weeks already, so it works. As real-time inflight communications links emerge, work with the rail providers should make it fairly straightforward to move to real-time inflight authorization. With real-time authorization, transaction values could be increased substantially. "Sir, would that be coffee, tea, or a BMW?" (just kidding...kinda)
2. As a result of this deal, GXI now has a partnership with another significant caterer/logistics manager beyond its highly successful relationship with LSG SkyChefs. Compass Group is C$3.4 billion equivalent hospitality operation that provides food and logistics services to ACES. With its extensive hospitality and resort catering services, there could be future alignment for more destination services to be sold onboard.
With its flow of announcements, GXI continues to demonstrate progress for investors. Based on my current forecasts, the operating break-even point is likely to be somewhere in the $1.6 to $1.7 million monthly runrate. On January 22nd, the company provided guidance that it should be exiting Q1, 2009 with a run-rate of approximately $1.5 million. With over 300 million passenger trip in its disclosed backlog, investors could infer that starting sometime in Q2, the Company may hit its breakeven inflection point. Deployment delays could create some variance risk to breakeven forecasts. Deployment delays during Q4 2008 have already pushed back breakeven by more than a quarter. With $5.6 million in cash and cash equivalents, the Company has a lot cushion. The most important takeaway is that the Company should emerge from this recession as dominant wordwide player in onboard retailing services where it is could be exposed to over 1 billion captured consumers...err...travellers annually. How many other Canadian stocks sport that type of profile, let alone one with a market cap below $30 million.
I do not own shares of GXI.
1. Transactions are completed with real-time authorization for the first time. Due to current communications restrictions, all airline deployments to date have been deployed as store-and-forward transactions, executed upon landing. As a terrestial service, GXI was able to develop real-time solutions. It has been deployed in poroduction for a few weeks already, so it works. As real-time inflight communications links emerge, work with the rail providers should make it fairly straightforward to move to real-time inflight authorization. With real-time authorization, transaction values could be increased substantially. "Sir, would that be coffee, tea, or a BMW?" (just kidding...kinda)
2. As a result of this deal, GXI now has a partnership with another significant caterer/logistics manager beyond its highly successful relationship with LSG SkyChefs. Compass Group is C$3.4 billion equivalent hospitality operation that provides food and logistics services to ACES. With its extensive hospitality and resort catering services, there could be future alignment for more destination services to be sold onboard.
With its flow of announcements, GXI continues to demonstrate progress for investors. Based on my current forecasts, the operating break-even point is likely to be somewhere in the $1.6 to $1.7 million monthly runrate. On January 22nd, the company provided guidance that it should be exiting Q1, 2009 with a run-rate of approximately $1.5 million. With over 300 million passenger trip in its disclosed backlog, investors could infer that starting sometime in Q2, the Company may hit its breakeven inflection point. Deployment delays could create some variance risk to breakeven forecasts. Deployment delays during Q4 2008 have already pushed back breakeven by more than a quarter. With $5.6 million in cash and cash equivalents, the Company has a lot cushion. The most important takeaway is that the Company should emerge from this recession as dominant wordwide player in onboard retailing services where it is could be exposed to over 1 billion captured consumers...err...travellers annually. How many other Canadian stocks sport that type of profile, let alone one with a market cap below $30 million.
I do not own shares of GXI.
2/11/09
HotThoughts: GXI-TSXV; RIM-TSX
GXI
Yesterday, the Company announced that American Airlines (AMR-NYSE) has adopted cashless in-flight retailing using the GXI Virtual Store Platform. This is important for Guestlogix for three reasons:
> Entrenches the platform for possible future transaction growth in areas beyond food and beverages including entertainment and destination-based services.
> This defacto standardization on its platform by American Airlines helps Guestlogix' negotiating position as AMR (its oldest client) renews its contract sometime later this year.
> Increases referenceability as a major client appears make the GXI system more integral to its core services.
The elimination of cash handling could reduce costs for GXI in providing the service. With most of the major airlines in North America adopting the GXI solution, and with the impending AMR renewal more likely, GXI has a lock on the North American airline industry. With the recently announced contract with an unnamed major airline, the Company has penetration in the North American industry possibly over 80%. It still has some short-term deployment challenges as the Company attempts to clean up a backlog of over 300 million passenger trips, however heading out of this recession, GXI is well positioned for strong growth in sales and earnings. Prior to this recession, an announcement like this would result in upgrades by analysts. There are already big targets on the stock relative to most other micro-caps, so this announcement may make analysts more comfortable that the Company could hit performance forecasts, with consensus forecasts more than a double over 2008 performance. Currently, liquidity is an issue with this stock, but investors should be pleased with progress.
RIM
No investor should be surprised by the lacklustre data coming from RIM this morning. As stated in previous posts, and supported by weak mobile device numbers from Nokia (NOK-NYSE) and Apple (APPL-NASDAQ) among others, RIM is not immune to the marked decline in mobile device upgrades during the 4th quarter. Consumers are simply delaying device upgrades as the economic situation deteriorates. As mentioned in the same previous posts, mobile subscriptions should be considered an essential consumer service. However, many could be converting subscriptions to lower cost pre-paid plans over the next few months as household budgets become tighter. The stock should take a hit today, although it likely remains a very good long-term stock to own.
I do not own shares in the Companies mentioned in this post.
Yesterday, the Company announced that American Airlines (AMR-NYSE) has adopted cashless in-flight retailing using the GXI Virtual Store Platform. This is important for Guestlogix for three reasons:
> Entrenches the platform for possible future transaction growth in areas beyond food and beverages including entertainment and destination-based services.
> This defacto standardization on its platform by American Airlines helps Guestlogix' negotiating position as AMR (its oldest client) renews its contract sometime later this year.
> Increases referenceability as a major client appears make the GXI system more integral to its core services.
The elimination of cash handling could reduce costs for GXI in providing the service. With most of the major airlines in North America adopting the GXI solution, and with the impending AMR renewal more likely, GXI has a lock on the North American airline industry. With the recently announced contract with an unnamed major airline, the Company has penetration in the North American industry possibly over 80%. It still has some short-term deployment challenges as the Company attempts to clean up a backlog of over 300 million passenger trips, however heading out of this recession, GXI is well positioned for strong growth in sales and earnings. Prior to this recession, an announcement like this would result in upgrades by analysts. There are already big targets on the stock relative to most other micro-caps, so this announcement may make analysts more comfortable that the Company could hit performance forecasts, with consensus forecasts more than a double over 2008 performance. Currently, liquidity is an issue with this stock, but investors should be pleased with progress.
RIM
No investor should be surprised by the lacklustre data coming from RIM this morning. As stated in previous posts, and supported by weak mobile device numbers from Nokia (NOK-NYSE) and Apple (APPL-NASDAQ) among others, RIM is not immune to the marked decline in mobile device upgrades during the 4th quarter. Consumers are simply delaying device upgrades as the economic situation deteriorates. As mentioned in the same previous posts, mobile subscriptions should be considered an essential consumer service. However, many could be converting subscriptions to lower cost pre-paid plans over the next few months as household budgets become tighter. The stock should take a hit today, although it likely remains a very good long-term stock to own.
I do not own shares in the Companies mentioned in this post.
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