Petty Cash is moving

I’ve decided to migrate the blog over to Substack to save some money and fit in with the cool kids. The WordPress site will continue for about another month or so before I take it down. I have transferred all my old posts over as well, although not all the media has been moved.

You can subscribe here. Hope to see you there.

Thanks

Dean

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$ISDR Quick Update

It’s been about 8 months since I did my last ISDR update. You can find it here.

Shares of ISDR are flat to slightly up. Energy company’s are up way more, the Nasdaq is down a bit, the “disruptors” are generally down, and (most importantly) the people’s crypto is down about 30%.

Q4 2021 Update

The company reported quite strong Q4 2021 results. Top line growth of about 20% (depending on whether you measure ttm or year over year on a quarterly basis), strong gross margins and reasonable operating margins led to operating income outperforming my expectations by a slight margin. It should be noted that investment via the income statement continued during the quarter. I expect EBIT margins to improve modestly as they scale into the higher expense line.

Customer count growth of 14% was nice to see. Platform id subscriptions came in a wee bit below their goal of 500 by 3. The ACV of the Platform id subscriptions is now 4.1 mil. Over half of the most recent quarter’s new subscriptions were sold to existing customers who were only using 1 product or service. This is a nice win for them as they have a large customer base that’s growing. They are anticipating customer growth of 20% in 2022. This bodes well for them scaling into the higher opex.

Accesswire grew revenue by 40% over the prior year’s quarter and is responsible for the majority of their customer growth.

Looking Ahead to 2022

Though they anticipate to grow customers by 20%, I’m not expecting 20% growth in revenue. The compliance business revenue was 2 mil in Q4 2021 vs 1.7 mil in Q4 2020, and I am not modeling that kind of growth in 2022 and beyond. Originally I was expecting flat to slightly lower revenue from compliance over time, but have been pleasantly surprised. Having said that, compliance is a smaller part of the business and even smaller part of the total gross margins.

TTM EV/FCF (without WC and ee comp) is around 18x. To me, this isn’t too expensive to warrant reducing the position. This also isn’t sell-all-your-powertools-to-buy-shares cheap either. ROIC is quite good, organic per share growth is likely over 10%, the balance sheet is strong and management is aligned with shareholders. I wouldn’t be surprised if ISDR makes an acquisition this year to further build out their product portfolio. They also announced a 5 mil NCIB and I believe it will get executed. I am going to maintain my position.

Anyone else own $ISDR?

Thanks

Dean

*long ISDR at time of writing.

Feb 2022 Update – $PSD.to, $ISV.to, $STC.to / $SANG, $FTG.to, $XTC.to, $SYZ.to, $PZA.to, $MCR.to, $GEO.to

Thoughts on Market Activity

Another eventful month. Feb continued to be rough on many of the prior winners. Inflation talk has taken a back seat to the Russia/Ukraine war. Since I have nothing valuable to add, I’ll leave it there.

What I’m Reading

• Nothing new. Caught covid this month so spent more time keeping up and recovering that I do typically.

Podcasts I Enjoyed Over the Last Month

I’ve decided I would share some of the podcasts I found valuable during the month. Feel free to send me your favorites.

• This Week in Intelligent Investing – SPECIAL: Spencer Jakab on The Revolution That Wasn’t: GameStop, Reddit, and the Fleecing of Small Investors
  • I’m looking forward to reading the book. Such a fascinating time.
• Mind Reading 2.0: Why did you do that?
  • Interesting mental exercise in understanding how others may perceive us
• Neckar’s conversation with Rob Wetheimer about great industrials
  • I am a sucker for industrial companies that relentlessly focus on improving
• Bill’s conversation with Chris Cerrone
  • Such a good insight into how Akre thinks and anlaysizes businesses
• Invest Like the Best with Frank Slootman
  • Felt this was a good listen for how to think about making decisions in real time with imperfect information. I found lots of little nuggets if information.

Posts this month

• Geodrill – $GEO.to
• Firan Technologies Update – $FTG.to
• Computer Modelling Group – $CMG.to
• Sangoma Technologies Update – $STC.to & $SANG

Developments on Companies Mentioned

• Pulse Seismic – $PSD.to
  • Reported Q4 2022
    • Strong as expected
    • Now debt free
    • Expect the majority of revenue to come from transactional deals
• Information Services Corp – $ISV.to
  • Acquiring UPLevel
    • Using cash on hand
    • Neutral to earnings in 2022 with integration costs
    • Accretive to earnings in 2023
  • Issued business update and guidance for 2022
    • Expect registry operations will slow but still exceed pre-pandemic
    • Services to continue organic growth
    • expect revenue for 2022 to be between $168.0 million and $173.0 million,
    • net income to be between $23.0 million and $27.0 million and
    • EBITD2 to be between $48.0 million and $53.0 million.
  • Friend of the blog Nelson from Uproar Capital did a post on ISV, go check it out.
• Sangoma Technologies Corp – $STC.to
  • Reported fiscal Q2 2022
    • Results were quite well
    • Ahead of guidance and guidance was upped
      • I think this is a bigger deal than the market is giving them credit for as they are typically quite conservative
• Firan Technology – $FTG.to
  • Results were impacted by covid as expected
  • I’ve been trying to get a handle on what this business will/can earn in a world without covid
• Exco Technologies – $XTC.to
  • Reported Q1 fiscal 2022
    • Weaker than I expected due to supply chain, labour challenges with omicron, some mix differences
    • Still expect the business to perform well over the medium term
    • Dividend was upped by 5%
      • Raised 13 of the last 14 years
  • Also announced NCIB for up to 10% of outstanding
• Sylogist – $SYZ.to
  • Reported fiscal Q1 2022
    • Results were below my expectations
    • Sounds like a case of investments leading the returns
    • I’m still waiting to see what the earning power of the business is with the recent acquisitions
• Pizza Pizza Royalty Corp – $PZA.to
  • Hiked dividend to $0.065 per share from $0.06 per share or to $0.78 from $0.72 per share annually
• Macro Enterprises – $MCR.v
  • Announced a new contract
    • 160 mil in cost plus
    • Starting Q1 2022 and completed Q3 2023
  • Management announced a take private at $4/share
    • Doesn’t look like there is much of a chance of a higher bid given that mgmt. controls the majority if the votes
• Geodrill – $GEO.to
  • Another contract win

Long: $PSD.to, $STC.to, $MCR.to and $GEO.to at time of writing