The Top 10 Canadian Tech Stocks Ranked by Revenue per Employee
Efficiency. It’s the dream of technology. Dishwashers, refrigerators, and personal computers are mainstays of most every home today, but they were once the time saving devices of the future. The technology dream for investors has always been the high-margin appeal of intellectual property; invent a piece of software that everyone needs, hit the copy button and watch the profits roll in while you sleep. While the days of that kind of windfall have probably gone to same place as Microsoft’s triple digit growth, the right technology can still underpin an extremely efficient business. A recent look at US companies with high revenue per employee inspired us to wonder if our Canuck equivalents are faring as well. It turns out, in many cases, we are doing better. The list below is comprised of the top ten stocks in the TSX technology index ranked by revenue per employee. For the revenue number we have taken each company’s most recently reported fiscal year numbers. We tried to source the most recently available number for employee count, using Hoover’s as our main source. In some cases, as in our number one and two companies which were very close, we contacted the company directly for the most recent employee count.
1. Mosaid (TSX:MSD): $71 million/ 47 employees =$1.510 million per employee
Kanata’s Mosaid licenses its communications technologies to some of world’s largest semiconductor companies. The company’s shares have more than tripled since late 2008 as they have consistently beaten analysts estimates. Revenue continue to climb for Mosaid, from $55 million in FY 2008, to more than $71 in FY 2010. While The Company actively defends its stable of patents in the courthouse, Mosaid has also signed licensing deals this year with the likes of Sony, Samsung and Sharp.
2. SXC Health (TSX:SXC): $1.43 billion/ 950 employees =$1.505 million per employee
Four years ago, SXC Health was lost in the shuffle -a mid sized healthcare IT provider from Milton, Ontario with just over $80 million in revenue. Today, after aggressive acquisitions and organic growth, the company is an international healthcare IT King. SXC is a pioneer in the pharmacy benefit management sector, with revenues in excess of $1.4 billion. Recently named by FORTUNE Magazine as one of the 100 fastest Growing Companies, SXC Health has become one of the biggest Canadian technology success stories in recent memory.
3. Cyberplex (TSX:CX): $110 million employees 90= $1.22 million per employee
Toronto’s Cyberplex’s, which provides online advertising solutions for multinational corporations, has taken it on the chin of late. Though the company’s rise in revenue has been meteoric, from $5 million in FY 2006 to $110 million in FY 2009, a couple of soft quarters appear to have taken the wind out the stock’s sails, which has fallen from a high of $1.89 in May, 2009 to just over $.40 cents last week. Cyberplex CEO Geoffrey Rotstein, however, believes the company is still very much on the upswing, recently reaffirming guidance that revenue for the second-half of 2010 is expected to be in the range of $75-million to $85-million.
4. Research in Motion (TSX:RIM): $14.9 billion/ 13,873 employees = $1,074,028 per employee
No respect. It’s hard to imagine that Research in Motion has become the Rodney Dangerfield of tech stocks. Just two years ago it seemed every analyst in the country was behind the company and its prospects. That country was, of course, The United States, home to Apple, Google, and Palm, who some nervy analysts are now actually comparing the Blackberry maker to. Is this a cultural thing? A few weeks ago Bloomberg reported on a growing divide between the way US and Canadian analysts saw the stock, which is now trading near a three year low. They noted that ten of eleven Canadian analysts who cover the stock rate it a buy, while just 54 percent of the 35 U.S. analysts covering the stock do. Investors following analysts who see RIM as a sloth in the world of iPhones and Androids might be surprised at the Waterloo giant’s numbers. It was just a year ago that Fortune named the company the fastest growing company in the world, and Research in Motion hasn’t yet taken its foot off the pedal, posting 24% top line growth in its Q1 2011 numbers, reported in late June. Is it possible that Research in Motion is now both a growth and a value stock?
5. Wi-Lan (TSX:WIN): $33.8 million/33 employees =$1,024,242 per employee
“Introducing inventions with mass appeal to the world.” That slogan is the way that Ottawa’s Wi-LAN, which holds a roster of patents covering everything from Bluetooth technology to WiMAX base stations to routers, sees itself. If certain people, and by certain people we mean people like Judge T. John Ward of the U.S. District Court for the Eastern District of Texas, who is presiding over Wi-LAN’s patent infringement litigations against giants such as Apple, Dell, Intel, Hewlett-Packard, LG and Broadcom, see things the same way, then the eighteen year old Wi-LAN will almost certainly earn mass appeal with investors. While success in the courtroom will mean a major splash for Wi-LAN, the company has had increasing success deriving revenue from licensing deals; more than 200 worldwide. It’s unlikely however, we have seen the last of Wi-LAN lawyers in US courtrooms as the Canadian junior has a impressive portfolio of more than eight hundred patents to defend.
6. Sierra Wireless (TSX:SW): $221 million/ 224 employees =$986,607 per employee
On September 23rd, Vancouver’s Sierra Wireless announced it was cutting 60 jobs and reorganizing into three distinct business units, each with its own dedicated sales, marketing, and research and development personnel. It’s been a long bumpy ride for Sierra Wireless shareholders since its halcyon days before the dot-com bubble burst, but the company appears to be gaining traction, revenue has risen from $221 million in FY 2006 to $526 million in FY 2009.
7. DragonWave (TSX:DWI): $161.9 million/182 employees =$889,560 per employee
You downloaded an app on your iPhone 3G today. Or pinged a friend using your Blackberry Bold. Or PVR’d a movie. Our appetite for wireless data has become unquenchable. And Ottawa’s DragonWave is at the gate, taking a toll. Dragonwave’s products provide wireless microwave transmission of broadband voice, video and data, which has become cheaper and easier than fiber. The Company’s primary clients are service providers. Well, more to the the point, Clearwire. DragonWave suffered its first real setback in more than a year when its recent fourth quarter results showed that 87 percent of the company’s revenue in the quarter came from Clearwire. Still, the resulting analysts cuts were not that deep for a stock that had risen so sharply. Many believe that as large carriers like AT&T and Verizon roll out into suburban and rural areas, where microwave equipment has natural advantages over fiber, DragonWave will have little trouble achieving a more healthy diversity to its client base.
8. Westport Innovations (TSX:WPT): $128.8 million/205 employees=$628.292 per employee
“You know I’m excited about this…I need you to check my enthusiasm…” On June 3rd of this year Jim Cramer of CNBC’s Mad Money’s was positively gushing in an interview with Westport Innovations CEO David Demers. Cramer felt the political winds of change were behind the Vancouver based developer of natural gas engines. Demers, clearly not as prone to bombast as the volcanic host conceded that “The spill in the gulf is a wakeup call that we need to do something now.” That something, the adoption of natural gas as what Cramer called a cleaner “transition fuel” that could bring energy independence to the United States, will be helped along by Westport Innovations, which has already partnered with three of the world’s top four top engine makers. It would have been hard to imagine such “A” grade exposure years ago. Founded in 1996, Westport grew out of a research project by Professor Philip Hill at the University of British Columbia’s Mechanical Engineering Department. Hill was developing a concept called high pressure direct injection (HPDI) of natural gas.
In 1994, through UBC’s University-Industry Liaison Office, Hill met current Westport CEO David Demers. In 1995, with HPDI technology as its principal strategic asset, Westport Innovations Inc. was formed.
9. Tucows (TSX:TC): $80.9 million/160 employees=$505,625 per employee
Tucows (originally an acronym for The Ultimate Collection of Winsock Software), has a long and colorful history of dabbling in various businesses that have, at times, confused analysts and shareholders alike. The Company was formed in Flint, Michigan, incorporated in Pennsylvania and headquartered in Toronto. If you noticed Tucows, it was probably in the 90’s when website directory of shareware, freeware, and demo software was everywhere.. The Company is now into domain registration, where it is the third largest ICANN-accredited registrar in the world, domain sales and advertising (In one private transaction in 2007, Tucows sold more than 25000 domain names from its portfolio of domain names for US$3.0 million), and building and maintaining content such as ButterScotch.com, a website with video tutorials that explain technology.
10. Mad Catz (TSX:MCZ): $ 119 million/250 employees =$476,000 per employee
If you don’t know Mad Catz, ask your kids. The Company designs and markets accessories for video game systems. Mad Catz has teamed up with Fender to make a wooden replica of the Fender Stratocaster for Harmonix’s Rock Band series of games, has made a special themed controller for Call of Duty: Modern Warfare 2 on the XBox and Playstation 3, and worked with Capcom to produce FightSticks and FightPads for Street Fighter IV. A soft Q1 2010 killed some of the company’s momentum, but President and CEO Darren Richardson believes that fiscal 2011 will feature best product portfolio in the company’s history.