2011: Canada’s Fastest Growing Tech Stocks

When Deloitte released its 2011 Fast 50 List for Canadian technology companies, a ranking of the Canadian tech companies with the highest percentage revenue growth over five years, the collection underscored a sobering fact. With just fourteen of the companies public on the TSX or TSXV, most Canadian techs aren’t looking at the public markets as a viable option for unlocking shareholder value.

But are things set to change? The high profile IPO’s of Burlington’s Ecosynthetix (TSX:ECO) and Toronto’s NexJ Systems (TSX:NXJ) may be evidence that the eyes of Bay Street investment bankers are taking their locked gaze off mining and metals and moving it back to technology. Perhaps it’s because the average growth rate of a 2011 Fast 50 company was 5,020 per cent, the third highest number Deloitte has ever recorded, according to Richard Lee, the firm’s national leader of the technology, media and telecommunications. While Canadian tech stocks weren’t represented in great numbers, the ones that did make the list made a good showing. Using Deloitte’s Fast 50 List, we count down Canada’s Fastest Growing Tech Stocks. The number in parentheses is the company’s overall ranking on the Fast 50.

1. NexJ Systems (TSX:NXJ) (4)
Five Year Growth: 29,161%

NexJ, as we mentioned, is that rarest of things today; a Canadian tech IPO. In May, the Toronto based company closed a $43.65 million IPO by selling 4.85 million shares at $9. The group that underwrote the offering; GMP, Cannacord, Raymond James, RBC, Scotia, TD and NCP Northland Capital Partners, might have had an a shorter due diligence process than normal, as NexJ makes Customer Relationship Management (CRM) solutions for the financial industry. NexJ has nearly tripled its revenue since fiscal 2008; from $7.86 million to $22.53 million in fiscal 2010.

2. Arise Technologies (TSX:APV) (6)
Five Year Growth: 10,017%

The troubles of Arise Technologies (the company is currently facing a TSX delisting review and, earlier this month, placed its German unit into insolvency) makes their inclusion on this list at least somewhat surprising. The Waterloo based solar player has had tremendous growth in its topline, from barely a million in revenue in 2007 to more than $73 million in fiscal 2010, but the company is still very much in the red; the company lost $4.6 million in its recently reported Q2.

3. Guestlogix (TSX:GXI) (10)
Five Year Growth: 2322%

At the M Partners Technology Conference last month in Toronto, Guestlogix CEO Tom Douramakos warned that airlines have plucked all the low hanging fruit. Douramakos said all little extras; a fee for your second bag, a surcharge for reserving your seat in advance, are actually saving the industry, producing close to $60 billion in revenue last year. Without this ancillary revenue, the airline industry would still be a losing game. But in order to sustain the industry airlines are going to have to find ways to produce revenue without increasing the weight of the plane. In other words, non-physical items such as theatre or transportation tickets.That’s where Guestlogix comes in. The Toronto company was formed in 2002 and has since become a dominant player in the business of delivering ancillary revenue to airlines, with contracts to service more than a billion trips annually. Guestlogix revenue has grown from just $5.43 million in fiscal 2007 to $25.72 million in fiscal 2010. The company graduated to the TSX on March 1st of last year.

4. WiLAN (TSX:WIN) (11)
Five Year Growth: 2306%

Are we in a patent bubble, or are we only now realizing the true value of intellectual property? Whatever the case, one thing is for sure: Ottawa’s WiLAN isn’t playing second fiddle to anyone in this nation’s capital. After trading as low as $1.19 in late October, 2008. WiLAN’s stunning run to nearly $10 (the stock has subsequently retreated) means the company is now the most valuable technology concern in Ottawa. Founded in 1992, WiLAN has developed a range of communications and consumer electronics products including routers, 3G handsets and WiMAX base stations. The Company now has more than a thousand patents, and has already licensed their technologies to blue chip techs such as Cisco, Nokia, Panasonic, Samsung. In doing so, the company’s revenue has climbed from just over $2 million in fiscal 2006 to nearly $50 million in 2010.

Cantech Letter’s Nick Waddell recently talked to WiLAN CEO Jim Skippen.

5. Cyberplex (TSX:CX) (14)
Five Year Growth: 1904%

Like Arise, Cyberplex’s recent woes overshadow the bigger picture. The Toronto based company, which provides online advertising solutions for multinational corporations, lost a whopping $61 million in fiscal 2010. The company’s rise in revenue has been meteoric, from $5 million in fiscal 2006 to $110 million in FY 2009, but that topline growth appears to have stalled and the company has been punished for it. Shares of Cyberplex have fallen from nearly $2 in 2009 to mere pennies today.

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6. Prosep (TSX:PRP) (22)
Five Year Growth: 973%

Share of Montreal’s Prosep, which provides water treatment equipment to the oil and gas industry, have been on a steady decline for five years, from a 2006 high of $1.98 to a recent low of just four cents. The company’s revenue leapt from under $6 million in 2007 to more than $51 million in fiscal 2008, but that number has slipped to just $34 million in 2010. The good news for Prosep shareholders is the company recently completed an $11.1 million private placement. The bad news is the company has needed to go back to market frequently, as it is a perpetual money loser.

7. Route1 (TSXV:ROI) (26)
Five Year Growth: 904%

Toronto’s Route 1 is still small, but the company has had success in securing some name brand clients for its TruOFFICE™ service, which allows remote users to securely access their digital resources from anywhere, and its Mobikey, an identity validation device. Sales to the Netherlands Ministry of Foreign Affairs, and the US Navy have helped Route 1 grow from $1 million in revenue in 2007 to $5.37 in fiscal 2010.

8. H20 Innovation (TSXV:HEO) (28)
Five Year Growth: 666%

Until 2008, H20 Innovation was a company enjoying steady but unspectacular growth in its water treatment business. Clearly, that wasn’t enough for The Company’s management team, led by Frederic Dugre. Early in 2009, H20 took initiatives to not only grow, but to diversify the company from merely being a manufacturer of water treatment systems and equipment into one that covered the complete life cycle of membrane filtration and biological waste water treatment systems. H20 Innovation has almost tripled its revenue, from $10.81 in fiscal 2008 to $28.8 in fiscal 2011, but has struggled to turn a profit from recent acquisitions, reporting a $1.61 million loss in 2011.

9. Research in Motion (TSX:RIM) (29)
Five Year Growth: 634%

Casual observers of Research in Motion might be forgiven for believing the company is on death’s door. The reception of the Waterloo giants entry into the tablet world, The Playbook has been a flop and the company is losing domestic consumer share to Apple at an alarming rate. But while shares of RIM have fallen from as high as $148 in 2008 to $23 on Friday, the company’s revenue has more than tripled. Cantech Letter’s Nick Waddell recently joined Kevin O’Leary and Amanda Lang of the CBC’s Lang and O’Leary Exchange to talk about the company’s recent woes.

10. PNI Digital Media (TSX:PN) (32)
Five Year Growth: 522%

Vancouver’s PNI Digital Media, which was once known as PhotoChannel, has an international reach. The Company’s PNI Digital Media Platform reaches clients through retail giants such as Walmart, Costco, SAM’s Club, CVS/pharmacy, Tesco, Kodak, ASDA, K-Mart Australia, and Hallmark UK. The Company’s kiosks are a hit for their ease of use. PNI’s footprint is so large, in fact, that one of the features of its new new iPhone app locates the nearest eligible retail location for users who might want to instantly print off a photo they just snapped with their iPhone. PNI’s success helped it graduate to the TSX on October 18th. Cantech Letter’s Nick Waddell recently sat down with PNI Digital’s CEO, Kyle Hall.

11. RuggedCom (TSX:RCM) (36)
Five Year Growth: 445%

Vaughn, Ontario’s RuggedCom, as its name suggests, makes communications and networking equipment that is used in difficult environments. Success in the electric power and transportation markets have meant growth for the company, from $39 million in 2008, to nearly $94 million in fiscal 2011. And those looking for a little sizzle in the company’s staid business need look no further than the company’s recent participation with the National Rural Electric Cooperative Association (NRECA) on its smartgrid project.

12. 5N Plus (TSX:VNP) (38)
Five Year Growth: 413%

A few years ago Montreal’s 5N Plus, which produces essential components of thin-film solar modules, became a primary material supplier to First Solar. When First Solar’s revenue was ballooning, they were being supplied cadmium telluride cells by 5N Plus. The Montreal company, meanwhile, was mirroring the action, albeit on a much smaller scale. Sales increased from $10.3 million for the fiscal year ended May 31, 2005 to over $70 million in fiscal 2010. Shares of 5N Plus moved from a 2008 low of $3.50 to a high of $9.85 this past March. The relationship still appears rock solid; 5N Plus recently announced new five-year agreement with First Solar that extends the relationship until Dec. 31, 2015. Criticism that 5N was too dependent upon First Solar was quashed with the April acquisition of Belgium’s MCP Group, one of the world’s leading producers of specialty metals such as bismuth, gallium, indium, selenium and tellurium. The acquisition, which cost 5N Plus just over $315 million, dramatically increases its scale. MCP is actually several times larger than 5N Plus; the company generated approximately $462-million of revenue in 2010, and has more than four hundred employees across Europe, Asia and the US. Michael Goldberg, an analyst with Stonecap Securities, who covers 5N Plus said the acquisition is a “game changer”. Goldberg thinks that, post acquisition, First Solar could contribute as little as ten percent to 5N Plus’ top line.

13. QHR Technologies (TSXV:QHR) (49)
Five Year Growth: 304%

Implementation. When technology solutions enter the public conversation, the assumption is that their practical use is not far off. Actual progress, for a myriad of reasons, is often much slower. Nowhere does this apply more than healthcare. Research firm Forrester estimates that the paper based health information “wastes hundreds of billions of dollars annually.” But transforming from paper charts to a digital 21st century healthcare systems is not an overnight fix. Although still small, Kelowna’s QHR Technologies has become an aggressive consolidator in the electronic medical records space. QHR’s recent acquisition of EMIS Inc, the Canadian division of the Leeds based Egton Medical Information Systems, the U.K.’s largest vendor of electronic medical records, was the company’s eleventh acquisition in the past eight years. QHR is clearly gaining critical mass; the company’s revenue has grown from just $5.89 million to $19 in fiscal 2010.

14. Nightingale Informatix (TSXV:NGH) (50)
Five Year Growth: 294%

Founded in 2002, Nightingale Informatix is an up and coming provider of web-based Electronic Medical Record (EMR), practice management and patient health record portal solutions, as well as revenue cycle management services to doctors, clinics, hospitals and other healthcare organizations throughout North America. Nightingale now has 140 employees across offices in Markham, Ontario and Rancho Cordova, California. Recently, Cantech Letter talked to Nightingale President and CEO Sam Chebib.

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