DataWind’s (TSX:DW) third quarter was in line with Haywood analyst Massimo Voci’s lofty expectations.
Yesterday, after market, DataWind reported its Q3, 2015 results. The company lost $2.0-million on revenue of $8.5-million, a topline that was up 54% from the same period last year.
“We delivered record revenue in the quarter,” said CEO Suneet Singh Tuli. “Unit sales were up 115 per cent over last year and 18 per cent compared with last quarter, driven by increasing demand through our direct sales channels and our expanding retail distribution network. We now have a second agreement with a national wireless carrier in place and the ability to offer bundled Internet service with every tablet we ship, positioning us for significant growth in the coming quarters. Working with this leading wireless carrier enables us to offer nationwide internet service coverage, add more subscribers to our already fast-growing customer base and build a recurring revenue stream.”
Voci says the quarter was basically in line with his expectations on the top and bottom line. One data point he was watching closely was gross margin. DataWind’s Q3 gross margin came in at 17.8%, above the analyst’s estimate of 17.2%. He notes that the number would have been 21.6% if not for interest expense related to a third party financing.
“Q3/15 represents another step forward for DataWind with revenue, unit sales and gross profit generally in line with our expectations, and the Company remaining on pace to triple sales from the pre-IPO levels to Q4/15 exit run rate,” says Voci. “We believe the three main drivers that investors should look to moving forward are hardware unit sales, ARPU, and internet service subscription numbers”.
Voci thinks DataWind’s revenue is about to expand rapidly. He believes the company’s topline will grow to $31.7-million in fiscal 2015, to $70.9-million the following year, and to $94.2-million in fiscal 2017.
In a research update to clients today, Voci maintained his “Buy” rating and $7.00 one year target on DataWind, implying a return of 211% at the time of publication.