TIO Networks (TSXV:TNC) will soon top $100-million in revenue and its most recent results are evidence that it knows how to put more of it to the bottom line, says Haywood analyst Pardeep Sangha.
Yesterday, TIO reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company earned $142,379 on revenue of $13.95-million.
“We achieved record revenue and EBITDA,” said CEO Hamed Shahbazi. “Fiscal 2015 was a year marked by the successful execution of M&A, shared services, cost improvements and R&D initiatives, strengthening Tio’s prospects for further growth. We look forward to closing our acquisition of Softgate Systems in early 2016 and remain steadfast and focused on organic revenue growth, EBITDA margin expansion and accretive acquisitions.”
Sangha says the quarter beat his estimates on both the top and bottom line. The analyst expects TIO’s revenue will grow to $78-million in fiscal 2016 and then to $107.6-million the following year. He notes that the company’s topline rise is being accompanied by a significant margin expansion, albeit it partly due to the way it recognizes revenue from its largest biller partner and a stronger U.S. dollar. The company’s gross margins rose from 28.7 per cent in the fourth quarter of 2014 to 52.6 per cent in 2015’s Q4.
“Tio is heading toward a strong Adj. EBITDA profile and over $100M in annual revenue by FY17,” says Sangha. “Tio has partnered with some of the largest U.S. billers to establish itself as a leader in bill payments, processing over $6B a year in transactions. The Company’s transformative acquisitions of Globex and Softgate has led to increased margins and has made Tio a leader in the North American walk-up bill payment space. We believe Tio Networks has a scalable multi-channel platform with which to launch new billers and acquire competitors in a fragmented marketplace.”
In a research update to clients today, Sangha maintained his “Buy” rating and one-year target price of $2.30 on TIO Networks, implying a return of 38.6 per cent at the time of publication.
Disclosure: Cantech Letter Editor Nick Waddell owns shares of TIO Networks.