Following the company’s fourth quarter results, Ecehelon Wealth Partners analyst Gianluca Tucci remains more than bullish on kneat.com (kneat.com Stock Quote, Chart TSXV:KSI).
On Wednesday, kneat.com reported its Q4 and fiscal 2018 results. In the fourth quarter, the company lost $624,000 on revenue of $465,205, a topline that was up 210 per cent over the same period last year.
“During the fourth quarter, Kneat ensured seamless implementations at its new client sites, secured additional customers and advanced the functionality of our platform,” CEO Eddie Ryan said. “I am pleased with the progress we made during 2018 and plan to build on this momentum in 2019 as we work toward milestones and scaling within our current customer base, build and invest in our team and deliver on a strong pipeline of targets.”
Tucci says KSI’s revenue was in-line with his expectations, while the EBITDA drain was above what he had modeled. Overall, the analyst says he expects revenue to continue to be lumpy but trending higher as 2019 progresses.
“We continue to believe KSI is on the verge of hitting its stride with its SaaS-based Kneat Gx platform, which addresses the challenge of data validation in the life sciences space,” he says. “In 2018, KSI signed seven new customers, scaled two existing customers and thus far in 2019 has scaled with two existing customers signed in 2018 and onboarded a new global biotech leader. These new customers and seats add to Kneat’s potential install base from its existing customers. This existing potential install base is now 250+ manufacturing sites and translates to an at-scale ARR opportunity of over $30M. We expect continued news flow in 2019 with two SaaS go-live events in Q119 which will serve as further validation of KSI’s value proposition. The importance for real-time validation, visibility and integrity of systems and data, all of which the Kneat Gx platform provides, cannot be understated. We continue to expect near-term qualitative announcements with 2H19 starting to show scalable operating leverage; we believe we could see KSI exit 2019 at a ~$5M run-rate. We forewarn that revs could be lumpy while SaaS revs build up to offset the lumpiness of on-premise revs – the focus is on SaaS. We further highlight that opex timing will vary with scaling momentum.”
In a research update to clients today, Tucci maintained his “Speculative Buy” rating and one-year price target of $3.00 on KSI, implying a return of 154 per cent at the time of publication. The analyst today reiterated his “Top Pick” status on the stock.
Tucci thinks KSI will post EBITDA of negative $5.7-million on revenue of $2.67-million in fiscal 2019. He expects those numbers will improve to EBITDA of negative $900,000 on a topline of $9.14-million the following year.
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