Based on upbeat second quarter results, Echelon Wealth Partners analyst Rob Goff is staying bullish on tech consulting company Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Chart, News TSXV:QUIS). Goff says to look for EBITDA growth over the next two quarters as the company scales up over time and looks to roll up more accretive acquisitions.
Microsoft cloud solutions provider Quisitive posted its Q2 results on August 28, coming in with revenue for the three months ended June 30, 2019, of $4.2 million, a 38-per-cent increase from a year prior, and EBITDA of $0.3 million. (All figures in US dollars unless where noted otherwise.)
In the quarterly press release, CEO Mike Reinhart says that the completion of the acquisition of Ottawa-based Microsoft tech company Corporate Renaissance Group in early June marked a major milestone in the growth of his company, effectively setting the foundation for future M&A activity.
“The combination of the CRG acquisition, which brings significant recurring revenue, and the award recognition by Microsoft as their United States Partner of the Year provides us real momentum as we drive towards the back half of 2019 with marketing and sales motions focused on bringing full Microsoft cloud capability to our customers,” writes Reinhart.
Goff says that the $4.2 million in revenue and $0.3 million in EBITDA were better than his forecasts of $4.0 million and $0.0 million, respectively, and that Quisitive should see further organic growth over the second half of 2019.
“We continue to forecast strong shareholder returns as Quisitive gains traction and scale over time as a consolidator in the Azure professional services space,” writes Goff in a client update on August 30. “Acquisition terms look for immediate accretion before considering revenue synergies expected through layering additional products onto the acquired sales teams along with scale efficiencies. We see Azure gaining share in the broadly defined cloud ecosystem where QUIS looks to be a consolidator of the fragmented tier of mid/small sized professional service providers.”
Quisitive was recently recognized as 2019 Microsoft Country Partner of the Year for the United States, an award for “demonstrating excellence in innovation and implementation of customer solutions based on Microsoft technology.” Goff says that the win is more indication that a pipeline of relationships could be growing for Quisitive.
“The strength of Quisitive’s Microsoft alignment was reflected in both its selection as Microsoft’s US Partner of the year and in tangible Microsoft leads. For many of the acquisition targets, the move to cloud services represents both exciting growth and challenges as the end client moves to next gen services. The industry inflection towards cloud-based SaaS models is expected to accelerate consolidation in the professional services space,” he writes.
Finally, Goff gives the thumbs up to the CRG acquisition, saying that it “makes QUIS a more attractive acquirer in the market. We are encouraged that QUIS didn’t go down the path of buying a turnaround or take on significant equity dilution,” he writes.
Goff is expecting QUIS to post 2019 revenue and adjusted EBITDA of $19.4 million and $1.3 million, respectively, and 2020 revenue and adjusted EBITDA of $24.6 million ad $2.7 million, respectively.
With the update, the analyst has reiterated his “Speculative Buy” rating and $0.46 target price, which represented a projected return of 268 per cent at the time of publication.