Quisitive Technology Solutions is undervalued, Clarus Securities says

Better than expected quarterly results from Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Chart, News TSXV:QUIS) are keeping Clarus Securities analyst Noel Atkinson bullish on the stock.

In an update to clients on Friday, Atkinson maintained his “Speculative Buy” rating and C$1.25 target, saying Quisitive is an attractive play on a number of macro technology trends.

Quisitive is a premier partner and National Solution Provider for Microsoft for enterprise business solutions using Microsoft Cloud and the company also has LedgerPay, a cloud-based payment processing and data insights platform in partnership with global retail analytics firm dunnhumby.

The Toronto-based Quisitive released on August 26 its second quarter financials featuring revenue of $13.1 million, up from $4.1 million a year earlier, and adjusted EBITDA of $2.8 million compared to $0.3 million a year ago. The company posted a net loss for the quarter of $5.8 million or $0.05 per share. (All figures in US dollars unless where noted otherwise.)

Among the news items over the quarter, Quisitive completed a bought deal financing round for C$16 million and won its first large Microsoft Azure migration in the State and Local Government sector.

Quisitive said its Q2 growth came from the company’s Q1 acquisition of Menlo Technologies, from organic growth in its cloud solutions business and the launch of LedgerPay.

“We also achieved advanced specialization with Microsoft for the modernization of web applications in Azure. This recognition has led to increased visibility within Microsoft's ecosystem and grown our enterprise customer engagements, helping them further leverage the cloud and compete with innovative digital solutions in these unprecedented times,” said CEO Mike Reinhart in a press release.

“With a strong cash position, a robust pipeline and a solid start to Q3, we are well positioned to continue executing against our multi-pronged growth strategy that involves supplementing our core cloud-based business with strategic M&A and partnership opportunities,” said Reinhart.

Quisitive’s revenue and EBITDA of $13.1 million and $2.8 million, respectively, beat Atkinson’s estimates at $11.4 million and $1.4 million, respectively. In his report, the analyst noted that SG&A costs were well-contained and the Q2 EBITDA margin of 21 per cent was a substantial improvement over 10.1 per cent for the previous quarter and well ahead of Atkinson’s 12.0 per cent estimate.

Atkinson said that by delivering on several key projects across different market segments and securing the large Azure migration project, Quisitive is making strides.

“We view these developments as indicative of the Company’s ability to successfully diversify and expand its Cloud Solutions client base to include larger institutions and corporations, which should drive larger projects and further support revenue growth,” Atkinson said.

“We continue to view QUIS as an attractive market play on three key global macro technology trends recently strengthened by the COVID-19 pandemic: increased demand for outsourced cloud technology services, the ongoing shift from cash and cheques to debit/credit card transactions, and efforts by brick-and-mortar retailers to compete more effectively against online stores,” he wrote.

Atkinson has made slight changes to his forecasts and is now calling for 2020 revenue of $50.0 million (previously $49.1 million) and adjusted EBITDA of $8.7 million (previously $6.6 million). His $1.25 target represented at press time a projected 12-month return of 95 per cent.