Q4/19 and Q1/20 Preview; More On The Move To The Cloud And LedgerPay

Highlights

• QUIS is scheduled to report Q4/19 and year-end financial results after market closes on Tuesday, April 28, 2020. Management will host a conf call at 8:30am ET on Wednesday, April 29, 2020. Dial in: (800) 319-4610 / (416) 915-3239. Replay info: (800) 319-6413 / (604) 638-9010 (pass: 4376).


• The Street is looking for: (1) Q4/19 revs/EBITDA of $5.4M/$0.6M – with no Menlo contribution which closed on January 2, 2020; and (2) Q1/20 revs/EBITDA of $10.0M/$1.4M – which includes Menlo, but no LedgerPay revs which should start ramping in Q2/20 (all values in US$ unless otherwise noted).


• QUIS recently launched LedgerPay, announced a strategic partnership and software licensing agreement with Rev19, and announced a strategic go-to-market relationship with dunnhumby, a global leader in customer data science - offering a first-of-its-kind service for brick-and-mortar merchants such as QSRs, grocers, and other retailers. See our previous note (here).


• In this note, we look at the Azure opportunity from Phil Sorgen’s viewpoint, and provide more colour on LedgerPay.

Catalysts

• We expect more LedgerPay announcements as QUIS works through its pipeline. Future deals could be a mix of SaaS-based revenue and annual license with maintenance and support.


• QUIS will report Q1/20 results towards the end of May 2020.

Valuation

On 2021E consensus estimates, QUIS is trading at an EV/Sales and EV/EBITDA of 2.2x/15.9x (fully diluted) versus its North American IT Services and Global Payment Technology comparables trading at 1.5x/10.9x and 5.4x/13.8x, respectively.

We believe QUIS’s consulting business should trade in-line with IT Services companies at 1-1.5x EV/Sales, and 10-12x EV/EBITDA, and LedgerPay should trade in-line with Fin Tech companies at 5-6x EV/Sales, and 13-15x EV/EBITDA. Using a sum-of-the-parts calculation on 2021E estimates for QUIS yields a valuation in the $0.69-1.41 range.