QMCI - QuoteMedia (QMCI) - Keeping The Foot On The Pedal
Q2 results softer than expected. Q2 revenues were relatively stable in a very difficult operating environment and against tough year earlier comparisons. Revenues were $3.029 million, a new quarterly record for the company, in line with our $3.050 million estimate. Operating cash flow, as measured by adjusted EBITDA, was $214,000, below our $486,000 estimate, reflecting investments in new products to be launched later in the year. Keeping the foot on the pedal. Management indicated that it plans to maintain its investment spending on new products and and features to be launched late in the current quarter. It may back off investment spend if the operating environment deteriorates. But, in our view, the company has enough liquidity and runway for the heightened spending. We believe that the new products and features should accelerate revenue growth, possibly as early as Q4, but, likely in 2021.A hit to its cash position. Cash as of June 30, 2020 was $636,012, down $197,000 from the first quarter. We believe that the management is mindful of its investment spending and may throttle the spending back if the business environment deteriorates.Lowering second half, full year estimates. We are lowering our cash flow, as measured by adjusted EBITDA, estimates to reflect the investment spending and the current lack of revenue visibility. The Covid pandemic has dampened the current revenue environment, and, as such, unmasked the company's heightened investment spend. We are lowering our full year 2020 cash flow estimate from $1.5 million to $897,000 and our full year 2021 cash flow estimate from $1.62 million to $1.34 million. Lower price target. We are lowering our price target from $0.17 to $0.14 to reflect our more conservative outlook for 2021. Near current levels, the shares trade at 10.2 times Enterprise Value to our revised 2021 adj. EBITDA estimate. We would note that revenue visibility is currently low, at least until the new products are introduced and the customer acceptance can be determined, which could be as early as Q4. The shares offer a compelling risk/reward relationship and are rated Outperform.Read More >>