Tag Archives: ISV

Jan 2021 Update – $OSS.v, $ISV.to, $STC.v, $VLN.to, $VMD.to, $SYZ.to, $MCB.to, $FRII.to, $RELL, $MTLO.v, $DWSN

Trying something new this month to catalogue some recent market activity and my thoughts around it.

Thoughts on Market Activity

I’m sure you’ve heard of activity around wallstreetbets reddit board and the short squeeze on some heavily shorted names (Gamestop being the most well known). Sorry to disappoint, but I won’t be participating in the short or long side of that corner of the market. It’s too risky for me. It is absolutely fascinating to witness in real time. I have been overly curious to understand what the thought process is for the individuals on each side. I will admit I have probably spent too much time listening to finance and non-finance people explain why they feel the way they do about it. Anyone interested in hearing some anecdotal data I’ve collected can send me an email or DM on Twitter.

I am not a macro guy. I can say that I have been finding interesting ideas lately, but I have not stumbled across businesses that I feel warrant a very large position in the portfolio. I am sitting on a higher than normal amount of cash, but that can change in a few weeks.

Posts this month

Relevant News from Companies Profiled Recently

  • OneSoft Solutions ($OSS.v)
    • Another customer signs on to integrate CIM into their pipeline operations
      • 4th customer in 3 months
      • This is a big positive and shares are up a bit for the month (about 15%)
  • Information Services Corp ($ISV.to)
    • They announced that they ratified a collective agreement with their in-scope unionized employees
      • They did this virtually which is good to hear
      • Provides 6 years of stability with the members with modest wage increases
  • Sangoma Technologies Corp ($STC.v)
    • Update on cyberattack
      • Had no material impact on sales or additional risks to the business
    • Huge acquisition announced
      • The had a call on Jan 29th to discuss
      • More details to come in the next few weeks
      • On the surface the acquisition seems like it is a good fit for the business and will further increase their value to customers, but the valuation is not cheap
        • This is common for Sangoma; all previous acquisitions looked a little off at first glance, but ended up being very well executed
      • I’ll likely to a more in depth post to help myself digest the news
      • As of this morning the shares are halted
  • Velan ($VLN.to)
    • CFO resigned to join a private owned company
      • Doesn’t seem a material event on the surface as he is staying to help transition the role
      • Would like to see a new CFO within a reasonable amount of time
    • Reported fiscal Q3 2021
      • The quarte was better than expected though covid is still having an impact on the business
      • They were able to execute the V20 plan remotely
      • They have the highest backlog in 8 years
      • Sale of the montreal plant resulted in a gain on the balance sheet
        • To me this gives additional margin of safety as looking at this as net-net gives no value to PPE which obviously has some value
    • I honestly think that this is one of those weird names that could earn more ebitda in a few years than the market cap in 2020
      • But that needs to be monitored
    • The bulletin boards are dead from this
  • Viemed ($VMD.to)
    • Released details of a recent Non-invasive vent study
      • Study was led by their CMO
      • Data was between 2012 and 2018
      • Seems like a good validation of NI vents and a helpful data point to bring to the table
  • Sylogist ($SYZ.to)
    • CI purchased shares
      • Bought 1.032 shares since Nov 10, 2020
      • About 40% of trading volume
      • These likely happened at the start of December as there was a spike in volume
    • New CTIO announced
      • Pedigree seems well
      • 225 options at $11.78
        • 5 year term that vest in equal tranches on 1st, 2nd, 3rd anniversary of $15, $17 and $19
  • McCoy Global ($MCB.to)
    • New board member announced (Cory Janssen)
      • Was co-founder of Investopedia
      • He’s quite connected as McCoy commercializes some of their digital products
  • Freshii ($FRII.to)
    • Alternative Monthly Report stating that Silver Ring Value Partners Fund LP
      • During the month ended December 31, 2020, Silver Ring acquired 195,500 Common Shares through open market purchases on the facilities of the Exchange, resulting in Silver Ring holding an aggregate of 2,806,233 Common Shares as at December 31, 2020, representing approximately 10.65% of the issued and outstanding Common Shares.1 Prior to December 1, 2020, Silver Ring owned, or exercised control or direction over, 2,618,733 Common Shares, representing approximately 9.95% of the issued and outstanding Common Shares.
      • Seems like a decent value shop
      • Nice to have a capital allocator own a large amount of the shares outstanding
    • Update on Special Meeting Circular announced
      • Reason for the special meeting is to reduce the stated value of the A shares so they can institute a NCIB
      • This is a step in the right direction
  • Richardson Electronics ($RELL)
    • Reported fiscal Q2
      • Results were better than expected and guidance was strong
      • Looks like wafer side of their business is rebounding and the current cycle could match or eclipse previous cycle
      • The CT tubes are seeing an increase in demand versus what was previously communicated, particularly seeing strength in Europe
        • looks like they could get the healthcare part of the business to break even closer than anticipated
      • shares spiked 20% on the news
  • Martello Technologies Group Inc ($MTLO.v)
    • Provided an update on operations
      • GSX (which was acquired in May 2020) is now fully integrated
        • Gizmo coupled with solutions MTLO already provides is set to take their DEM strategy to another level
        • Sales from all GSX and Savision were about 58% of rev in Q2 fiscal 21
      • Reiterated that legacy products have been declining and will mask core business growth
        • They noted that expenses related to managing the legacy part of the business are minimal
  • Dawson Geophysical – ($DWSN)
    • Wilks Family disclosed a passive stake of 2.28mil shares or 9.7% of the outstanding shares

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Filed under Company Updates, Random Thoughts

July 2020 Update – $OSS.v $ISDR $PSD.to $ISV.to $STC.v

I was thinking that I would try sending out a quick update on the companies mentioned here recently that I keep tabs on. Maybe I’ll make it a regular thing, maybe not. Many companies will be announcing Q2 2020 numbers next week.

OneSoft Solutions – $OSS.v

Their wholly-owned subsidiary (OneBridge Solutions) was named as a finalist of Application Innovation 2020 Microsoft Partner of the Year. The demonstrates the value of their solution and the intimate relationship of the relationship with Microsoft.

Filed a statement of claim against a breach in a Software License Agreement from 2014. The claim is not material from a financial standpoint, but it shows how important they take their IP.

Issuer Direct – $ISDR

Issuer reported their results last night and they were really good. Shares have jumped over 20% today. Revenue was up over 20%. Profitability was the highest in a long time. They have cash to deploy on multiple capital allocation opportunities. If growth and profitability is maintained, then ISDR is still cheap.

Pulse Seismic – $PSD.to

Very rough quarter, but that was expected. Still generated a little bit of cash. They are in compliance with covenants at this point.

Information Services – $ISV.to

They announced an acquisition of Paragon. This diversifies the business and bolts in well to the existing Services side of the business and is recession resistant. The price isn’t dirt cheap, but does seem reasonable.

Sangoma Technologies – $STC.v

Closed a financing for $81 mil. This was oversubscribed. The price was at $2.30 per share. They now have a bunch of cash and I would expect an acquisition announced soon.

 

The author is long shares of $STC.v, $OSS.v and $ISDR

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Information Services Corp ($ISV.to)

I came across Information Services Corp when looking at stocks yielding about 5%, with no/low debt, 3 year sales growth, and less than 10x ebit.

Background (pasted from TIKR)

Information Services Corporation, together with its subsidiaries, provides registry and information management services for public data and records in Canada and internationally. It operates through three segments: Registry Operations, Services, and Technology Solutions. The company provides land titles registry services that issues titles to land and registers transactions affecting titles, including changes of ownership and the registration of interests in land; land surveys directory, which plans and creates a representation of Saskatchewan land parcels in the cadastral parcel mapping system; and geomatics services that manages geographic data in relation to the cadastral parcel mapping system. It also offers personal property registry, a notice-based public registry in which security interests and other interests in personal property are registered; and corporate registry, which is a province-wide system for registering business corporations, non-profit corporations, co-operatives, sole proprietorship’s, partnerships, and business names. In addition, the company provides search and registration services through an online workflow platform for the Ontario business information system; know-your-customer services; and corporate supplies for companies to organize and maintain corporate legal documents. Information Services Corporation serves law firms, financial institutions, accountants, non-profit and co-operative associations, and entrepreneurs, as well as lending, leasing, and credit issuing businesses and institutions. The company was formerly known as Saskatchewan Land Information Services Corporation and changed its name to Information Services Corporation in November 2000. Information Services Corporation was founded in 2000 and is headquartered in Regina, Canada.

Sounds pretty boring on the surface, and really it’s kind of boring mundane stuff. Let’s dig a little deeper.

Here’s a quick table on the revenue mix from the AIF as well as a chart of the various segmented information.

 

As you can see the “growth” segments are the Services and Technology division.

Some interesting tidbits of info from the AIF and Annual Report (emphasis mine)

Registries

Land Registry includes Land Titles Registry, Land Surveys and Geomatics.

Because the Land Titles Registry revenue is comprised of both residential and non-residential activity, mortgage rates and business lending rates may affect revenue. Changes in land values, provincial population and mortgage qualifying requirements also affect the housing market which, in turn, influences changes of ownership and revenue.
Revenue for the Land Titles Registry is earned through registration, search and maintenance fees. Registration fees are either a flat fee or value-based, calculated as a percentage of the value of the land and/or property being registered. We typically charge a flat fee per transaction for search and maintenance transactions. However, in certain instances, we may charge a negotiated fee for a customized search or maintenance transaction such as certain mineral certification or bulk data requests.

Approximately 80.4 per cent of all Land Titles Registry registration transactions were submitted online in 2019.

In July 2016, the Corporate Registry began using the Company’s RegSys platform, thereby providing customers with a more convenient service to search, register and maintain corporate entities in Saskatchewan. In addition, RegSys also offers customers access to digitally verified registry documents and options to self-manage staff access. Approximately 90.8 per cent of all registrations in the Corporate Registry were submitted online in 2019.
A number of permanent changes to the services and fee structure were implemented with the launch of the system.

Services

In our Services segment, our core legal and financial services revenue has little seasonality; rather, it fluctuates in line with the general economic drivers. Our collateral management services revenue experiences seasonality aligned to vehicle and equipment financing cycles, which are generally stronger in the second and fourth quarters. Some smaller categories of products or services can have some seasonal variation, increasing slightly during the second and fourth quarters.

Technology

Our Technology Solutions segment provides the development, delivery and support of registry (and related) technology solutions. We generate revenue through the following:
• Sale of software licences related to the technology platform;
• Provision of technology solution definition and implementation services; and
• Provision of monthly hosting, support and maintenance services.

Through our wholly owned subsidiary ERS, we offer RegSys — a complete registry solution that provides a readily transferable technology platform capable of serving a wide range of registry needs. RegSys is a multi-register platform that delivers the flexibility, scalability and features that enable public sector organizations to deliver enhanced services to businesses and citizens.
With a full suite of integrated modules which provide core functionality for submission, enforcement and enquiry processing, RegSys delivers solutions enabling the provision of core services to citizens in a user-friendly, efficient manner across multiple access points. The RegSys solution has also been used to manage other legal registers such as intellectual property, securities, licences, charities, Uniform Commercial Code and pension schemes. Our customers include governments and regulatory organizations, such as chambers of commerce, that have responsibility to authorize, license, maintain and revoke the function of a registry.

Competitors include other registry software providers that develop and provide software platforms to manage registries. On the technology services side, our competitors include all technology services organizations that provide application development, systems integration and/or application management services. This includes large multinationals or local niche players, both of which we partner with to complement our offering depending on the clients’ needs.

Consolidated Results

The company has acquired a good portion of their growth. You can see that the top line has took off as gross margins have been compressed. Operating profit and margins have continued to tick up as they have scaled into their acquisitions in Services and Technology and have seen some organic growth. Both revenue and profitability continues to improve on a per share basis as well (although not as quickly as revenue per share).

Compensation

Here is a quick chart on compensation.

The MIC has lots of detail on how they derive the compensation for executives. The CEO’s total comp is 800-900k per year with 350k in salary.

Share Structure and Ownership

There are 17.5mil class A shares and 1 (Golden) class B share. The Golden is held by the Crown Investment Corp of Saskatchewan. It limits the sale of assets outside of Saskatchewan and transfer of head office outside of Saskatchewan. The same entity owns 31% of the A shares.

Another 14% of the A share are held by CI Investment.

Management and the board don’t own many shares.  The CEO owns about a years worth of salary in A shares (give or take).

Summary

ISV has a very close relationship with Saskatchewan. The registry business is somewhat economically sensitive, but is essentially a toll bridge on certain activities. They are producing cash consistently, have decent ROIC and manage to cover dividend payments several times over. However, there are limited growth opportunities and I would like to understand the Technology side of the business a bit better before grading management’s capital allocation strategy.

I think this would be a good fit in a dividend focused portfolio for income with some potential capital appreciation. It is modestly priced with a little over 5% yield. They have are in a net cash position and focused in a province that has seemed to manage the lockdowns and reopening well (so far).

This is assuming that the impact from covid will be temporary and somewhat minimal.

Anyone look at ISV before? Or will let me crash on their couch if I go visit management?

 

Thanks,

Dean

 

*the author does not own any ISV at time of writing.

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