eResearch is pleased to publish a new Equity Research Report on EQ Inc. (TSXV: EQ) pertaining to EQ’s recent release of its Q2/2020 financial statements.
You can download our 14-page Update Report by clicking on the following link: eR-EQ-UR-2020_09_09-FINAL3
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EQ Inc. (“EQ”) enables businesses to understand, predict, and influence customer behaviour. Using unique & third-party data sets, advanced analytics, artificial intelligence and machine learning, EQ creates actionable intelligence for businesses to attract, retain, and grow customers.
EQ’s proprietary SaaS platform mines insights from location and geospatial data, enabling businesses to close the loop between digital and real-world consumer actions. EQ is one of the largest providers of location-based data in Canada with over 1 petabyte of data and growing at 7 terabytes daily.
Q2/2020 Financial Highlights
- EQ’s Q2/2020 revenue was impacted by COVID-19 but revenue recovery is underway.
- Advertising revenue in the quarter was negatively impacted by the outbreak of COVID-19 as certain customers suspended or postponed work.
- Q2/2020 Revenue was $1.73 million, a decrease of 22%, compared to $2.21 million in Q2/19, but in-line with our estimate of $1.77 million.
- EQ reported that the revenue was at its lowest point in April and has increased steadily through to June.
- EQ expects revenue in Q3/2020 to be at least 50% higher than the second quarter revenue of $1.73 million. We estimate revenue in Q3/2020 of $2.6 million and $3.5 million by Q4/2020.
- Location-Based Data is a Large and Growing Market
- Data solutions revenue increased 38% year-over-year to $0.4 million in Q2/2020, now accounting for 25% of the overall quarterly revenue, and expected to reach 50% of overall revenue by 2022.
- Room to Grow in the United States
- In Q2/2020, the U.S. accounted for only 7% of revenue but is the largest ad market in the world (Canada is #10).
- Strong Balance Sheet
- In May, EQ accelerated the expiry date of 3.3 million warrants, raising $3.3 million.
- At the end of June 2020, EQ had a cash balance of $5.0 million.
Financial Analysis & Valuation
- We reduced our 2020 Revenue estimate to $10.0 million from $11.3 million & EBITDA estimate to -$0.9 million from -$0.3 million but maintained estimates for 2021 and 2022.
- 2020E: Revenue $10.0 million; EBITDA -$0.9 million;
- 2021E: Revenue $17.8 million; EBITDA $3.0 million;
- 2022E: Revenue $23.1 million; EBITDA $5.6 million.
- We estimate an equal-weighted price target of $2.00, based on a DCF valuation ($2.15/share) and a Revenue Multiple valuation ($1.72/share).
We are maintaining a Buy rating with a (blended) one-year price target of $2.00.
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You can download our 14-page Update Report by clicking on the following link: eR-EQ-UR-2020_09_09-FINAL3
CHART 1: Revenue and EBITDA Margins Estimates – 2020-2023
