eResearch is pleased to publish an Update Report on EQ Inc. (TSXV:EQ). The report covers the Company’s Q3/2022 Financial Results and recent news.
We are maintaining our Buy rating but decreasing our one-year price target to $1.80 from $1.90. We estimate an equal-weighted price target of $1.80 based on a DCF valuation ($2.31/share) and a Revenue Multiple valuation ($1.29/share).
You can download the full 13-page report by clicking here: eR-EQ-UR-2022-Q3-2022-12-02_FINAL
EQ enables businesses to understand, predict, and influence customer behaviour. Using unique and third-party data sets, advanced analytics, artificial intelligence, and machine learning, EQ creates actionable intelligence for businesses to attract, retain, and grow customers.
The Company’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.
Quarterly Highlights:
- Quarterly Revenue Declines 32% Y/Y and 35% Q/Q
- EQ reported Revenue of $2.1 million in Q3/2022, down from $3.1 million in Q3/2021 and $3.2 million in the previous quarter, and lower than our estimate of $3.5 million.
- The revenue decline was primarily due to reductions in client spending due to the delay in certain advertising campaigns that were pushed in 2023, primarily by clients in the automotive industry.
- In addition, EQ continued to refocus resources towards its higher margin, recurring revenue suite of products, including the recently launched retail data insights tool (“ClearLake”) and data dashboard.
- Revenue Guidance
- EQ reported that Q4/2022 bookings should be approximately 50% higher than in the third quarter.
- It also reported two major contract extensions ($0.4 million and $0.6 million), a large client renewal, and eight new clients signed during the quarter for data and media engagements with revenue that should be recognized in Q4/2022 and 2023.
- Based on its current forecasts, the Company expects to be profitable in the second half of 2023.
- New Retail Insights Product (“Clearlake”) Launched in Beta
- EQ has rolled out its retail data insights tool (“ClearLake”) that incorporates millions of consumer transactions and billions of dollars of consumer spending to provide insights and understanding into consumer behavior and spending trends in Canada.
- We believe ClearLake should increase recurring revenue and improve Gross Margins and EBITDA in 2023.
Figure 1: Financial Summary
Financial Analysis & Valuation:
- Due to the lower revenue in Q3/2022, the Company’s guidance for Q4/2022, and uncertainty about the timing of revenue from EQ’s new data services, we have lowered our quarterly revenue estimate to $3.2 million from $4.5 million in Q4/2022, which decreases our annual revenue estimate to $11.3 million in 2022 from $14.0 million. For 2023, we are reducing our revenue estimate to $17.0 million from $21.5 million.
- We estimate an equal-weighted price target of $1.80 based on a DCF valuation ($2.31/share) and a Revenue Multiple valuation ($1.29/share).
We are maintaining our Buy rating but decreasing our one-year price target to $1.80 from $1.90.
You can download the full 13-page report by clicking here: eR-EQ-UR-2022-Q3-2022-12-02_FINAL
FIGURE 2: EQ 1-Year Stock Chart
Notes: All numbers in CAD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article and may have been paid by a company mentioned in the article or research report. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the Company’s management as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eResearch’s full disclaimer.
