Wishpond Technologies $WISH.V FINS Review
Q2 2024 (2.75 / 5)
Wow, it’s been over two years since I last reviewed Wishpond. I didn’t hate it giving it three stars way back when but it certainly hasn’t performed like a three star stock. It was in the high fifty cent range at that time back in May of 2022 and peaked in the 90 cent range shortly after that review. It recently hit lows near twenty-five cents but has received a bit of a bounce on these earnings. Justified? Let’s find out.
Balance Sheet:
If I had to describe their current ratio in a word - shite. It currently sits at a paralyzing .48 with $1.1M in cash and just $460k of other short term assets against $3.23M of liabilities due in over the next twelve months (deferred revenue excluded). They do have $1.25M drawn on their $6M credit facility which was renewed post financials, so that amount won’t actually be required to pay off within a year. But even with that excluded their current assets still do not offset their accounts payable. Interestingly, their credit facility is secured by company assets which mainly consists of goodwill and intangibles.
Cash Flow:
Through two quarters are basically operationally cash flow neutral with $54k of operational cash flow generated compared to $430k of operational burn at this stage last year, so some positive steps being made here which puts a little less pressure on their lackluster balance sheet. They paid out $631k in acquisition related activities and increased their debt load by about a quarter million dollars. Overall their cash position has depleted by 23% from where they started off 2024.
Share Capital:
Decent sized float with just 54.2M shares outstanding with virtually no dilution in the last 18 months
Post financials, renewed their NCIB. This is a smokescreen. They are in no position to be buying back stock barely being cash flow positive with a poor balance sheet
2.75M options outstanding, all out of the money with none expiring for 3 plus years. Do not expect assistance to the balance sheet to come from here
193k RSU and 1.35M PSU’s outstanding
41% insider and 4% institutional ownership per Yahoo Finance
Some insider buying in the 40 cent range in Dec/Jan
Income Statement:
$5.8M of revenue achieved in the quarter, a modest lift of 3.4% over Q2 last year and at their midway point of the year have delivered $11.9M, up 5.5% to last year with their QoQ results down by 3.7%.
More impressively is the improvement in their already sexy gross margin rates. Q2 grew over last year by 230 basis points to 67.6% and YTD has grown by 240 basis points to 67.9%. So overall they achieved 9.5% more gross margin dollars on 5.5% revenue growth.
YTD total expenses are down by 1.6% but the majority of that was through non cash based share based compensation which was down by 57% or $400k. Actual cash burning expenses (G&A and Sales & Marketing) are up 4.3% on the year but they did show some better conversion in Q2.
Overall they reduced their losses to $123k in the quarter ($645k last year) and $591k YTD ($1.45M last year).
Overall:
Some decent improvements over last year but when I saw a 50% share price jump on earnings I have to say I was expecting a little bit better than this.
A company who can produce a nice investor deck is always nice and Wishpond does a pretty darn good job of that.
Not totally sure of what I think about today’s valuation. It’s under 1x TTM revenue so it is certainly intriguing and worth a look. I like their high margin, recurring revenue model and the movement of business into their new product, Propel IQ with even better margins. On the flip side is their high costs of doing business today. Right now their two cash burning expense buckets of G&A and Sales and Marketing are 61% of revenues. A business with 30% margins and a 15% expense structure is more attractive than a 70% margin, 61% expense model.
From 2020 to 2022, their growth was an impressive 30 - 80%, last year in the low teens and this year mid single digits. So the biggest opportunity to deliver more on the bottom line appears to be expense reduction and I just haven’t seen enough here yet. Watchlist worthy at best. 2.75 stars.
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Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.