Zoomd Technologies ($ZOMD.V) FINS Review

Q3 2024

Nov 29, 2024

What a morning! The share price gapped up large this morning after seemingly very strong results touching $1, which was 61% up from yesterday’s close. It came all the way back to around 70 cents, and closed at 80, up 29%, in a wild trading day that saw 4M shares trading hands.

Heavy volume and FOMO in early morning trading on ZOMD

Back on Nov 18th, this hit one of my alerts. After digging in i recognized what a soft quarter the company had last year and thought this could set up to be a big winner when they released financials later in the month, which I then highlighted to paid subscribers.

Screenshot from Nov 18th subscriber chat.

The stock barely got into my targeted zone and I was lucky enough to pick up as many shares as I could then then. FULL disclosure, I sold during the early run up at 99 for a very nice quick double.

Now let’s take a look at the financials to see whether I and the market at large should be taking these guys more seriously into the future and perhaps look to rebuild a position. Oddly, I have not reviewed the stock since December of 2022 when I gave it a measly two stars. I’m sensing a big upgrade will be in store.

Oh yeah. These guys. Terribly formatted financials with very little corresponding notes, and their MD&A isn’t much better. This will be a tough review to do, but on the other hand it will be short.

Note: ZOMD reports in USD.

Balance Sheet:

A very good current ratio of 1.9 that consists of $6.8M in cash and $8.7M in receivables over top of $8.25M of short term liabilities. The growth of their receivables from the beginning of the year is explainable due to their growth but no idea of the aging, and no info on their $2M line of credit in their quarterlies. Zoomd has no long term debt.

Cash Flow:

An incredible $5.08M of operational cash flow generated YTD compared to burning almost a half million at this stage last year. More than half of that positive OCF was achieved in the third quarter. They have also made some small investments in software and equipment totaling $450k, and after paying their leases have improved their overall cash position by 163% since the beginning of the year.

Share Capital:

98.3M shares outstanding, with only 1% dilution over their past seven quarters in a very well managed float.
10.7M options well ITM with no other dilutive measures
23% insider ownership (per YF)
No insider activity posted to SEDI since Dec 2022. Really?

Income Statement:

I can’t believe we’re already here!

As suspected, an absolute slam dunk on the top line with $16.7M in revenue in the quarter, 135% better than the comparable quarter bringing their YTD revenue to $39.4M, 60% better than 2023.

Zoomd has very stable gross profit with 39.3% in Q3, a slight 20 basis down from last year and 38.9% on a YTD basis, about 50 bps better than 2023. Operational spending was up 15% but anytime you grow by 135% that is more that acceptable and on a YTD basis, operational expenses are actually DOWN 33%, but that does include a $2.8M one time impairment. With that removed, their operational spending is still down 15% while driving 60% more on the top line. Incredible conversion. After finance expenses the company drove $3.16M in net income vs a loss of $260k. That net income is more than half of their YTD profitability of $5.85M, which is more than a $10M turnaround from the $4.6M in losses they incurred at this stage last year.

Overall:

There really isn’t anything to fault them for in these financials, although part of that reason is they do not disclose ANY notes in the absolutely worst disclosure and formatted financials I have ever reviewed, so that has to be considered.

More personal disclosure, after being out at $0.99 this morning, I’m back in at $0.75 just before close.

So how do we look at this from a valuation perspective? Given today’s exchange rate (OMG the poor Canadian dollar) their $16.7M in revenue translates to $23.4M CAD giving them a quarter over quarter increase of 22%. That gives them a TTM of $64.6M in revenue and $8.1M in net income. Those would drive MC/Sales ratio of 1.3 and a 9.7 P/E. That would be relatively attractive at their recent rate of growth.

But the last two quarters blow the previous two quarters out of the water. If we trend their last six months it works out to $85M in revenue and $14.75M in net income which would come out to a MC/Sales ratio of .92 and a P/E of 5.3. Even after a share price increase of 30% today.

I listened in to the earnings call a little bit today. No slides, and while the commentary was positive, I already knew most of what was conveyed by reading these financials. I bailed 15 minutes in. Pro tip: Slides.

These are financials worthy of FOUR stars. I’m hesitant to award them a rating that high given the formatting and disclosure here, so I promise you I will go through their annuals with a fine tooth comb when they are forced into more disclosure when released. But these are just too good to award them any less. 2025 Wolf Pick worthy? Potentially, but some more DD work must be done.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

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.