Company Description: EQ Inc. (“EQ” or “the Company”) 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: ( 1) Data Revenue Increased by 12% Y/Y but Down 51% Q/Q (1a) EQ’s data solutions revenue, recently its fastest-growing segment, increased 12% year-over-year to $0.48 million in Q1/2021 but decreased 51% from Q4/2020. (1b) Due to seasonality & COVID-19 impacts, overall revenue for Q1/2021 was $1.75 million, down from $2.20 million in Q1/2020 but slightly higher than our estimate of $1.70 million. (2) EQ Expects Q2/2021 Revenue at Least 60% Higher Q/Q (2a) In mid-May, EQ commented that it expects Q2/2021 revenue to be at least 60% higher than Q1/2021 revenue as revenue increased month-over-month through the first quarter. (3) Recent Client Deal Announcement Supports Stronger H2/2021 (3a) In January, the Company reported that it signed commitments of more than $4 million for data-driven marketing projects. (3b) In June, EQ announced that it signed a data services contract with one of Canada’s largest integrated media companies and also signed a $1.8 million agreement with an unnamed Media Agency. (4) Strong Balance Sheet After Q1/2021 Financing (4a) As of March 31, EQ’s cash balance was $13.4 million.
Financial Analysis & Valuation: We slightly reduced our 2021 revenue estimate due to the continued impact of COVID-19 on advertising spending but left 2022E revenue unchanged. 2021E: Revenue $14.5 million; EBITDA $0.8 million; 2022E: Revenue $23.2 million; EBITDA $3.0 million. We estimate an equal-weighted price target of $2.65 based on a DCF valuation ($2.54/share) and Revenue Multiple valuation ($2.78/share). We are maintaining our Buy rating and increasing our one-year price target to $2.65.
23 Jun 2021
Data Revenue Increases 12% Year-over-Year as EQ Forecasts 60% Revenue Growth Next Quarter as Retail Reopens
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Data Revenue Increases 12% Year-over-Year as EQ Forecasts 60% Revenue Growth Next Quarter as Retail Reopens
Company Description: EQ Inc. (“EQ” or “the Company”) 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: ( 1) Data Revenue Increased by 12% Y/Y but Down 51% Q/Q (1a) EQ’s data solutions revenue, recently its fastest-growing segment, increased 12% year-over-year to $0.48 million in Q1/2021 but decreased 51% from Q4/2020. (1b) Due to seasonality & COVID-19 impacts, overall revenue for Q1/2021 was $1.75 million, down from $2.20 million in Q1/2020 but slightly higher than our estimate of $1.70 million. (2) EQ Expects Q2/2021 Revenue at Least 60% Higher Q/Q (2a) In mid-May, EQ commented that it expects Q2/2021 revenue to be at least 60% higher than Q1/2021 revenue as revenue increased month-over-month through the first quarter. (3) Recent Client Deal Announcement Supports Stronger H2/2021 (3a) In January, the Company reported that it signed commitments of more than $4 million for data-driven marketing projects. (3b) In June, EQ announced that it signed a data services contract with one of Canada’s largest integrated media companies and also signed a $1.8 million agreement with an unnamed Media Agency. (4) Strong Balance Sheet After Q1/2021 Financing (4a) As of March 31, EQ’s cash balance was $13.4 million.
Financial Analysis & Valuation: We slightly reduced our 2021 revenue estimate due to the continued impact of COVID-19 on advertising spending but left 2022E revenue unchanged. 2021E: Revenue $14.5 million; EBITDA $0.8 million; 2022E: Revenue $23.2 million; EBITDA $3.0 million. We estimate an equal-weighted price target of $2.65 based on a DCF valuation ($2.54/share) and Revenue Multiple valuation ($2.78/share). We are maintaining our Buy rating and increasing our one-year price target to $2.65.