A 13-page Equity Research Report was published this week by eResearch Corp. (www.eresearch.com) on EQ Inc. (TSXV: EQ; OTCPK: CYPXF), pertaining to EQ’s third quarter financial results.
EQ enables businesses to understand, predict, and influence customer behavior. 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 Software-as-a-Service (SaaS) platform mines insights from location and geospatial data, enabling businesses to close the loop between digital and real-world consumer actions.
EQ reported revenue of $2.1 million in the third quarter, down 32% from $3.1 million in the quarter last year, and lower than eResearch’s 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. However, Gross Margin in the quarter remained strong at almost 39%, unchanged from the third quarter of 2021, and in-line with eResearch’s estimate of 39%.
The Company reported that throughout 2022, various cost-cutting and restructuring changes were implemented to focus on higher-margin recurring revenue products and overall company profitability. EQ’s Sales, General, and Administrative expenses were $1.2 million in the quarter, down 18% from $1.5 million in the same period last year. The company forecasts cost savings of approximately $2.5 million annually.
EQ continued to refocus resources towards its higher margin, recurring revenue suite of products, including ClearLake, its recently launched retail data insights tool. ClearLake incorporates hundreds of millions of consumer transactions and billions of dollars of consumer spending into a solution that provides insights and understanding into consumer behavior and spending trends in Canada. The company reported that initial feedback from customers for ClearLake was positive for both the retail and automotive products, which the Company believes are important verticals for its solution.
EQ also reported that fourth-quarter bookings should be approximately 50% higher than in the third quarter. It also reported two major contract extensions, a large client renewal, and eight new clients during the quarter for data and media engagements with revenue that should be recognized during 2022 and into 2023.
Due to the lower revenue in the third quarter, lower company guidance in the fourth quarter, and the slower adoption of ClearLake, eResearch lowered its revenue estimate in 2022 and 2023, which decreased its one-year target price but maintained the current rating.
Chris Thompson, Director of Equity Research of eResearch wrote, “EQ is one of the largest providers of location-based data in Canada. We received a demo of the new product [ClearLake] and were impressed with the depth of data and consumer insight that retailers can use to target customers. We believe ClearLake should increase recurring revenue and improve Gross Margins and EBITDA in 2023.
In the digital advertising, analytics, and business intelligence industry, EQ competes with Adobe (NASDAQ: ADBE), Foursquare Labs, and Inuvo (NYSEAM: INUV).
For more information about eResearch's 13-page update Equity Research Report on EQ, including the target price and revenue forecasts, please visit eResearch's website (www.eresearch.com).
Disclaimer / No representations, express or implied, are made by eResearch as to the accuracy, completeness or correctness of its research. Opinions and estimates expressed in its research represent eResearch’s judgment as of the date of its reports, are subject to change without notice, and are provided in good faith and without legal responsibility. Its research is not an offer to sell or a solicitation to buy any securities. The securities discussed may not be eligible for sale in all jurisdictions. Neither eResearch, nor any person employed by eResearch, accepts any liability whatsoever for any direct or indirect loss resulting from any use of its research or the information it contains. eResearch reports may not be reproduced, distributed, or published without the express permission of eResearch. eResearch accepts advertising and other fees from companies, financial institutions, other third parties, and Institutional and Retail Investors. The purpose of this policy is to defray the cost of researching small and medium capitalization stocks which otherwise receive little or no research coverage. To ensure complete independence and editorial control over its research reports, eResearch follows the CFA Institute’s “Best Practice Guidelines Governing Analyst/Corporate Issuer Relations”.
