TOP IDEAS: AirIQ Inc. (TSXV: IQ) recurring revenues and profits are poised to grow due to the multitude of orders received for the Company’s electronic control module that provides real-time engine diagnostics for a major US rental operator of vehicles.

Investorfile's share price accumulation target of $0.20 for AirIQ Inc. was reached on July 5th, 2019. For the record, we do not revise share price targets for our Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.

Currently AirIQ’s stock price is up 138% in value since Investorfile first recommended the Company as one of its Top Ideas (See: AirIQ is a technology company small in size but the stock is big in value). But we believe the Company is already set to generate strong financial results in fiscal 2020 (which began April 1, 2019) therefore enhancing the stock’s short-term upside potential.

AirIQ Inc. (TSXV: IQ – C$0.19) operates in the growing telematics industry and, for 20 years, the Company has been providing Global Positioning Service (GPS) solutions to customers throughout North America. With its intuitive web-based platform, AirIQ utilizes GPS devices to provide fleet operators and vehicle owners with a suite of asset management solutions to reduce cost, improve efficiency and monitor, manage and protect their assets. Services are available online or via a mobile app and include instant vehicle locating; boundary notification; automated inventory and maintenance reports; security alerts; electronic logging; and vehicle disabling and unauthorized movement alerts.

The Company has seen a growing demand for its Electronic Control Module (ECM), a device that connects to the vehicle's electronic control module and delivers real-time engine diagnostic codes to AirIQ's Web application, AirIQ Fleet. With the AirIQ Fleet solution, an operator of a fleet of vehicles can then view reports and set up notifications to monitor the health of their fleet, including engine, transmission and emissions-related problems. By integrating a GPS (global positioning system) device with diagnostic capability together with AirIQ's Web application, a fleet operator can monitor their vehicle's engine performance to quickly identify issues, proactively perform maintenance, and thereby decrease costs by increasing safety, uptime and productivity.

The features of AirIQ's fleet management solution have been well-received by a customer of the Company, a major US-based light and heavy truck rental operator. The Company has started receiving a multitude of orders for its ECM device from this customer. AirIQ’s ECM device is being installed on all new vehicles that this rental operator is deploying. Over the past 12 months, the combined value of orders from this one customer is growing and currently exceeds C$2.9 million.

Typically, when AirIQ wins orders, they have two distinct revenue components. The hardware component (the ECM) is revenue which is earned on delivery. The GPS monitoring of AirIQ ECM is recurring revenue, usually recognized over a 24-month term, amounting to about 60% of the total contract award.

Last week the Company released its fiscal 2019 results for the 12-month period ending March 31, 2019. AirIQ reported solid results this past fiscal year. Recurring revenues were up 22% to C$2.72 million, which accounted for 74% of the total revenues of C$3.68 million. For fiscal 2019, net income grew 44% to C$231,000, or C$0.01 per share. Working capital of C$1.12 million for the year ended March 31, 2019 improved by 52% or C$385,000 from the prior fiscal year. At the end of the fiscal year 2019 the Company had C$717,000 cash on hand and no debt.

While we are content with AirIQ’s recent annual financial results we think investors should look forward to future quarterly results, which will begin to be impacted positively by the forementioned multitude of orders.

As mentioned in our last blog post on AirIQ (See: AirIQ is building for a takeover of itself), Vecima Networks Inc. (TSX: VCM) has acquired a 21% ownership position in the Company. Vecima Networks is a cash-rich operation that has a telematics division operating under the Contigo, Nero Global Tracking and FleetLynx brands. Investorfile still believes they could be a potential acquirer of the remaining 79% stake in AirIQ Inc. That said, there are also other possible acquirers operating in the GPS business.

We conclude that, given our robust outlook for the upcoming financial results combined with the future possibility of a liquidity event (takeover), the stock of AirIQ remains attractively priced at its current trading level of about C$0.19. For small cap investors who purchase shares there is still ample upside potential with minimal downside risk.

AirIQ has approximately 29.8 million shares outstanding.

The Company's website: www.airiq.com

Author's share ownership disclosure: IQ - Yes

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This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

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The author of this article has acquired and may trade shares of AirIQ Inc. through open market transactions and for investment purposes only.