TOP IDEAS: Entry into the transit markets has lead to growth in sales and profits for Gatekeeper Systems Inc. (TSXV: GSI), a provider of high-definition video surveillance systems and security solutions for mobile applications.

Investorfile's share price accumulation target of $0.25 for Gatekeeper Systems Inc. was reached on November 25, 2016. 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.

It has been a while since Investorfile has posted about Gatekeeper Systems Inc. as one of our Top Ideas. Within the first six months of our introductory blog on the Company (See: Gatekeeper Systems is a value buy as revenues continue to grow), the stock price raced up 195% in value. Admittedly, the stock value got ahead of itself and the underlying business growth -- for various reasons -- became stagnate. As a result, the stock price drifted down and has traded in a low range. That said, today there is renewed strength in the Company’s business, which may lead to renewed strength in Gatekeeper’s stock price going forward.

Based in Abbotsford BC, Gatekeeper Systems Inc. (TSXV: C$0.12) is a leading provider of high-definition mobile video surveillance and safety solutions for a range of markets, including school districts, law enforcement, public transit authorities, as well as the US military and Coast Guard. Each Gatekeeper mobile video solution integrates high-definition digital video (HDDV) with Global Positioning System (GPS) for real-time vehicle location, time, date and telematics data, while providing a comprehensive 360-degree view inside and outside vehicles.

Historically, the majority of the Company’s business was focused on the school bus market. Gatekeeper is a brand leader in outfitting school buses in North America with mobile video systems used for recording incidents inside and outside school buses. The Company continues sell in this marketplace, with deliveries of its recently launched SP25 School Bus Vision systems, which have 10-megapixel dual-camera systems for multi-lane viewing licence plate capture capability; a high-speed licence plate tag reader; and cellular network compatibility, ready for remote and auto downloading of stop-arm violations. More and more school districts are using video evidence to help protect school children, following the increase in tragic deaths of students who have been struck by vehicles illegally passing school buses.

Since we first profiled Gatekeeper Systems, the Company has embarked on a strategy to accelerate the expansion into mobile video maintenance and support services within the transit industry in North America. As such, in April 2018, Gatekeeper acquired the key business assets of an existing mobile video surveillance service provider to the transit industry and established a US subsidiary, Gaterkeeper USA, located in Wilmington, Delaware. The assets purchased included assignment of existing contracts to provide mobile video surveillance products, support, and maintenance to the Southeastern Pennsylvania Transportation Authority (SEPTA). SEPTA is the sixth largest public transportation system in the U.S. and is actively using video as protection against fraudulent claims with an installed base of more than 27,000 video cameras on vehicles and in stations.

The asset acquisition and creation of Gatekeeper USA provided an opportunity to showcase its video technology to SEPTA as part of a competitive process. The Company was subsequently chosen as SEPTA’s video systems supplier for new buses, which SEPTA had contracted to be supplied by New Flyer. Gatekeeper said this initial order validated the Company’s strategic direction and provided further opportunity for the Company to showcase its ability to provide outstanding support services. Gatekeeper was awarded further contracts by SEPTA, and the Company says it is now leveraging this customer’s endorsement, along with the Company’s service strategy, to attract additional transit customers and new business in other industries.

As at May 31, 2019, the Company says contracted sales backlog and sales funnel have grown to exceed prior years. Increased activity in the transit market has supported the growth with school bus sales continuing to contribute at historical levels. The addition of the transit business is reflected in the Company’s fiscal 2019 revenue for the three and nine month periods ended May 31, 2019, which were $4,308,506 and $8,846,803. This revenue growth represented an increase of 70% and 70%, respectively from the comparable prior year periods. Gatekeeper generated net income of C$616,572 (C$0.01 per share) in its most recent quarter (fiscal Q3), and the Company expects to be profitable again in fiscal Q4. The 2019 fiscal year concludes at the end of August.

The Company says it is also progressing on its recurring revenue strategy, defined as revenue from long-term service contracts; hosted solutions for maintaining video systems; video management with AI capability; and other long term monthly recurring revenue contracts. Recurring revenue for the current fiscal quarter reported was approximately $629,000 compared to approximately $317,000 for the comparable period in the previous year.

To support future growth in recurring revenues, Gatekeeper recently launched a number of new products that would support a Software-as-a-Service (SaaS) model. The Company said it has a completed phase one of its Artificial Intelligence (AI) platform as part of its G4 Vision Web Based software application for transit and other mobile markets. Gatekeeper’s Management believes in the market opportunity of being able to provide comprehensive, integrated management solutions for the data and information for its equipment and other devices collect, combined with intelligent applications that are able to analyze and interpret video as it is being recorded. Additionally, offering the capability to provide professional, hosted data management services to monitor, review and package video evidence on behalf of customers is another potential area of growth that could represent significant scalable recurring revenue, according to the Company’s Management.

Investorfile is encouraged to see that Gatekeeper Systems has returned to profitability through its recent growth in revenues generated from the Transit markets. We see "born-again” value in the Company’s share price at the current trading levels, much like the value we identified in our initial blog post before the stock price appreciated significantly. That said, for the Company share price to sustain future appreciation, recurring revenues will be an important component to for overall sales growth. If Gatekeeper's recurring revenues mix continues to grow, we see strong upside potential for the stock price.

The Company maintains a good balance sheet with cash on hand and no debt.

Gatekeeper Systems currently has about 87.5 million shares outstanding.

The Company's website www.gatekeeper-systems.com.

Author's share ownership disclosure: GSI - 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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