TOP IDEAS: With the stock up 700%, Gatekeeper Systems’
(TSXV: GSI) Artificial Intelligence (AI) and video analytics solutions for
vehicle and mobile applications could scale recurring revenues.
No doubt, to date, Gatekeeper Systems
has been a very rewarding small cap investment for readers of the Investorfile
blog. Since we first introduced the Company as one of our Top Ideas, trading at
C$0.11 (See: Gatekeeper
Systems is a value buy as revenues continue to grow), the stock
price soared to a high of C$1.43 earlier this year. Currently the shares are up
700% in value since Investorfile first initiated coverage.
in Abbotsford, BC,
with operations in Bristol,
PA, Gatekeeper Systems Inc. (TSXV: C$0.88) provides
scalable, end-to-end, high-definition safety and security solutions for mobile
applications. Core markets include school buses, transit buses and trains.
Gatekeeper integrates high-resolution video, voice and
mapping for extreme mobile applications, providing customers with an effective
tool to increase passenger safety, protect drivers, and manage fleet
operations. The Company's products provide a 360° view inside and outside
vehicles, and each system integrates high-definition video with GPS location
technology for real-time vehicle location, along with time, date and telematics
data. All data is recorded to a military standard digital recording system,
located inside the vehicle.
the majority of the Company’s business was focused on the school bus market as
a camera hardware provider outfitting school buses in North America with mobile
video systems used for recording incidents inside and outside around the
perimeter of the school buses. But two years ago, the Company embarked on a
strategy to accelerate the expansion into mobile video maintenance and support
services within the transit industry in North America and, as a result, was
chosen as Southeastern Pennsylvania Transportation Authority (SEPTA) video
systems supplier for new transit buses for the City of Philadelphia. Subsequently, Gatekeeper was
awarded a long-term contract with SEPTA to service existing video equipment and
provides certain evidence management services.
Gatekeeper’s business in its core markets, both school bus and
transit, has achieved accelerated revenue growth and profitability. For the
Company’s fiscal 2020 financial results, annual revenues topped C$20 million,
up 48% from the prior year, while earning a net income of C$3.5 million or
C$0.04 per share. Gatekeeper reported that revenues for the first quarter of
fiscal 2021 were also up 48% from the prior year's quarter, and Management has
said that contracted sales backlog and sales funnels remain brisk.
growth and profitability over the last two years is impressive. We note that
currently about 85% of Gatekeeper’s revenues are hardware sales (mostly
comprising mobile surveillance cameras and recorders). The balance is generated
from servicing cameras and video equipment, which is tied to longer-term
contract(s) of three to five years. The latter is revenue that is recurring.
Investorfile expects that Gatekeeper will continue to win
significant contracts to supply its hardware within its core markets. However,
we are of the opinion that services contracts that generate recurring revenues
will become a much more important component for the Company’s overall
consistent sales growth and profitability.
Here is why.
to Gatekeeper, it has come apparent that the increasing uses of video recorded
from all mobile data collections installed on school buses, transit buses and
trains generates a tremendous of data, but it is becoming too complex to
analyze and manage using traditional methods. Still, the data that is generated
is becoming a very important asset for use in incidence investigations, which
impact insurance claims, road infractions and safety. As such, Gatekeeper’s
Management has stated that it is developing a strategy which could represent
significant scalable recurring revenue streams to the Company by offering
comprehensive hosted data management services solutions for the data and
information derived from its hardware equipment and other devices collected.
This would be combined with intelligent applications, such as Artificial
Intelligence (AI), which analyze and interpret video as it is being recorded and
automatically make decisions without human interaction. The strategy, as
described by Gatekeeper, is to evolve software applications to manage discrete
data input from multiple devices, which will also transition parts of the Company’s
business to a Software-as-a-Service (SaaS) recurring revenue model.
believes its Artificial Intelligence and video analytics solutions for vehicle
and mobile applications are competitive differentiators and, as such, data
management could be a major growth driver for the Company going forward.
Investorfile, we acknowledge that Gatekeeper’s stock price has appreciated
significantly since our last blog post on the Company. However, from speaking
with Gatekeeper’s CEO (and major shareholder), the focus is to continue grow
the Company, with the goal to become a services and hardware business in equal
proportions over the next several years. That said investors should pay special
attention to future product developments, partnerships and contract
announcements that can scale the Company’s recurring revenue steams in the
future. If Gatekeeper's recurring revenue streams continue to grow, we still
see good upside potential for the stock price from its current trading levels.
Company continues to maintain a good balance sheet.
Systems currently has about 89.7 million shares outstanding.
Company's website www.gatekeeper-systems.com
share ownership disclosure: GSI – Yes
share price accumulation target of $0.25 for Gatekeeper Systems Inc. was
initially reached on November 25, 2016.
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.
is not engaged in an investor relations agreement with Gatekeeper Systems Inc. nor has it received any compensation from Gatekeepers System Inc. the preparation or distribution of this article.
author of this article has acquired and may trade shares of Gatekeeper Systems Inc. through open market transactions and for investment purposes