Intouch Insight Ltd (INXSF)

[MikeDDKing]

There were insider purchases of 5,600 shares of INX.V / INXSF on 12/5/2012.

http://www.canadianinsider.com/node/7?menu_tickersearch=inx.v

[MikeDDKing]

INX.V / INXSF is in with another solid quarter with earnings of $0.022/share. Q4 is going to be a little light but this is temporary. I'm expecting Q4 pre-tax earnings to be $0.018. One other factor that they don't mention in the PR but mention in the filing is that they temporarily lost some revenue with hurricane Sandy. The balance sheet is starting to look really nice with a BV of $0.21/share and cash of $0.05/share. IMO the stock remains significantly undervalued and will eventually get noticed.

[MikeDDKing]

In-Touch Survey Systems Ltd. announces Q3 2012 financial results with 68% increase in net profits

OTTAWA , Nov. 22, 2012 /CNW/ - In-Touch Survey Systems Ltd. ("In-Touch") (INX.V) announces revenue of $2.8 million , which was comparable to revenue reported in Q3 2011. Year to date revenue of $8.5 million was 44% higher than revenue reported in the comparable period last year. Net income before taxes for the third quarter of 2012 was $318 thousand , which was 68% higher than net income before taxes reported in the third quarter of 2011. For the nine months ended September 30, 2012 , net income before taxes was $800 thousand , which was 131% higher than the comparable period in 2011. Gross profit as a percentage of revenue for the three months ended September 30, 2012 increased to 54% compared to 46% in the comparable period year ago. Gross profit as a percentage of revenue in the third quarter of 54% also represented the third consecutive quarter-over-quarter increase compared to 49% reported in Q2 '2012 and 44% reported in Q1' 2012. The Company-defined adjusted EBITDA increased 25% to $468,000 in Q3 2012 (YTD 2012 - $1,239,000 ), compared to an adjusted EBITDA of $376,000 in Q3 2011 (YTD 2011 - $792,000 ).

"I am very pleased to report excellent bottom-line results for the third quarter ended September 30 , 2012," said Michael Gaffney , Chief Executive Officer. "Although third quarter revenues were similar to last year, Q3 2012 was our eleventh consecutive quarter of profit. We anticipate 2012 annual revenues to be just under our target growth rate of 25% over fiscal 2011 revenues.. Several large retail customers with Mystery Shopping programs have put their projects on hold although we expect these projects to resume in January 2013 . Generally, these customers have postponed our programs due to their own internal management and program changes and strategic reviews. We believe that current economic conditions have also caused our customers to take a more conservative approach to spending on services," explained Mr. Gaffney .

"During Q3 we acquired two new contracts from European luxury brand automobile manufacturers that open the doors to a specialized product focus and a new business vertical. 2012 saw a tremendous amount of effort invested into solving the gross margin challenges associated with last year's acquisition of Service Intelligence from Global Compliance. The tremendous improvement in gross margins is a direct result of the efforts of our operations teams. On November 12 in New York we launched EventMatrix (eventmatrix.com) a platform as a service solution for Chief Marketing Officers and Chief Information Officers to leverage investments in their CRM. Beginning in the summer of 2012 investments in marketing and sales increased significantly as we refocused our efforts and resources from acquisition integration of existing customers towards new customer acquisition," said Gaffney.

Consolidated Statements of Operations 	Q3 2012 	  	Q3 2011 
   	  	  	  	  	  
 Revenue 	$ 	2,763,145 	  	$ 	2,762,963 
   	  	  	  	  	  
 Cost of services 	  	1,285,024 	  	  	1,495,352 
   	  	  	  	  	  
 Gross profit 	  	1,478,121 	  	  	1,267,611 
   	  	  	  	  	  
 Operating expenses 	  	(1,118,000) 	  	  	(970,347) 
   	  	  	  	  	  
 Earnings from operating activities 	  	360,121 	  	  	297,264 
   	  	  	  	  	  
 Finance costs 	  	(18,282) 	  	  	(19,947) 
 Loss on fair value of derivative 	  	- 	  	  	(80,398) 
 Loss on fair value of contingent consideration 	  	(945) 	  	  	- 
 (Loss) gain on foreign exchange  	  	(30,325) 	  	  	362 
 Gain on disposal of property and equipment 	  	7,949 	  	  	- 
 Net earnings before income taxes 	$ 	318,518 	  	$ 	197,281 
   	  	  	  	  	  
 Weighted average number of common shares - basic 	  	14,226,312 	  	  	14,049,646 

Certain statements included in this news release contain forward looking statements, which by their nature are necessarily subject to risks and uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements reflect the Company's current views with respect to future events, and are based on information currently available to the Company and on hypotheses which it considers to be reasonable; however, management warns the reader that hypotheses relative to future events which are beyond the control of management could prove to be false, given that they are subject to certain risks and uncertainties.

The TSX Venture Exchange has not reviewed the foregoing and has neither approved or disapproved the contents of this press release.



SOURCE: In-Touch Insight Systems Inc.
Contact:

George Pretli
[e-mail]
Controller and Corporate Secretary
613-270-7916

[MikeDDKing]

Fundamental Research Corp. put out an updated research report. They are estimating 2012 earnings of $0.06/share and 2013 earnings of $0.08/share. I think there is considerable upside potential on that 2013 estimate especially if they do another acquisition. It certainly is undervalued at $0.45!

http://www.researchfrc.com/research/pdf/inx/INX%20Update%20-%20Sept%202012.pdf

[MikeDDKing]

I've been buying more INX.V / INXSF. It is one of the best opportunities out there IMO.

[ST Trader]

I know you don't have a lot of faith in technical analysis, but the long-term chart on INX.V sure looks nice.

http://screencast.com/t/UdLKYPpAC

[MikeDDKing]

I've been buying more shares this morning. IMO this is way too cheap!

[littlefish]

Yes that looked decent and the further commentary about the EDC segment picking up (used words "bullish on further growth") also helps (in Outlook section). EDC is usually higher margin I blieve. Also some verbiage of a major Trade magazine helping target the Gas and Convenience biz industry.

They are staying with topline guidance of $11-$11.5 mill for full year so not looking at much pickup sequentially on topline. However, Michael Gaffney does have a history of hitting/exceeding their guidance/marks. And the 55-60% GM guidance for Q3 is helpful.

Could be looking at a cash cow (cash generator) in a couple quarters.

[MikeDDKing]

INXSF / INX.V is a rapidly growing marketing data collection company and is my second largest holding. I think it has excellent odds to be a multi-bagger over the next year and a 10+ bagger over the next 2.5 years. It trades in Canada as INX.V and in the US at INXSF. Here are some reasons why I am very bullish:

1. Revenue has been growing rapidly over many years:
2005 $1,684,290
2006 $3,632,304
2007 $5,060,576
2008 $5,914,814
2009 $5,479,081
2010 $5,893,125
2011 $8,930,735
2012 They are guiding for 25% revenue growth over 2011 but they are ultra conservative and likely will greatly exceed that.

2. The stock is very cheap relative to Q2 earnings of $0.018/share after-tax and $0.024/share before tax. 2012 diluted after-tax EPS should be in the range of $0.06-$0.08 and I expect 2013 to be a significant improvement from there. While it is a bit early, my model currently suggests 2013 diluted after-tax EPS of $0.12-$0.14.

3. They are expanding into mobile apps which is a big part of their growth initiative.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63379561

4. They have a history of successful acquisitions which provides significant upside potential. They have been looking for additional acquisitions but are patiently waiting for the right one.

5. Insiders have been buying:

Jun 15/12 Jun 13/12 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 8,000 $0.350 
 Jun 8/12 Jun 6/12 Watt, Cameron James Control or Direction Common Shares 10 - Acquisition in the public market 14,000 $0.330 
 Jun 7/12 Jun 5/12 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 30,000 $0.320 
 Jun 7/12 Jun 4/12 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 22,500 $0.310 
 Jun 8/12 Jun 5/03 Watt, Cameron James Control or Direction Common Shares 10 - Acquisition in the public market 40,000 $0.340 
 Dec 2/11 Dec 2/11 Pretli, George Direct Ownership Common Shares 10 - Acquisition in the public market 6,000 $0.305 
 Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 3,000 $0.340 
 Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 36,000 $0.340 
 Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 10,000 $0.335 
 Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 8,000 $0.330

6. Their customers include a large number of blue chip companies some of which include the following:
Sprint, Best Buy, Victoria's Secret, Toyota, GM, Mazda, Ford, Pizza Hut, Staples, and BJ's
http://www.intouchinsight.com/industry

In-Touch provides integrated solutions for custom data capture and mobile marketing solutions for global enterprise customers. You can learn more about In-Touch Survey Systems here:
http://www.intouchinsight.com/

The INX.V / INXSF board is located here:
http://investorshub.advfn.com/boards/board.aspx?board_id=11816

[MikeDDKing]

From the INX.V / INXSF MD&A regarding GM: "Management has set a target gross margin from 55-60% of revenues and with on-going efforts to reduce costs, expects gross margins to increase to these levels by the third quarter of this fiscal year." Note that GM in Q2 was 49.5%.

[Traderfan]

Yes, the balance sheet is getting better and better now. Good numbers overall in Q2.

[MikeDDKing]

The balance sheet is really cleaning up nice. They are down to $656K in debt with $309K in cash. They should be debt free or effectively debt free (cash>debt) in two quarters. Book value is $0.18/share and tangible book value is $0.15/share.

After tax diluted EPS was $0.018/share although they are not actually paying taxes.

[littlefish]

Agreed- that's a valid question but maybe a mostly mute point with the filing probably hitting tomorrow pre open I'm guessing, i.e. you may be able to get the answer before the stock opens for trading.

With the info that was given in the PR the most important #s to me were the improved GMs (pre royalty reductions and still in midst of customer migration). They're still under 50% but expect that to change in Q3 and probably more so in Q4.

[Traderfan]

I just looked up the Q1 filing on sedar. They accounted for "future tax expense" and for "current income tax" in Q1. What I don't get is why don't they report the taxed number then.

[littlefish]

They may very well pay taxes on the # they PRd (I expect it).

Remember, it is a pretax # they put out but I personally think they'll ahve osme tax on it. Maybe roughly 30% but probably won't know until the Sedar filing happens.

I applied a 30% rate to the # and got toughly 1.75 cents EPS. We should know tomorrow when the SEDAR filing hits. Gotta run. Good luck.

[Traderfan]

Any approximate idea how long they can avoid paying taxes going forward at this rate of income?

[littlefish]

I'm tentative without being able to look thru the filing but on the surface agree very much.

Only 49% margins for Q2 and some of the legacy issue savings likely have not hit if they still ahve to keep the equip running for the last couple customers to migrate. Q4 could be good with that in mind but thinking they'd be hard pressed to get to 60% GMs by Q3.

At any rate, good call and looks good at least in the PR Lots of potential improvement too ptoentially if margins guidance can be ballpark met. 55-60% I thought by year end? Something like that.

Anyway, 5% GM improvement sequentially is a nice hint.

[MikeDDKing]

In-Touch Survey Systems Ltd. announces Q2 2012 financial results with 71% increase in sales and 190% increase in profits

OTTAWA , Aug. 29, 2012 /CNW/ - In-Touch Survey Systems Ltd. ("In-Touch") (INX.V) announces revenue of $2,947,069 in Q2 2012, which was 71% higher than revenue of $1,722,998 in Q2 2011. Year to date revenue of $5,737,408 was 82% higher than the same period last year. Net income before taxes for Q2 2012 was $351,933 , which was 190% higher than net income of $121,195 reported in Q2 2011. Gross profit as a percentage of revenue was up 5% to 49% in Q2 2012, compared to 44% in Q1 2012 and down 5% compared to 56% in Q2 2011. The Company-defined adjusted EBITDA increased 93% to $493,000 in Q2 2012, compared to an adjusted EBITDA of $255,000 in Q2 2011.

The Company acquired Service Intelligence ("SI") on Aug 4, 2011 with the intent of migrating all of SI's services and products onto In-Touch platforms. The company's gross profit significantly improved by 5% between Q1 2012 (44%) and Q2 2012 (49%) due to the successful ongoing migration. The company expects all but one or two customers to have moved entirely off legacy Service Intelligence technology by the end of Q3 2012 and therefore expects further gross profit margin improvements at a similar level of sales.

"I am very pleased to report superb Q2 results. Q2 2012 was our tenth consecutive quarter of growth and profit. Kudos are due to our management team and all our employees for these results. The past three quarters have been dominated with integrating and migrating Service Intelligence into In-Touch. These activities have taken longer and been far more complex than anticipated. However, to date I am pleased to report that to date we have kept 100% of Service Intelligence customers - even with the tremendous strain of legacy SI systems. It has become patently clear about the superiority of In-Touch systems to provide audit and mystery shopping and mobile on-site audit services," said Michael Gaffney , Chief Executive Officer.

"In January 2012 we had expected to complete at least one acquisition in 2012 that would contribute 25% growth over last year's revenues in addition to the 25% organic growth target. While we have investigated a number of different acquisition opportunities during the year, none have yet met our desired financial criteria. Notwithstanding this, acquisitions are still very much a part of our ongoing strategic plan and thus efforts to identify suitable targets will continue throughout the fiscal year but will only be consummated if our financial criteria are met. We have met or exceeded our organic revenue targets for the first two quarters and the team is working hard to ensure that we meet our 25% revenue growth goals for 2012," said Gaffney.

Consolidated Statements of Operations 	  	Q2 2012 	  	  	  	Q2 2011 
   	  	  	  	  	  	  	  	  	  
 Revenue 	  	  	$ 	2,947,069 	  	  	$ 	1,722,998 
   	  	  	  	  	  	  	  	  	  
 Cost of services 	  	  	  	1,489,552 	  	  	  	750,211 
   	  	  	  	  	  	  	  	  	  
 Gross profit 	  	  	  	1,457,517 	  	  	  	972,787 
 Total operating expenses 	  	  	(1,097,333) 	  	  	  	(856,804) 
 Earnings from operating activities 	  	360,184 	  	  	  	115,983 
 Finance costs 	  	  	  	(28,226) 	  	  	  	(13,676) 
 Loss on fair value of derivative 	  	- 	  	  	  	(45,712) 
 Gain on fair value of contingent consideration 	  	730 	  	  	  	- 
 Gain on foreign exchange 	  	14,763 	  	  	  	63,864 
 Gain on disposal of property and equipment 	  	4,482 	  	  	  	736 
 Net earnings before income taxes 	 $ 	351,933 	  	  	 $ 	121,195 
   	  	  	  	  	  	  	  	  	  
 Weighted average number of common shares - basic 	  	14,226,312 	  	  	  	13,897,979

Certain statements included in this news release contain forward looking statements, which by their nature are necessarily subject to risks and uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements reflect the Company's current views with respect to future events, and are based on information currently available to the Company and on hypotheses which it considers to be reasonable; however, management warns the reader that hypotheses relative to future events which are beyond the control of management could prove to be false, given that they are subject to certain risks and uncertainties.

The TSX Venture Exchange has not reviewed the foregoing and has neither approved or disapproved the contents of this press release.

SOURCE: In-Touch Insight Systems Inc.

[MikeDDKing]

That is an awesome report. I also like that GM will improve further!

[littlefish]

Looks like about 2.5 cents EPS for Q2 pretax:



http://finance.yahoo.com/news/touch-survey-systems-ltd-announces-214100448.html

Was just putting together email for gilead and saw the #s PR hit. Haven't had a chance to glance over it but looks good on the surface

[MikeDDKing]

They typically issue options at prices they think are attractive. So, they think $0.36 is attractive and I concur. :)

[Hegotgame]

Some news out..http://finance.yahoo.com/news/touch-survey-systems-ltd-grants-165700807.html

[MikeDDKing]

The insider buys continue. Cameron Watt continues to add to his holdings.

Jun 15/12 	Jun 13/12 	Watt, Cameron James 	Direct Ownership 	Common Shares 	10 - Acquisition in the public market 	8,000 	$0.350 
 Jun 8/12 	Jun 6/12 	Watt, Cameron James 	Control or Direction 	Common Shares 	10 - Acquisition in the public market 	14,000 	$0.330 
 Jun 7/12 	Jun 5/12 	Watt, Cameron James 	Direct Ownership 	Common Shares 	10 - Acquisition in the public market 	30,000 	$0.320 
 Jun 7/12 	Jun 4/12 	Watt, Cameron James 	Direct Ownership 	Common Shares 	10 - Acquisition in the public market 	22,500 	$0.310	  
 Jun 8/12 	Jun 5/03 	Watt, Cameron James 	Control or Direction 	Common Shares 	10 - Acquisition in the public market 	40,000 	$0.340

http://www.canadianinsider.com/node/7?menu_tickersearch=inx.v

[littlefish]

Nice to see some continued insider buying happening in some of our small microcap companies during the recent market selloff.

[MikeDDKing]

There was some good size insider buying of INX.V / INXSF of 52,500 shares at $0.31-$0.32.

Jun 7/12 	Jun 5/12 	Watt, Cameron James 	Direct Ownership 	Common Shares 	10 - Acquisition in the public market 	30,000 	$0.320 
 Jun 7/12 	Jun 4/12 	Watt, Cameron James 	Direct Ownership 	Common Shares 	10 - Acquisition in the public market 	22,500 	$0.310

http://www.canadianinsider.com/node/7?menu_tickersearch=inx.v

[littlefish]

There are a few companies that are pretty good at being conservative with small market caps including this one but ya you are right- a vast majority of the .OB and .PK companies IMO are more hot air than anything else even when they are completely legit and a good number of them are not even completely legit.

Might be nice to have actual CCs for Q reports with Gaffney available for calls in future but at least they do a thorough job breaking down the #s in their reports.

[gistheman]

Good to hear Sean. I look foward to your report if you get to visit.

[SeanMarconi]

I was on the analyst call as well and for some reason my dial in # wouldn't work. From what I could see the presentation was quick and basically just scrolled through the report very quickly.

I'm a huge believer in this company..they are in the right place in the right time. You just don't see companies under a 10m dollar market cap under promise & over deliver. Very rare...Michael Gaffney is the real deal. I'm potentially going to be meeting with Gaffney in a few weeks. If not I'll be flying up to Ottawa to "kick the tires."

I have my eyes very close to this story and looking forward for additional positive news.

[littlefish]

Thanx for wasting your time then and not mine

When are you going to start covering companies so I can get good, pertinent, and reliable info LOL?

I'm getting tired of reading paid coverage that seems at best somewhat on target and at worst clueless.

Just speaking generally with those comments and not at all with this particular analyst covering INX.V.

All IMO.

[littlefish]

They have a solid track record of overdelivering which is quite an accomplishment for a $5 mill market cap company and something I've always liked with them.

Wonder what had them guide to lower end of range though since it has not been all that long from previous forecast and this forecast is coming after that $10 mill booking # was out there. Maybe it is simple conservative judgement by management.

Anyhow, even at lower range we're talking 55% GMs on $5.5 mill revs (that's the low end of revs and GMs) for Q3 and Q4.

That ought to equate to roughly $300K more in gross profit per Q. Depending on what operating expenses/overhead do, that should travel pretty well to the bottom line.

[MikeDDKing]

I listened to the call. It was worthless.

[MikeDDKing]

I'd be surprised if they didn't blow away that revenue range. Remember that they already have $10M in revenue booked and that was as of a month ago. They are experts at under promise/over deliver.

[littlefish]

Anybody in on the analyst call or have a link?

I just realized they were hosting one today at 2PM west coast time.

[littlefish]

This is a bit weaker guidance (on low end) and hints at flattish sequential revenues going thru rest of year (approx $2.7-$3 mill per Q for Q2-Q4):

"Based on the opportunities before the Company, Management anticipates year-over -year revenue growth. Q2 2012
revenues are currently forecasted to exceed $2.7 million, which represents a 60% increase over Q2 2011, and the
Company continues to forecast total 2012 revenues in the range of $11-11.5 million with a target of 25% growth over
2011."

But company has a track record of being conservative. Maybe they saw an acquisition possibility earlier that isn't there now or something so guided toward lower end. Not sure.

On the plus side, they affirmed looking for 55-60% margins for Q3 and mentioned looking to be done with SI transition by end Q2 which is coming up fast so probably close to a known instead of guesswork.

Looked like COGS on IMS was heavy in Q1 and partially responsible for the lower margins along with the elevated costs from continued migration/transition of SI customers too.

The 55-60% Q3 GM guidance helps show that Q1 is probably a bit of GM aberration along with maybe some seasonal weakness.

[MikeDDKing]

In-Touch Survey Systems Ltd. announces Q1 2012 financial results with 95% revenue increase

OTTAWA , May 30, 2012 /CNW/ - In-Touch Survey Systems Ltd. ("In-Touch") (INX.V) announces revenue of $2,790,339 in Q1 2012, which was 95% higher than revenue of $1,428,242 in Q1 2011. Net income before taxes for Q1 2012 was $129,584 , which was 351% higher than net income of $28,685 reported in Q1 2011. Gross profit was 43.7% in Q1 2012 compared to 62.2% in Q1 2011.The Company-defined adjusted EBITDA increased to $279,000 in Q1 2012, compared to an EBITDA of $161,000 in Q1 2011.

"We were very pleased with our achievements in the first quarter. First and foremost, revenues for Q1 2012 exceeded expectations. Our IMS group experienced significant growth in revenues in the quarter and we were very pleased with our success in retaining customers following the acquisition and integration of Service Intelligence ("SI") into the Company. Retaining the SI customers is a testament to the fine efforts of our Operations Team. Further, we are continuing our efforts to realize synergies, improve gross margins and achieve cost savings from the ongoing integration of our businesses and expect to realize the benefits of this plan this fiscal year", noted Michael Gaffney , Chief Executive Officer.

"We also increased our investment in product development and sales and marketing in Q1 2012 by $133,000 relative to Q1 2011 to support the development of new software features and functionalities in our EDC and MDC business segments, as well as to drive revenue growth in the next three quarters. We reiterate our previous forecast for higher revenues in 2012 compared to 2011," said Gaffney.

During the quarter, we also entered into an arrangement with a major trade magazine that will allow us to take a prominent role in the Gas & Convenience Industry. In May 2012 , we launched Industry Benchmark Mystery Shops, which will form the foundation of an article in the magazine; the results of which will be presented at an industry leadership summit in August. The presentation will involve representation from In-Touch/Service Intelligence and will take place on the main stage just prior to the keynote address by Bill Clinton & George W. Bush. In addition, we have been engaged by several major companies in the industry to generate their own Benchmark Shopping Study using the magazine study as the comparison. Other similar opportunities in other target industries are currently being pursued as well.

Consolidated Statements of Operations 	Q1 2012 	  	Q1 2011 
                 
 Revenue     	$ 	2,790,339 	  	$ 	1,428,242 
                 
 Cost of services     	  	1,570,711 	  	  	540,342 
                 
 Gross profit     	  	1,219,628 	  	  	887,900 
                 
 Total operating expenses   	  	1,030,864 	  	  	743,987 
 Earnings from operating activities 	  	188,764 	  	  	143,913 
 Finance costs 	  	(33,775) 	  	  	(15,943) 
 Loss on fair value of derivative 	  	- 	  	  	(45,369) 
 Loss in fair value of contingent consideration 	  	(349) 	  	  	- 
 Loss on foreign exchange  	  	(25,056) 	  	  	(55,920) 
 Gain on disposal of property and equipment 	  	- 	  	  	2,004 
 Net earnings before income taxes 	$ 	129,584 	  	$ 	28,685 

Certain statements included in this news release contain forward looking statements, which by their nature are necessarily subject to risks and uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements reflect the Company's current views with respect to future events, and are based on information currently available to the Company and on hypotheses which it considers to be reasonable; however, management warns the reader that hypotheses relative to future events which are beyond the control of management could prove to be false, given that they are subject to certain risks and uncertainties.

The TSX Venture Exchange has not reviewed the foregoing and has neither approved or disapproved the contents of this press release.

[littlefish]

Sounds like good reasoning.

Maybe they'll clarify in the MD&A when that stuff gets posted on SEDAR.

Thanks.

[littlefish]

Teaser rate doesn't make sense for GMs declining sequentially with the higher revs so I'll go with maybe a combination of higher level of SI migration in the Q causing higher overhead expenses than in Q3 or Q4 and also maybe some seasonality weakness thrown in. Plus annual audit costs probably hit in Q1.

[MikeDDKing]

As I understand things, the improvement in GM is due to switching the customers from SI software to INX software. The GM improvement is not related to obtaining new customer contracts. I don't know the mechanics of the conversion but they likely need to write software to convert customers over. That type of conversion is often not done one customer at a time but rather is done as a group. I could be wrong about this but that is what I have pieced together. Also, if you read the April 30th PR, it indicates that they expect gross margin improvement in Q3. They didn't say they expect gross margin to increase sequentially through the first three quarters which is what you would expect if your theory were correct.

You probably are also correct that there is some conversion cost that is temporarily impacting GM.

[littlefish]

Could be they had increased overhead by migrating a larger chunk of SI customers than in Q4.

Think Gaffney had mentioned they were something like 75% thru earlier in May (off memory) so maybe they went thru a substantial pile in Q1.

Probably several factors in play.
Anyway, as mentioned this still looks quite cheap barring another market meltdown.

[littlefish]

Doesn't it seem a bit counterintuitive to not recognize any gross margin improvement until the very last customer is switched over?

Shouldn't the company be gradually switching customers from lower margin SI to higher margin INX.V contracts as time goes on and therefore represent at least a bit of margin improvement the higher the % of SI customers get switched over (i.e. hint at sequentially improving margins)?

Certainly some cost saving benefits won't hit until the very last customer has switched over but thought we'd get a general trend upward as well with margins so I was a little bit disappointed to see them slip back a bit.

I suppose there may be some seasonality and/or lumpiness Q to Q and there is some variation of margins within the differing operating segments too.

At any rate, the filing should put a little more light on things.

Margins difference definitely could be from a bit of lumpiness and the real cost saving benefits won't hit until 2nd half 2012.

But I was hoping we'd see a creep upward in margins as migration continued from SI to In-Touch not downward.

It is just one Q and not like it was a big miss or anything. Revs improvement continued strong YOY and they still made money.

Thanx for the thoughts. Stock still seems quite cheap. Starting to find a few of those around these days LOL.

[MikeDDKing]

The GM wasn't surprising at all. GM dropped a little bit but it was consistent with the quarter-to-quarter swings that they have had in the past. Q4'11 GM was 47.5% whereas Q1'12 GM was 43.7%. There is significant variation in GM by segment which causes the quarter-to-quarter swings. Also, it is my understanding that they have to cut over the entire SI customer base before they get the improvement in GM there. So, we have to wait until Q3'12 to see that improvement. They haven't provided GM numbers for SI customers but my estimate is that it was roughly 32% in 2011 which provides a significant opportunity.

[littlefish]

Just one quarter but the gross profit % dip was surprising (at least the % amount of the drop).

Not sure what caused that. They definitely have some lumpiness with costs as well as revs and this is just one quarter (that likely involved continued SI migration potential costs) but Q1 numbers have me wondering where their GP % will eventually be going forward. It was a wild swing sequentially.

Certainly they have some tailwinds with reduced royalty payments latter half of year and they'll have some immediate cost savings once all SI customers are migrated/integrated over (like shutting down old servers and the energy they soak up). But I'm starting to wonder if they'll get back to 60% unless there were some one times in the Q.

I was only reading the headline PR and didn't see the actual Q report on Sedar yet so I'll wait for that to get better picture.

Revs were nice but the margins caught me a bit offguard. My feel after talking to Gaffney (and reading filings) were that revs target looked fairly attainable and that margins could (should?) creep higher with time this year. Guess that didn't include Q1. Bummer.

On the plus side, they did make money even off the suppressed margins so if this is a hiccup it won't be a major problem. Let's hope it is a hiccup and not harbinger of lower margins going forward.

I'm a little concerned this SI migration may be a bit lower margin than what I was expecting.

I wonder if the company is giving teaser pricing up front with short term contracts to capture all the SI customers? It sounded to me like they were pretty much getting all of them to switch over so far and they were something like 70%+ through the migration. If that be the case, I'd expect them to get better temrs on renewals (hence would make sense to have short term contracts). Might have to make another call.

Good luck.

[gistheman]

Mike, thank you for the insider purchase list. The incentive is there and execution seems to be on track. Patiently holding. My third largest holding.

[MikeDDKing]

The last insider purchase of INX.V / INXSF was 6,000 shares at $0.305 on December 2nd. There have been periodic insider purchases over the past year and maybe more. I don't remember exactly. Here is a list of the ones from November 2011 and forward:

Dec 2/11 Dec 2/11 Pretli, George Direct Ownership Common Shares 10 - Acquisition in the public market 6,000 $0.305
Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 3,000 $0.340
Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 36,000 $0.340
Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 10,000 $0.335
Nov 10/11 Nov 8/11 Watt, Cameron James Direct Ownership Common Shares 10 - Acquisition in the public market 8,000 $0.330

Also, as of the end of 2001 there were 1.8M stock options outstanding with a weighted average exercise price $0.19. Only 245,001 of those options were exercisable as of December 31, 2011. Insiders clearly have incentive to build a higher valuation for the stock.

[TrueFlaco]

Mike - agreed that this company looks very undervalued, especially with those estimates. Haven't had time to look but do you know if there is much in the way of insider purchases going on? It would be nice to see that as a sign of internal agreement as to the expectations here.

[MikeDDKing]

There is a new research report out on INX.V / INXSF by Fundamental Research Corp. They have a price target of C$1.00. Their estimates for 2012 are for revenue of $11.7M and EPS of $0.08. I think those estimates are low but the stock is drastically undervalued IMO if they only hit those numbers.

[MikeDDKing]

INX.V volume over the past week has been much higher than normal. Today it was 39,333 shares vs an average volume of 13,315. It was up $0.005 to $0.345 and has moved up since earnings day when it jumped 23%.

[littlefish]

I think there may be a chance at a sequential weakish Q1 with the 'significant' portion of work lost from Canadian retailer customer (in 2010 and 2011 they accounted for over 10% revs).

No numbers given in the MD&A how much of the work would be lost but sounds like most of it (think customer was $1.2+ mill revs in 2011 and company used the word 'significant' describing the loss).
Also makes me wonder a little bit about competition in the various segments they operate in (the lost biz was from MDC segment).

The positive is that they've been fairly conservative with guidance in the past it seems and are still guiding for the higher YOY revs after the significant downsizing of work for that customer.

On the whole I would guess that loss is higher margin biz that would probably drop off significantly sequentially for Q1 (just guessing) while the other SI biz that is probably still a bit lower margin starts to fill in for it (ISM probably helping fill gap too).

Going forward I would expect the lower margin biz to get back up to where the lost biz margins are in back half 2012 given the company's commentary so seems like a temporary POTENTIAL risk for Q1. May not even materialize. If it does (some selling on a possible disappointing Q1), seems like would be a buying opportunity unless the economy suddenly takes a drastic turn for the worse.

The company demonstrated in the big downturn how vulnerable they may be to macroeconomics. That can obviously be said of a vast majority of micros.

BTW I maybe shouldn't extrapolate out the SI revs for all of 2012 (from my last post) since those customers are supposed to be fully integrated/migrated by end July 2012.

I'll have to try to get a better handle on their basic business approach like how long contracts are signed for, what potential range would be from 'big' to 'small' customer contracts. I have no clue right now.

I had a bid in for a few of the INXSF.PK shares today (broker only allows the pink equivalents) but got none.

Good luck.

[littlefish]

Could just bite off a small starter position since the ask was only I think $0.35. That's what I did Monday (bought a little at the ask). I put in for a few more at $0.335 to support bid tomorrow.

If I get more I'll start digging a bit more. Time is a bit fleeting these days.

I am curious if much of the projected 2012 revs growth (organic) is just continued migration of SI customers. Cuz if you use the rate of gross revs recognized in 2011 ($1.7 mill thru 5 months I think?) I got almost $4 mill revs for 2012 if they continue at that pace. Guessing the revs may be more heavily weighted early so the $1.7 mill recognized since Aug to end of year might be a bit 'heavy'.

That's a $2.3 mill difference YOY if they could continue the same pace of revs from SI thruout 2012 which equates to almost the entire projected low end revs target for 2012. They did mention some lost revs too so maybe that's where ISM growth optimism comes in to fill that lost revs gap (MDC biz loss).

They will be losing some of the MDC biz ( a decent chunk) from a Canadian retailer client in 2012 that made up over $1 mill of revs in 2011 so guess there's combo of new biz and attrition from that client moving biz to another provider going on with the 2012 revs projection (not sure how competition stacks up, apparently in the MDC biz it affected one client mostly switching to other provider).

Might be something I can ask if I can get a call in some time fairly soon (how much/what % of projected revs growth roughly would be from SI vs ISM in the organic growth for 2012 or something like that).

Not sure how much of that SI migration may become recurring revs/repeat customer biz too but it is helpful to see the company getting them signed on to the tune of $1.7 mill in 5 months for 2011. Figuring the customers are probably liking what they see enough to drive that much business INX.V's way.

I don't even know how long these negotiated contracts are typically for either as customers switch over (was thinking typiclally annually but thought they mentioned some are month to month for now possibly as they debate switching over, who knows). I need to do some work to get up to speed.

Mike- do you know how long these contracts typically run?

Been a long week already, I'm about done for the night.

All IMO. Good luck.

[SSKILLZ1]

Unfortunetly I don't have a share yet. I did try but I wanted around .30. I do like it a lot, but have to decide if I'm willing to go a little higher. All is just my opinion, and I could always be wrong though.