Wooferwax, that question can only fully be answered by the company and I am with you there as the "IoT" division is currently the single largest revenue generator for iQSTEL. Thus even small margin gains there could add up to big contributions to the bottom line.
But here are some things to consider as I see it. To begin, you have to note that the "IoT" division as we think of it (Smart Tank, Smart Gas) is not necessarily what the 10-Q is referring to. Actually there may not be any revenue in Q2 from IoT devices, or if there was it has been minimal to the date of the last filling. I think if there was substantial IoT device revenue we would have been told.
Rather, the "IoT" revenue as stated in the 10-Q is either all or mostly all revenue from the telecom (like SMS) business that the company acquired and operates from Austin , Texas. I'm not sure why the 10-Q shows it as "IoT", but I can only assume the two fall under the same ownership for that division or are legally tied together for accounting purposes. Just my guess, but we know that Q2 revenue is all or mostly all telecom revenue.
The QGlobal telecom business based in Miami is minimal to the whole so I won't say a lot about that. Smartbiz and Whisl are new, but each reported decent margins at near 10%, and over 21% respectively. Swisslink has reported margins over 10% for at least the last 6 quarters, if not more.
That leaves Etelix and "IoT", and I'll refer to IoT as "Austin" for the remainder of this post.
Several times, I have referred back to a statement from iQSTEL that generally said that newer SMS business involved lower margins, at least until the company can get in a position where it can negotiate better prices. And you have to keep in mind that competition is fierce amongst the various small telecom companies.
Austin is the newest of their business, but Etelix is among the oldest. The two together represented 87% of total revenue for iQSTEL in the 2nd quarter, but had the lowest margins. Etelix margin was 3.66% and Austin was only .62%.
You might think Austin has been around long enough to start showing more improvement, and certainly Etelix has been around for some time. Personally, I would love to start seeing better improvements for each or at least hear from the company that improvements for each of those will improve soon. Typically, they just advise that overall telecom margins are expected to improve.
Since Etelix and Austin are such big revenue contributors, then even small gains in margins can make a huge difference. If they are able to reach around 10% margins or better that could really do a lot of good to the bottom line. Only iQSTEL can answer where they see this going.
But I suggest to consider that Etelix and Austin are the recent big growers of revenue. Swisslink is relatively flat in growth and Miami is minimal in size anyway. Etelix has nearly doubled over the last 6 quarters, and you could almost say the same for Austin. In fact Austin, grew by about $2 million in the last quarter and that increase alone is more than total Swisslink and Miami sales. Also, the Austin increase equals to about a third of total Etelix sales.
So 87% of revenue is growing and that brings me back to the idea of "new" business, and tighter margins. Etelix and Austin are both not "new" but they are adding a lot of "new" business, and maybe that helps explain why margins are more lean there. as they may not be in a position to negotiate better prices yet.
Still, when you look at the whole, Etelix and Austin should still have a lot of business that the company has carried for a while, and we should hope iQSTEL can start improving the margins better there. It's a good question for the company, because it does make a difference on future profits. Are these margins about all we can expect or can Etelix and Austin perform as well as Swisslink?
But recently the company made this statement, so maybe we already have the answer.
Management reports that the company's Telecom Business Division is performing amazingly growing revenue and increasing gross profit as a percentage of revenue.
Although modest, margins have grown over the last three quarters, and if they continue the positive trend then they can build on it. For example, Q2 at 3.01% margins exceeded the full year margin result of 2021 of 2.37%.
But the company says telecom margins will further improve. Meanwhile, any tech products or Fintech additions should involve better margins and that should also serve to bring up the total margin. The bottom line is that the company expects profitability by Q4 and adds "and beyond". That may be the best clue we have on margin direction at this time.
One last note. I pointed out that Etelix and Austin are the largest growing segments. But we don't yet know if Smartbiz and Whisl are going to be large growers too. They represented about 8% of total revenue for Q2 which they only had sales for 1 month of the quarter. If they grow and maintain higher gross margins then that should help the overall quite a bit.
Likewise, other telecom acquisition activity may occur, and can become a large factor in overall margins. iQSTEL was selective with the last two acquisitions and looked for those opportunities that will be immediately accretive.
Maybe a little more than you asked for, but just putting it out there as I see it.
