Intouch Insight Ltd (INXSF)

[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.