LGIQ: The Plan Comes Together: Revenues and Margins Improve Sequentially in Q1 2021

By Lisa Thompson

OTC:LGIQ

READ THE FULL LGIQ RESEARCH REPORT

As forecast, Logiq LGIQ increased revenue and gross margins sequentially showing Q4 2020 as the trough for both. It is regaining sales from the switch from low margin distributors at AppLogiq to direct sales and as DataLogiq gains traction. While we believe AppLogiq should show higher sequential revenues in Q1 and higher gross margins, we are not certain about DataLogiq, as its revenues are lumpier given they are generated by specific campaigns that often are tied to specific time periods. With Fixel and the acquisition of Rebel AI on March 30, 2021, as well as organic growth, the DataLogiq business should however show significant year over year growth. Combined with the AppLogiq business, total revenues should show year over year quarterly growth by Q3 2021. We have raised our Q2 revenue forecast from $6.9 million to $7.8 million given the beat in Q1.

The Company May Spin off AppLogiq

The wild card in 2021 remains what happens to AppLogiq. With its new businesses coming on stream in Indonesia starting in Q3, the company had had a lot of interest in spinning the entire division off to shareholders as a separate entity. Management is aggressively working on this and if it happens in the next few months it could be valued as high as $100 million. If this business were sold, it would also eliminate most of the company's losses. This provides yet another reason to invest in Logiq.

Q1 2021 Results

For Q1 2021, Logiq reported $8.1 million in revenues versus $15.0 million a year ago, down 46%. AppLogiq revenues were $2.4 compared to $11.8 million in Q1 2020. CreateApp margins rebound to 30.1% versus 17.7% a year ago. DataLogiq generated $5.6 million in the quarter compared to $3.2 million last year, up 76.5%. Sequentially revenues grew 22.7%.

Gross margin declined in Q1 2021 from $2.6 million to $2.2 million, or 15.8%. The margin percentage improved to 27.6% from 17.7% last year from the revamp of the CreateApp sales model. We expect margins to continue to improve as AppLogiq moves to its higher margin business model and the high margin DataLogiq business grows to a bigger percent of revenues helped by the March 30^th acquisition of Rebel AI.

Operating expenses increased to $6.3 million from $5.4 million in 2020. G&A, R&D and Sales and Marketing increased $604,000 as the company switched its AppLogiq business to direct sales from channel sales and DataLogiq businesses were added. Depreciation and amortization increased by $240,000 with acquisitions. This should increase again in Q1 as Rebel AI closed on March 30, 2021.

Other expense was $1,897. Pretax income, net income and income to common shareholders were all a loss of $4.1 million in Q1 2021 versus a loss of $2.8 million in Q1 2020. This resulted in a GAAP loss per share of $0.25 versus a loss per share of $0.24. Primary shares outstanding for the year increased 41% to 16.3 million.

Balance Sheet

As of March 31, 2021, Logiq had $2.8 million in cash and debt of $5.5 million. $2.9 million of that debt is from a convertible promissory note and $509,000 from a government PPP loan. The company also owes cash for the acquisition of Rebel AI, which will be paid upon the conclusion of its IPO. Its current ratio is 1.8 times and it had $5.3 million in working capital. The company had negative operating cash flow for the quarter of $1.9 million (not including changes in working capital) and a negative free cash flow of $2.3 million. In Q4 2020 it had negative cash flow of $4.8 million and negative free cash flow of $4.4 million. The company stated it has sufficient cash for the foreseeable future.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.