PKKFF: Peak Fintech Beats Estimates and Expects NASDAQ Listing Within Days

By Lisa Thompson

OTC:PKKFF

READ THE FULL PKKFF RESEARCH REPORT

Peak Fintech PKKFF blew away our revenue estimate of $25 million coming in with a $30.6 million quarter, which was growth of 322% compared with last year. Taking out the bank interest generation and ASCS loan servicing fees, platform and supply chain related revenues were $29.8 million compared to $6.2 million a year ago, or growth of 382%. Most of the revenues in the quarter were from low margin supply chain customers but the future growth is expected to come from higher margin services that will contribute gross margins between 50-60%. This quarter $2.0 million in revenues came from these higher margin services. The $2.0 million is the sum of the bank (ASFC) plus ASCS plus services generated from platform customers of $1.2 million. Although it was not evidenced this quarter, gross margin is expected to improve by the shift to using Gold River rather than outside suppliers, which could cut costs 30% for Peak. Gross margin from the platform were flat with Q1 2021 at 8.0% and down from the 10.6% in Q2 2020. Revenue from ASFC (the bank) was $610,000 in the quarter compared to $828,000 last year, down 26%. ASCS loan servicing fees dropped to $199,000 from $244,000 a year ago. These two segments are becoming tiny parts of the business and we expect the company may not break them out in the future. Total gross margin was below last year and Q1 2021. It was 10.5% this quarter versus 25.3% last year and 13.3% in Q1 2021.

Despite increasing revenues $23 million, expenses (ex the one-time gain) only increased $286,000 showing the huge operating leverage the company has. Spending was slightly higher than our estimates. The pretax income was $957,877 in Q2 2021 and was a loss in Q2 2020 of $315,140. The tax rate came in at an unusual 69.1% due to losses in countries where the company pays no income tax and profits where it does. After paying taxes and taking out minority interest, the loss to common shareholders was $19,560 in Q2 2021 compared to a loss of $716,886 in the Q2 2020. On a non-IFRS basis it was a profit of $183,238 compared to a loss of $638,596 last year.

The loss per share to common shareholders was almost breakeven compared to a loss of $0.019 a year ago. On a non-IFRS basis taking out stock based compensation and the one-time expense we calculate non-IFRS earnings of $0.003 per share compared to a loss of $0.017 in Q2 2020. During that time the share count increased over 75%. Adjusted EBITDA for Q2 2021 was $1.0 million versus $176,113 a year ago.

We are again raising our 2021 revenues to CN$121 million (US$96 million) due to the strong Q2 results. The company has not yet revised its previous guidance given before Q2 was reported and shown below, but expects to after it closes the purchase of Cubeler, which is expected by the end of September.

With CN$24 million cash on hand and a fully diluted share count of 111.7 million this puts its US market cap at US$978 million and its enterprise value at US$959 million. Using US$96 million for 2021 estimated revenues, the stock is trading at 10.0xs EV to sales versus its peers who trade at an average 14.9 times, with Upstart being its closed comparable.

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