OneSoft Solutions Quick Update - OSS.v

Quick update after Q1 2024

*Disclosure: I own shares in OSS. I am not a professional. Please do your own due diligence.

Price: $0.72 CAD

MC: 87.9 million

EV: 79.9 million

1 year performance: +44%

OSS reported Thursday and held a call Friday. Results were behind my expectations and the stock was down 1% on low volume.

All amounts are in CAD unless stated otherwise.

Quarter Recap

• Revenue came it at 2.9 million vs 2.2 million last year.

  • Up 32%.

• Adj EBITDA was a loss of 244k vs a loss of 379k last year.

• They mentioned that the top line was below their expectations and that there were some delays in signing contracts with customers.

• The cash balance was away up to 8 million and deferred revenue was up to 6.2. million. This was due to the customers renewing their CIM contracts during Q1.

• They reaffirmed guidance for the full year.

Call Notes

• Outlook was as expected.

• They are confident with the guidance issued and that they will hit it during the remaining 3 quarters.

  • The guidance doesn’t include any M&A which could support a higher topline.

• With respect to M&A, they are focusing more on SME or subject matter experts. This would be similar to the IM group acquisition in 2022. There was 340k in M&A expenses this quarter so it looks like this is a large priority for them.

• The crack and risk modules are progressing as expected.

• There were two comments on the call that give me conviction in the opportunity with OSS.

  • They have only ever lost 2 customers and that was due to the customer being acquired.

  • They have not experienced customers reducing their use of CIM once they are on the platform.

Valuation

I have OSS trading at a 5.5-6x 2024 revenue. I think that is a fair price given the opportunity.

Closing Thoughts

I was given some comfort with the quarter after they reaffirmed guidance. As well, I was happy to hear the modules were on track. I have been a shareholder in OSS since 2017. This was before is was really cool to buy “disruptors”. I have trimmed and added over this time of course.

OSS has more potential than I originally thought. However, as they continue to build a bigger TAM they increase their expenses. I am not expecting a large amount of dilution from here, but there is the always increasing share count. Such things need to be considered for me.

It has been a long time since I profiled OSS. I have been debating doing a full write-up on the opportunity as it continues to have a spot in my portfolio.

I continue to hold.

Thanks for reading.

Dean

* long OSS.v