Cogint (COGT) reported Q2 earnings last week. The following are key excerpts from analyst reports evaluating the results:
Roth Capital's William Gibson:
"While direct customer relationships remains Cogint’s primary focus for the long-term scalability of its business, it is also developing strategic partnerships that combines its first-party data with large service and technology providers in the banking, financial services, healthcare and technology industries with multi-factor authentication verification and background screening on the backend.
The 2Q17 gpm improved to 30.9% from 28% a year earlier and 30.7% in the preceding quarter. We expect margins to improve as Information Services becomes a larger part of the business. We estimate a gpm of 32% for 2017 increasing to 40.2% in 2018 as the risk management solutions business grows. Once scale is achieved, the risk management business should be able to achieve a gpm of 70%-80%. The blended gpm profile is 45%-55%.
Lastly, we view the settlement with TransUnion as a significant positive. Cogint had paid hundreds of thousands of dollars each month in multiple litigation and it could have stretched for years as well as time and distractions for management. The settlement removed a significant impediment to being able to focus on the opportunity.
In our opinion, Cogint is positioned to grow significantly, helping businesses and government through powerful analytics to transform data into intelligence, enabling its clients to cost-effectively run their organizations in an efficient manner."Barrington Research's James Goss:
"Operating trends are encouraging:
Importantly, management feels that following a largely investment-oriented year of business creation in 2016, idiCore is now transitioning to a sales-driven company.
In that regard (and aside from the impact of the legal settlement with TransUnion), we now look for idiCore to begin to emerge as an increasingly important contributor to cogint’s performance.
At the same time, we observe that the performance marketing services, primarily Fluent, are continuing to develop growth at a more rapid pace than we envisioned earlier.
The improved gross margin points to the emergence of higher revenue shares from higher margined businesses."Chardan's James McIlree:
Information services revenue increased 13% from Q1 and 30% over the year ago quarter. We expect this business to expand as marketing resources are devoted to the business as new products hit the market. Incremental margins are high, tempered by the amount of marketing required to ramp sales. Performance marketing rose 24% over the year ago quarter and was about flat with Q1. We expect a big ramp in 2H revenues as the second half is typically strong for that business.
We continue to expect improved gross margins and EBITDA margins for the year as the Performance Marketing business maintains current margins and the Information Services business gross margin increases with volume. At scale, gross margins for the Information Services business can exceed 70%. We expect margins to improve with the scaling of the Information Services business, and the margin improvement to drive a multiple expansion.More COGT analysis HERE.
Disclosure: Long COGT
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