TOP IDEAS: Entry into the transit markets has lead to growth in sales
and profits for Gatekeeper Systems Inc. (TSXV: GSI), a provider of
high-definition video surveillance systems and security solutions for mobile applications.
price accumulation target of $0.25 for Gatekeeper Systems Inc. was reached on
November 25, 2016. For the record, we do not revise share price targets for our
Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to
be one of the first providers of a pragmatic perspective of a small cap company
stock's potential worth, where there may be uncovered value that has been
largely overlooked by the investment community.
It has been a while since Investorfile has posted about Gatekeeper Systems Inc. as one of our Top
Ideas. Within the first six months of our introductory blog on the Company
Systems is a value buy as revenues continue to grow), the stock
price raced up 195% in value. Admittedly, the stock value got ahead of itself
and the underlying business growth -- for various reasons -- became stagnate.
As a result, the stock price drifted down and has traded in a low range. That
said, today there is renewed strength in the Company’s business, which may lead
to renewed strength in Gatekeeper’s stock price going forward.
in Abbotsford BC, Gatekeeper Systems Inc. (TSXV: C$0.12) is a leading provider
of high-definition mobile video surveillance and safety solutions for a range
of markets, including school districts, law enforcement, public transit
authorities, as well as the US military and Coast Guard. Each Gatekeeper mobile
video solution integrates high-definition digital video (HDDV) with Global
Positioning System (GPS) for real-time vehicle location, time, date and
telematics data, while providing a comprehensive 360-degree view inside and
Historically, the majority of the
Company’s business was focused on the school bus market. Gatekeeper is a brand
leader in outfitting school buses in North America
with mobile video systems used for recording incidents inside and outside
school buses. The Company continues sell in this
marketplace, with deliveries of its recently launched SP25 School Bus Vision
systems, which have 10-megapixel dual-camera systems for multi-lane viewing
licence plate capture capability; a high-speed licence plate tag reader; and
cellular network compatibility, ready for remote and auto downloading of
stop-arm violations. More and more school districts are using video evidence to
help protect school children, following the increase in tragic deaths of
students who have been struck by vehicles illegally passing school buses.
Since we first profiled Gatekeeper Systems, the Company has embarked on
a strategy to accelerate the expansion into mobile video maintenance and
support services within the transit industry in North
America. As such, in April 2018, Gatekeeper acquired the key business
assets of an existing mobile video surveillance service provider to the transit
industry and established a US
subsidiary, Gaterkeeper USA,
located in Wilmington, Delaware. The assets purchased included
assignment of existing contracts to provide mobile video surveillance products,
support, and maintenance to the Southeastern Pennsylvania Transportation
Authority (SEPTA). SEPTA is the sixth largest public transportation system in
and is actively using video as protection against fraudulent claims with an
installed base of more than 27,000 video cameras on vehicles and in stations.
The asset acquisition and creation of Gatekeeper USA provided an
opportunity to showcase its video technology to SEPTA as part of a competitive
process. The Company was subsequently chosen as SEPTA’s video systems supplier
for new buses, which SEPTA had contracted to be supplied by New Flyer.
Gatekeeper said this initial order validated the Company’s strategic direction
and provided further opportunity for the Company to showcase its ability to
provide outstanding support services. Gatekeeper was awarded further contracts
by SEPTA, and the Company says it is now leveraging this customer’s
endorsement, along with the Company’s service strategy, to attract additional transit
customers and new business in other industries.
As at May 31, 2019, the Company says contracted sales backlog and sales
funnel have grown to exceed prior years. Increased activity in the transit
market has supported the growth with school bus sales continuing to contribute
at historical levels. The addition of the transit business is reflected in the
Company’s fiscal 2019 revenue for the three and nine month periods ended May
31, 2019, which were $4,308,506 and $8,846,803. This revenue growth represented
an increase of 70% and 70%, respectively from the comparable prior year
periods. Gatekeeper generated net income of C$616,572 (C$0.01 per share) in its
most recent quarter (fiscal Q3), and the Company expects to be profitable again
in fiscal Q4. The 2019 fiscal year concludes at the end of August.
The Company says it is also progressing on its
recurring revenue strategy, defined as revenue from long-term service
contracts; hosted solutions for maintaining video systems; video management
with AI capability; and other long term monthly recurring revenue contracts.
Recurring revenue for the current fiscal quarter reported was approximately
$629,000 compared to approximately $317,000 for the comparable period in the
To support future growth in recurring revenues, Gatekeeper recently
launched a number of new products that would support a Software-as-a-Service
(SaaS) model. The Company said it has a completed phase one of its Artificial
Intelligence (AI) platform as part of its G4 Vision Web Based software application
for transit and other mobile markets. Gatekeeper’s Management believes in the
market opportunity of being able to provide comprehensive, integrated
management solutions for the data and information for its equipment and other
devices collect, combined with intelligent applications that are able to
analyze and interpret video as it is being recorded. Additionally, offering the
capability to provide professional, hosted data management services to monitor,
review and package video evidence on behalf of customers is another potential
area of growth that could represent significant scalable recurring revenue,
according to the Company’s Management.
Investorfile is encouraged to see that Gatekeeper Systems has returned
to profitability through its recent growth in revenues generated from the Transit
markets. We see "born-again” value in the Company’s share price at the current
trading levels, much like the value we identified in our initial blog post
before the stock price appreciated significantly. That said, for the Company
share price to sustain future appreciation, recurring revenues will be an important
component to for overall sales growth. If Gatekeeper's recurring revenues mix
continues to grow, we see strong upside potential for the stock price.
The Company maintains a good balance sheet with cash
on hand and no debt.
Gatekeeper Systems currently has about 87.5 million
The Company's website www.gatekeeper-systems.com.
Author's share ownership disclosure: GSI - Yes
article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
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is not engaged in an investor relations agreement with Gatekeeper Systems Inc. nor has it received any compensation from Gatekeepers System Inc. the preparation or distribution of this article.
author of this article has acquired and may trade shares of Gatekeeper Systems Inc. through open market transactions and for investment purposes