TOP IDEAS: AirIQ Inc.’s (TSXV: IQ) growing recurring revenue streams and cash generation put the Company in a stronger position to acquire or be acquired.

It was about two years ago when Investorfile was bullish on the future of AirIQ's fiscal 2020 financial results (See: AirIQ is set to deliver strong growth for the upcoming fiscal 2020 results). Back then, the Company delivered. For fiscal 2021, AirIQ’s growth was subdued, mostly due to the impact of the COVID-19 pandemic. But, to date, in fiscal 2022, there are already signs of good growth occurring again. This growth could be rewarding for investors in one way or another.

AirIQ Inc. (TSXV: IQ – C$0.31) operates in the growing telematics industry and, for 25 years, the Company has been providing Global Positioning Service (GPS) solutions to customers throughout North America. AirIQ's solutions allow commercial businesses to reliably, effectively and efficiently monitor assets in near-real time. The Company develops iOS and Android mobile and web-based applications, As well as cloud-based solutions that stand alone or that can be readily integrated with existing software. AirIQ solutions are mixed fleet-capable and provide fleet reporting, maintenance, compliance, safety and analytics, utilizing multiple hardware options, including a fully integrated video telematics camera solution and a battery-powered solution for non-powered assets.

Our optimism for 2022 is partially based on AirIQ’s most recent financial report. Just recently, the Company reported its 2022 fiscal Q2 results. Monthly recurring revenues are hitting new record highs which total C$860,000 and make up 73% of the C$1.2 million revenues for the quarter. During the quarter, the Company earned EBITDA margins at a rate of 22% of revenues. AirIQ’s Management said they are operating towards achieving the coveted "rule of 40” metric for optimal financial performance of growth companies (this implies the summation of recurring revenue growth and EBITDA margins). The Company already scores high at 31 with the summation of both metrics this quarter.

When AirIQ wins orders for its suite of asset management solutions, it has two distinct revenue components. The hardware component is revenue which is earned on delivery, while the GPS and video surveillance monitoring is recurring revenue.

We are highly encouraged with results to date for fiscal 2022 at AirIQ and believe the recent growth momentum will continue throughout this year and next. The Company’s customer base, which is largely in the construction equipment and commercial fleet sectors, is showing robust business activity and, therefore, has the propensity to invest in asset management solutions.

Of note, the Company’s cash flow generation is strong: C$700,000 from operations in Q2. As of September 30, 2021, AirIQ had about C$2.3 million in cash on its balance sheet, with no debt.

Given its financial position, Investorfile believes (post-COVID) that the Company will be active with some M&A activity. Otherwise, given AirIQ’s industry, growing recurring revenue streams, EBITDA margins and hefty tax-loss credits, the Company could also be subject to a buyout by being an attractive target. We feel one or the other could occur in 2022, which would reward shareholders who hold the stock.

AirIQ’s stock price is up 290% in value since Investorfile first recommended the Company as one of its Top Ideas (See: AirIQ is a technology company small in size but the stock is big in value).

AirIQ has approximately 29.8 million shares outstanding.

The Company's website: www.airiq.com

Author's share ownership disclosure: IQ – Yes

Investorfile's share price accumulation target of $0.20 for AirIQ Inc. was initially reached on July 5th, 2019.

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The author of this article has acquired and may trade shares of AirIQ Inc. through open market transactions and for investment purposes only.