RIWI Corp. is a Toronto based company that specializes in collecting predictive data for a wide variety of industries. RIWI collects data using its patented Random Domain Intercept Technology (RDIT). RDIT technology was developed by CEO Neil Seeman and is being used around the globe. Their patented technology has proven time and time again to be extremely accurate, not only in collecting important data but predictive data.
RIWI was put on my radar by Trevor Treweeke at Veritas Vatillum. His report is extremely well written and detailed. Honestly, I don’t think I can do better so I won’t write a full report. Check out his report and follow up report here:
Manuel Maurício at AllInStocks.com was also turned onto RIWI by Trevor. He also wrote an excellent research report found here:
I agree with the opinions of both Trevor and Manuel and as a result, I purchased shares of RIWI. I do want to collect my own thoughts on why I purchased the stock and why I think it can be a market beater. A tweet was written by Ian Cassel of Microcapclub.com which sums up my approach to this post:
I want to fully understand the company and its positive and negatives so I can build my own conviction.
RIWI Corp: Business Overview
The idea behind the technology of RIWI was developed by its CEO Neil Seeman. Mr. Seeman is a public health expert and was tasked by the Ontario government to collect data on how the public was responding to various global pandemics. Mr. Seeman discovered that existing methods of collecting this data were unreliable, inefficient and difficult to compare across countries.
As a result, he developed the RDIT technology that is the backbone of RIWI. They collect data by intercepting web users. When a web user types in an incorrect website domain in the URL bar they are redirected to a RIWI survey. This is the basis of the RDIT technology. This allows RIWI to collect unbiased data from internet users around the world.
On June 5th, 2019, RIWI released a new investor deck. Let’s pick out some of their slides and give some analysis and what I like about RIWI.
Common shares are low. 17.6 million shares outstanding is a very reasonable share count. A low share count allows them to meaningfully grow earnings per share. RIWI insiders own 57.6% of the company. CEO Neil Seeman owns 35% of the company while director Bob Seeman owns 32%. If you are looking for management with skin in the game, look no further.
Highlights of RIWI Technology
RIWI has the capability to collect data from around the world. The data they collect is from opt-in surveys and they do not collect personally identifiable information (PII). Facebook has come under intense scrutiny for its use of PII. RIWI should not have this issue as all survey participants can simply choose not to participate. In addition, RIWI provides real-time data. This is one of their distinct advantages. They are able to launch a survey and start collecting data in a very short time frame. After that, they continue to update and collect data for their customer giving the most up to date information. This adds to the accuracy and actionability of their data.
RIWI recently produced research on the sentiment of Chinese consumers toward Apple. Along with Chinese data, they were able to collect information from Venezuelan citizens regarding their support for President Nicolás Maduro. This type of access into difficult to penetrate markets provides a valuable advantage to RIWI. They are truly a global data collection company.
Slide nine provides an excellent example of how their RDIT technology is superior to other data collection techniques. The random column check mark is essential to the quality of RIWI’s data. For a data set to be as accurate as possible, it must be taken from a sample that represents the entire data set. Their ability to collect random data greatly increases the accuracy of their research. In addition, the speed of their data collection is also a wonderful advantage. They can start collecting data almost instantly by sending out their surveys into their targeted area. The time between hiring RIWI and implementing the surveys is extremely quick.
Predictive Capabilities of Their Data
RIWI’s data has had an incredible track record predicting world events. The above slide shows how accurate their data is by predicting eight of the most hard-fought Senate races. They also predicted the Donald Trump Presidential victory.
2016 US Election — Predicting Electoral College for Trump and the Popular Vote for Clinton
Over 147,000 random Americans offered RIWI forecasts on who would win the 2016 US Presidential Election. Up to election night, RIWI predicted an Electoral College win for President-elect Trump, and for Secretary Clinton to win the popular vote by 1.94% (vs. 2% actual). Clients aware of the prediction leveraged the data for significant gains.
If you need any convincing about the capabilities of their RDIT technology check out their Predictive Work page. It is astounding how accurate their data has been in predicting various events around the world. Not only is their data extremely accurate but RIWI can continually update sentiment after an event takes place.
Battle of the Quants Award
RIWI is also gaining recognition in the financial community by recently winning the “Rising Star” Award at the Battle of the Quants in New York City. This type of recognition gives RIWI more credibility among hedge funds and financial institutions. This award is in addition to previous awards that RIWI has earned:
- Best new and disruptive technology at the Insight Innovation eXchange in Philadelphia -2013
- NGMR ‘Disruptive Innovator of the Year’ award – 2014
Let’s look at what is truly exciting about RIWI and their recent results. Three consecutive quarters of profitability. Their revenues are recurring which typically garners higher multiples than non-recurring business models. As CEO Neil Seeman said in his most recent video they are focused on profits and being a profitable tech company is a beautiful thing. And let’s not forget they have NO DEBT. They should be able to fund their growth strategy through their own internal cash flow without having to take on debt or raise money by issuing equity.
Not only has RIWI grown their revenue by 109% since Q1 2018 they only grew expenses by 2%. Their ability to grow revenue but keep costs the same allows new revenue to be extremely profitable. RIWI has projected a revenue increase of 100%-150% on two of their three business lines in 2019. If they can achieve these projections while continuing to keep costs steady RIWI’s earnings per share should grow right along with revenue.
As CEO Seeman said in his recent interview with Robert Kraft of SNN Live they are completely focused on finding the right sales staff that can tell their story to institutions around the globe. Two of their main business lines are in Security and the Private Sector. In the Private Sector, RIWI has been working with large financial institutions including Bank of America Merrill Lynch. With an expansion into NYC and London England RIWI will establish a more permanent foothold in these important financial hubs. An office in Washington D.C. would do the same for their classified security work with the United States government. RIWI is also working on getting more employees security clearance to work on classified data for the United States government.
Although I have not reached out to management to date I have gained an admiration of CEO Neil Seeman. In Trevor’s article, he describes meeting Mr. Seeman. Mr. Seeman was engaged in their conversation and displayed a thirst for constant improvement. To get a sense of Mr. Seeman and his love for the company he built please read his two letters to shareholders. In the 2019 letter specifically, his values truly shine through: honesty, intelligence, competitiveness, determination and conviction.
At the bottom of this post, I’ve added all the videos I’ve watched regarding RIWI. In the videos with Mr. Seeman, you can see his growth as a businessman. His presentation skills are continually improving and his intelligence shines through in his interviews. You can see the passion he has for his company and the technology he has developed. RDIT technology was not developed in order to make money but to improve the health of citizens around the world. I am working on compiling some questions to ask Mr. Seeman when I get an opportunity to speak with him.
RIWI checks all the boxes that I look for in a microcap company:
- Revenues are growing at an exceptional rate;
- Management is intelligent, engaged and has substantial “skin in the game”;
- Zero DEBT;
- Proven patented technology that has been acknowledged with numerous awards and publications;
- Recurring revenue;
- Low share count.
I have made a few purchases of RIWI stock in the past four months at $3.00, and more recently at $2.70 and $2.45. I plan to purchase another block of stock while RIWI is trading in the $2.50 to $2.70 range.
The stock is not cheap trading at a $40.5 million market cap and 13.5x sales however they project to grow revenue close to 100% in 2019 and earnings per share should climb along with it. RIWI is a high-quality company with excellent technology and management. With this type of quality recurring revenue and growth, I don’t have any issue paying the higher multiple. As a result, I anticipate RIWI being a long term holding in my portfolio and plan to add more as I see RIWI grow.
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