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NamSys Q2 2020 Results

On June 24th, 2020, NamSys Q2 2020 results were released. The company continues to show growth in a challenging COVID-19 environment. Revenue was up 14.5% for Q2 and up 19.2% for the first half of 2020.

The cash on the balance sheet continues to grow and NamSys collected on unusually high receivables we saw in Q1.

Margins rebounded in Q2 due to much lower employee long term bonus plan expense.

I recently wrote a post about Brinks launching a second NamSys service, Cirreon Banking. Cirreon Banking: The 2nd NamSys Product Brinks Is Launching.

Disclosure: I own shares of CTZ.V.

NamSys Q2 2020 Results: Balance Sheet

NamSys continues to build up cash on the balance sheet. They now have $5.5 million in cash and short term investments. They also have no debt.

Receivables decreased from an unusually high number in Q1 2020. On the annual meeting conference call, COO Siemens explained that some of their clients were still paying by cheque which caused the increase in receivables. This issue was resolved. This seemed overly simplistic explanation but receivables have decreased to more normal levels.

NamSys Q2 2020 Total Receivables
NamSys Q2 2020 Total Receivables

As for the deferred revenue, the level of deferred revenue is consistent with prior years. Here is the explanation for NamSys’s deferred revenue:

NamSys Deferred Revenue Recognition

The company’s deferred revenue grown has alongside overall revenue. It’s not something I’m concerned about. I hadn’t paid it much attention prior to now and isn’t something I will follow closely in the future.

NamSys Q2 2020 Results: Income Statement

NamSys grew revenue by 14.5% compared to Q2 2019. I am happy with this growth since in the annual meeting conference call COO Siemens said smart safe revenue had declined 10%. I think it is notable that NamSys’s Q2 is from February to April. They have more exposure to COVID-19 then companies reporting Q1 earnings from January to March when the virus was really starting to affect North American in late March.

Recurring revenue was a very healthy 83%.

Operating margin jumped back up to 45%. This is much more in line with historical operating margins. This was mainly accomplished by very low employee bonus expenses compared to prior quarters.

This chart gives a nice visual of the steady revenue growth the company has achieved since 2015. Operating margins have fluctuated but tend to revert back to the 40-50% range over the long run. Operating and gross margins will be depressed until the employee bonus plan is completely expensed.

NamSys Q2 2020 Results: Cash Flow

NamSys Q2 2020 Cash Flow Statement

Not much to really point out on the cash flow statement. Again, the company did a decent job collecting on receivables.

We also see that a only $4,368 was expenses for the employee bonus plan.

NamSys Receivables

The company made some progress on its overdue receivables as seen above. Since 2012 the company has not had to account for any bad debts. That should give some confidence in their ability to collect receivables.

Addition MD&A Info

NamSys Segment Information
Segment Information

We see that the portion of revenue from Brinks is slowly decreasing, 38% in the past six months. This is still a huge number and if Brinks Complete takes off then it could start to increase again.

NamSys Q2 Geogrpahic Region
NamSys Geographic Information

Every single geographic region that NamSys operates in was up in the past six months. Notably, Mexico increased by 246% to $104,600. This is not a huge portion of revenue but the growth is impressive and hopefully, it continues.

Brinks acknowledged that Mexico was a strong performer for them in Q1. They also acknowledge that cash still represents a majority of transactions which bodes well for the cash management industry in Mexico.

Conclusion

It was good to see that NamSys has maintained growth throughout the COVID-19 pandemic. Margins have fluctuated recently with Q1 2020 being their worst showing in years.

NamSys Q2 2020 Margins
NamSys Gross and Operating Margins

With the exception of Q1 2020 gross margin has been fairly consistent while operating margins have more peaks and valleys. Staffing costs continue to increase which is concerning. Both headcount and compensation are increasing. I doubt compensation goes anywhere but up based on the demand for software engineers.

My interpretation is the company is investing in growth initiatives (international expansion, Brinks Complete, cash in transit app). Since NamSys is an asset-light company there aren’t new factories to build so their investments are made into staffing.

My goal is to pay closer attention to the cash in transit industry, especially Brinks. This is time-consuming however so if any readers have any insight on what’s going on in the industry please let me know.