Gatekeeper Systems - Public Transport Safety from Canada

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Gatekeeper Systems (https://www.gatekeeper-systems.com/investors/) is a leading provider of intelligent video solutions, focusing on designing safer transportation environments for children, passengers, and public safety personnel across various modes of transport.

Gatekeeper’s main products are indoor and outdoor cameras installed in public transit vehicles, along with real-time analysis of the data they provide. Video data can also be used as evidence for and against parties in the event of an accident; for example, in the US, SEPTA (Southeastern Pennsylvania Transportation Authority) has estimated it saves approximately $20M annually in insurance premiums alone when video data works in their favor.

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The company originates from Canada but is now also striving to expand into the US market on a large scale. About a year ago, the Federal Railroad Administration (FRA) ruled that every single train must be equipped with internal and external cameras (https://railroads.dot.gov/about-fra/communications/newsroom/press-releases/fra-publishes-final-rule-requiring-installation-0). As a result, Gatekeeper is already in discussions with 4 out of the 6 largest train manufacturers in the world, as well as other public transport OEMs [taken from SEDAR+ 2024 Q3 MD&A]. This means their products could also become a global solution.

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Gatekeeper Systems’ growth is on a sustainable footing. The company’s Gross Margin hovers around 50%, and the company has been net income positive in practically every fiscal year since 2016, excluding 2018:
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Following yesterday’s rally after a positive profit warning (posari), the market cap is $56M CAD, or about $40M USD, meaning there is plenty of room for the enterprise value to grow. This market cap gives a Price/Sales ratio of about 1.5 and a P/E ratio of about 9 (note: 2024 net profit is an estimate of Q1-Q3 + estimate for Q4 revenue, sourced from the CEO.CA forum). Thus, this is by no means an expensive company. Additionally, the company has $9M cash in the bank and Current Assets of $18.8M CAD, representing nearly 33% of the total market cap. The company has no debt, and Current Liabilities are $2.9M CAD, which is not very high. The Balance Sheet is therefore in good shape.

The revenue growth rate for 2024 vs. 2023 is approximately 35%, and I expect this to accelerate following the company’s recently renewed strategy, which places more emphasis on growth. For this reason, Sales & Marketing expenses have also grown from 0.8M CAD to 1.3M CAD in a year. Still, this is not a massive money pit.

In summary, it is a profitably growing PaaS (Platform as a Service) business from North America with high growth ambitions. It might sound all too familiar to many, similar to a certain company starting with ‘V’ on the TSXV, but this time the difference is the profitability and the strength of the Balance Sheet.

More information can certainly be found on the company’s own website (https://www.gatekeeper-systems.com and Investor Presentation https://www.gatekeeper-systems.com/investors/), as well as on the CEO.CA pages (https://ceo.ca/gsi).

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As a disclaimer, I own a relatively large portion of the company in my own portfolio. Furthermore, the information and figures presented above may be incorrect, so do your own research and investigation. I am not responsible for the potential total loss of your invested capital, so this must not be considered investment advice. The idea was to bring a new profitably growing company to the attention of the Inderes community, as there are currently only 14 owners on Nordnet.

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I’ve had another moment to delve even deeper into this.

The CEO’s Q2 interview provides good insight into questions related to the company and its culture:

So, the CEO is quite conservative regarding maintaining the cash position, which sounds like a positive thing to me. Now, they’ve started investing the cash on hand a bit more into R&D and sales. Additionally, investments have been made in infrastructure (data center), which enables larger volumes of business and expands customer opportunities beyond existing client groups.

The product itself is also discussed there—why these recording cameras are needed for public transport and school transit. Also, how the Platform as a Service business works, the concept of “revenue per vehicle,” etc.

There is also talk about expanding outside North America, especially in the train business. A “basic setup” for a bus is about $3,000/vehicle, but this can rise to $8,000 with a more extensive package, which seems plausible based on the CEO’s comments. For trains, the figures are around $20,000 - $30,000 per train set.

It was also mentioned that competition in the industry is low and there aren’t many significant players. More on this in the comments: competitors are mainly fragmented, small individual players, and there isn’t really another manufacturer of a comprehensive product platform like Gatekeeper.

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IMG_2225

Taken from CEO.ca. Institutions have started to get interested in the stock after that positive profit warning.

I managed to finish listening to the rest of the videos today; I might have the time/energy to write a summary next week. But don’t hold your breath.

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And then a TA perspective:

On the daily chart, we broke through the short-term downtrend as well as the MA200 resistance level. The next resistance is at the 0.70 CAD level, then at 0.77 CAD for the longer-term trendline, and finally 0.86 CAD. After this, the path is open to the previous highs from 2021, i.e., the 1.35 CAD level.
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Additionally, on the weekly chart, we just pushed through the MA20 & 50 resistance levels as well as the declining short-term trend.
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Furthermore, in the longer-term trend, a perfect Cup & Handle pattern seems to have formed, which would indicate a possible explosive rise in the near future.
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NOTE: Still not investment advice, just my own observations and views.

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Tekninen analyysi (ei kyselyitä)
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Staggering percentage growth in the number of Nordnet owners, 20%!!

Who’s confessing?

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The latest CEO interview, explaining the positive profit warning from the most recent quarter.

The goal is to increase the number of Mobile Data Collectors in buses, which would then generate more recurring cash flow. From the looks of it, the strategy execution is also working.

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More in-depth research available on Seeking Alpha for those interested:
https://seekingalpha.com/article/4699525-gatekeeper-systems-recent-legislation-can-help-sustain-a-track-record-of-20-percent-growth

Short bullish quote from a comparison with the peer group:
" I compared Gatekeeper to 44 other companies in the “security & protection services” industry on Morningstar, and found Gatekeeper was 400% more profitable, 50% less expensive (on a P/E basis) and growing 100% faster than average."

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The number of shareholders increased by four yesterday, meaning that based on the “Bought & Sold” thread, one person reported their trade and three others followed suit.

Nothing new in the business, just waiting for the full-year results.

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Uusi asiakas muutaman viikon takaa.

Gatekeeper Completes Contract with Lexington County School District One, Featuring a Landmark Deployment of Student Protector Stop Arm Cameras

Abbotsford, BC – November 21, 2024 – Gatekeeper Systems Inc. (“Gatekeeper” or the “Company”) (TSX-V:GSI) (OTC:GKPRF), a leader in intelligent video and data solutions for public transportation and smart cities, is pleased to announce the completion of a contract with Lexington County School District One (“Lexington One”) for the full-fleet implementation of Live View Wireless and internal video on the district’s 250 school buses.

Lexington One, one of South Carolina’s largest school districts, has also installed Gatekeeper’s Student Protector stop arm cameras on 150 buses in the fleet, marking it as one of Gatekeeper’s largest single deployments of Student Protector stop arm cameras to date. Student Protector stop arm cameras leverage advanced AI and video analytics to detect and capture violations of vehicles illegally passing school buses while the stop arm is extended. The system records high-quality evidence, including license plate data, that can also be seamlessly processed for automated ticketing when Gatekeeper’s proprietary software is optioned.

“Recently one of our students came within a few feet of being struck by a vehicle illegally passing a stopped school bus,” commented Will Hall, Director of Transportation at Lexington One. “Adding Gatekeeper’s Student Protector solution to capture critical evidence of stop arm violations will act as a deterrent and add a layer of safety for our children when boarding and disembarking our buses.”

Mr. Hall continued, “I can’t tell you how much Live View Wireless has helped us here at Lexington One just to expedite our investigations or respond to dangerous or hazardous situations. Previously, we could have created another full-time position for someone who was manually pulling video.”

Prior to switching to Gatekeeper’s Live View Wireless solution, the district’s manual video retrieval process required staff to physically locate buses, remove hard drives, and sift through hours of video footage. Live View Wireless allows real-time video streaming from buses, GPS tracking, advanced audio features, event-based alerts, and exceptional customer support.

Gatekeeper has also published a detailed case study on this deployment, available at Gatekeeper Success Stories.

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This autumn has been intense, big deals every few weeks. Thanks @Seeras for creating a thread about the company on the forum :folded_hands:, I bought this a year ago.

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No worries!
I ended up selling at the original purchase price in February when I got scared by the dip in sales and thought another global train camera company would win the market in the US.

I was wrong, and I underestimated Americans’ enthusiasm for American technology. Damn it, I’m so pissed off, tens of thousands were now left unreceived.

But luckily that money went into Nebius, so it’s pretty much even anyway.

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