Quartix Technologies (LON: QTX) shares are down 22% today. This is on the announcement of the results which have, obviously enough, not been good which is why QTX shares are hard hit. But the results are probably worse than the market is currently evaluating them at. For there’s an important point we’ve got to recall - corporate results are not adjusted for inflation. That’s something that we’ve got to calculate out ourselves. It’s also something not enough people do - so we should probably try to get ahead of the game by doing so.
It’s entirely true that Quartix is hit by a couple of issues. 2G is going to be phased out in a couple of markets therefore they need to upgrade the in car gadgets to 4G on a portion of the installed fleet. This is something the company will have to pay for - the risk of losing the customer base if they don’t is too high.
They’re also digesting a takeover of a promising but at present lossmaking company, that also affects results. So, yes, we could say there are a couple of specific reasons as to why results are going to be bad but once those are past all is golden, right?
Quartix share price from Google Finance
Well, actually, no, not so much really. Because in the announcement there is this: The annualised recurring revenue of the fleet subscription base was £28.7m on 1 October, representing an increase, in constant currency terms, of £2.1m year on year, based on exchange rates as at 1 October 2023. The Company's subscription base has grown by 13.0% year on year, to just under 259,000 vehicles.”
That’s not good. That’s falling revenue per subscription there. The growth in the base is higher than the growth in revenue. But it’s worse than that too. That revenue growth was 7.3%. But that’s about - maybe a little less than - inflation was over that time period. Depends which market we want to concentrate upon for that inflation rate. So revenue is actually static, in real terms, at best. While the subscription base - and costs - are rising. And of course costs are rising by the inflation rate.
There’s more at Quartix than the 2G and corporate acquisition problems, they’re not beating inflation there. That has much more important long term consequences than those passing issues.
