Please ensure Javascript is enabled for purposes of website accessibility
Small-Cap Confidential
Undiscovered stocks that can make you rich

November 5, 2020

Two of our portfolio stocks report earnings.

QTWO and RGEN Weigh In With Q3 Reports

You’re getting enough about the election from everyone else in the world so I’m not going there. We’re talking stocks, and two in particular that reported solid results within the last 24 hours. Here’s what’s up.

Q2 Holdings (QTWO) reported Q3 results that were largely consistent with expectations and on trend with what the company experienced in Q2. More consumers are using digital banking tools, driving user growth up 700,000 to 17.1 million (up 21%) and helping to fuel 31.5% revenue growth. Revenue of $104.8 million beat modestly, by $1.9 million. Adjusted EPS of $0.07 improved from $0.05 in the year ago quarter and beat by $0.01. The company signed a large Tier 1 deal with a $12 billion bank as well as an enterprise contract (for Q2’s CardSwap solution) with one of the 10 biggest global banks. As expected, there was decrease in cash flow as the company tweaked pricing to help retain customers during their renewal periods. Finally, Jennifer Harris, the company’s CFO for the last eight years, is retiring in March 2021 and will be replaced by David Mehok. Mr. Mehok was the CEO of Epicor Software for the last two years and is ready for a new adventure after Epicor was bought by a PE firm. Q2 Holdings increased its full-year guidance by $2 million, to a range of $402.5 million to $404.5 million. Altogether there were no big surprises here, either positive or negative. I’m expecting QTWO will continue to trade in its established trading range and eventually break out to new highs. BUY

Repligen (RGEN) reported another terrific quarter this morning that surpassed expectations on Covid-19 and gene therapy demand. Total revenue of $94 million was up 35.4% and beat by $7.6 million while adjusted EPS of $0.40 grew by 54% and beat the consensus of $0.28. Covid-19 programs generated 14% of quarterly revenue and 55% of revenue growth, while gene therapy grew by 30%. Management said the order book grew by 80% with Covid-19 driving half of that. The business was strong across the board with Proteins up 20%, Filtration up 50%, Chromatography up 40%, and Process Analytics up 30%. The Non-Metallic Solutions acquisition should add $5 million in revenue in 2021 and the announced ARTeSYN Biosolutions acquisition (for $200 million) should close in Q4 and add roughly $34.5 million in revenue in 2021. With the strong results, management increased guidance again, pushing 2020 revenue guidance up by a couple of percentage points to $348 million to $352 million. Covid-19 will continue to be a tailwind, aided by a new chromatography resin specifically for purifying Covid-19 vaccines. On Covid-19 it’s important to understand that Repligen isn’t tied to one company’s vaccine – it can support all of them (that’s a good thing). With the various growth factors gaining momentum, there’s little reason to change tack here. Keeping at buy, just look to pick up new shares on weakness. BUY