North American technology stocks delivered excellent returns to investors in 2013, and in Canada some of the sector’s top performers were CSE-listed companies making their homes in Vancouver, where tech names large and small are quietly establishing a major presence.
3D movie technology leader Gener8 Media Corp (CSE:GNR) made its trading debut in April and after some early turbulence climbed steadily to close 2013 up 110% at $1.27. CSE veteran RESAAS Services (CSE:RSS) did even better, finishing at an all-time high of $4.00, up 344% on the year.
Below we present some of the business highlights and concepts behind these two big winners and also provide some thoughts on what lies in store for the newly branded CSE (formerly CNSX) in 2014.
Gener8 – If You Don’t Know You Can’t do It, Maybe You Can
Gener8 proved in 2013 that if you focus on your core business and deliver great performance, the proverbial light bulb will eventually go on and investors will take note.
Gener8 is the only company in the world that can deliver 3D stereo conversion for an entire feature-length film that matches or exceeds the quality of native 3D filming. The company’s technological approach is different than that taken by competitors, a destination arrived at through a process Chief Operating Officer Tim Bennison laughingly describes as “disruption through ignorance.”
When competitors first saw what Gener8 was doing, all claimed there was no way it would ever work, and particularly not from a commercial standpoint. “As they were telling me this, I was finishing a full movie using the method,” Bennison says.
Companies post-processing 2D film to convert scenes into 3D typically use a technique called Displacement Mapping that delivers what Bennison refers to as “2.5D.” Gener8 developed its own method called Virtual Native 3D, where filming takes place in 2D and software re-creates the image by re-filming with a two-lens virtual camera inside the computer. The result is indistinguishable from filming with a native 3D camera. And since filming with 3D cameras is both slow and expensive, that solves two very important problems facing 3D filmmakers.
“We are being asked to bid on every 3D project in Hollywood. I would not have been able to say that two years ago because half of the producers didn’t even know we existed,” Bennison explains.
With studios such as Sony Pictures, Warner Bros and Twentieth Century Fox on its client list, it is clear that the industry knows who Gener8 is now. And in the final quarter of 2013, its superior industry position finally started to be reflected in the share price.
Founder and CEO Rory Armes says the company had to learn about the capital markets following its listing in April 2013, “and the good news is we learn fast around here,” he adds with a smile, describing the listing as “both exciting and scary.” As the story got out more broadly through creative means, and the financial statements started to evidence business model success, investors began to respond.
From a financial perspective, Gener8 began 2013 a private company and wanted to obtain more working capital, for use both from a G&A standpoint and to fuel its research and development efforts. The CSE listing and concurrent financing facilitated this, and the wisdom of this move is evident in the company’s near 250% year-on-year revenue growth in the nine months through September 30 to $8.4 million.
As strong as the company’s 3D business is, investors are also excited about another product that Gener8 created for its own use but soon realized that the film industry and others could benefit from. This product is Cumul8, which in a nutshell takes complex processes involving numerous teams and individuals and organizes the work process in such a way as to save immense amounts of time and money. Or as both Armes and Bennison explain, it takes the overwhelming volume of data facing the modern executive and organizes it in such a way that it can be used for decision-making and other purposes in real time. “We built this technology internally for our own film production purposes,” says Armes, “then we realized this is a much bigger play.”
That same description applies to Gener8 as a whole, as one considers how this young company could leverage its growing resources to tackle these and other challenges. “As technology companies go, you don’t actually just create one technology,” says Armes. “What a technology company does is invest and create ideas that will enhance their vision. A true form technology company will realize you probably have two or three or four brands within your technology.
“So our story for Gener8 is not so much that we are a 3D movie house, as that we are a technology company that will look at a problem and help to create a solution for that problem.”
This is product diversification at its finest – multiple products that stand on their own merits, yet at the same time are inextricably linked and combine to benefit the company’s client list better than the individual products could alone. The way Armes and Bennison make it sound, Gener8 is just getting started.
Gener8 closed on Tuesday January 14 at $1.50, up more than 19% since the beginning of the year.
RESAAS – Being Your Customer’s Best Friend Works
CSE stalwart RESAAS had a truly outstanding year on many fronts, enjoying a successful commercial launch of its online social network platform for real estate agents, and seeing its share price end 2013 at an all-time high of $4.00.
RESAAS provides a social media platform for real estate agents to showcase their listings, answer questions from potential homebuyers, and communicate ideas on their market and profession to followers online. “We are helping a professional to bring their model into the new generation,” explains RESAAS CEO Cory Brandolini.
The results speak for themselves, as reading the message streams of some of the agents, one follows along as they answer questions and offer ideas, build credibility and finally see listings and sales begin to ramp up. The bottom line is that RESAAS works.
While the user base may be growing quickly, this is hardly an overnight success story. The RESAAS team spent the rest of the year following platform launch in February visiting offices, attending trade shows and making connections with agents and teams of agents. “Our sales team made a conscious decision that our approach was going to be boots on the ground, arm around the customer, and what can we do for you?” says Brandolini. “It was almost a year before we started to do any digital media buying.”
Although the company will not disclose specific numbers, they will say that the user base is growing at something starting to resemble the much coveted hockey stick profile. “We have a platform that is first and foremost for the real estate agent and they power the industry, so we were not surprised to see the growth we experienced early on,” says RESAAS President Tom Rossiter.
Rossiter explains that “2013 was about launching the social network, which is an ecosystem for real estate agents to promote their knowledge, their brand and their content. And the response was through the roof.” A glance at RESAAS’s list of news releases leaves no doubt that the company is adding new users at a torrid pace.
The RESAAS executive team speaks carefully about its plans for 2014 and clearly has some strategic ideas in the works that will only be offered for public consumption when the time is right. “We are adding a whole new realm to RESAAS, which is a platform for the industry,” Rossiter volunteers, happily pointing out, “We have had massive demand from overseas.”
One thing RESAAS does not hesitate to do is give the CSE credit for helping it to get the resources it needed to grow early on. “It has been a great platform for raising money,” says CFO Cam Shippit, pointing out that the company has raised approximately $12 million since its February 2011 debut. “We feel like we are not just a number,” says Shippit. “Extremely proactive,” Brandolini says in describing the exchange.
Same goes for RESAAS itself. From organizing numerous focus groups in formulating its product, to being a presence at every industry gathering it could possibly reach, the RESAAS team has earned its success through a commitment to working harder, smarter and better than the competition. The mood in RESAAS’ Vancouver headquarters is upbeat with a comfortable, low-burn intensity -- the team knows it is onto something and is eager to leverage its early success to the utmost. Its stock price performance and the loyalty of its shareholder base suggest it is doing a fine job.
RESAAS closed Tuesday at $5.00, giving it a gain of 25% since the start of 2014.
Could 2014 be an even better year for technology stocks on the CSE? It will be challenging to best the one just finished, as Toronto-based Micromem (CSE:MRM) and its 775% gain in 2013 also helped skew CSE tech issuer performance stats to the upside. Needless to say, the answer lies in continuing strong performance by existing issuers and good showings by new names debuting in 2014. And while the exchange itself reserved comment, word has it that more than one listing application from a young, promising Vancouver-based technology company is either before the exchange or heading its way soon.