Renoworks Software
Renoworks Software (RW.V / ROWKF:PINK) announced on November 29th. RW, you’ll recall, makes home visualization software for the remodeling industry. Their software helps homeowners preview changes to their home on a computer or mobile device. It’s pretty slick.
Revenues hit $800,000, up 10% from Q3 last year. This was the second straight quarter of record revenues. RW is a steady grower -- although their growth rates are unlikely to wow the market.
Once again results were driven by the graphic services business. This business started by accident. A customer asked if they could help with this and RW thought maybe other customers have the same need? Just a few months later it is RW’s fastest growing segment.
Now let’s turn to the cost side. Gross margins dipped from 77% to 73%. R&D expenses increased to $150,000, up 50% y/y. G&A expenses increased to $646,000, up 55% y/y.
The reason for all the increase is investing for future growth -- specifically the graphic design business. Most of the increase came from hiring. So these are recurring expenses vs one-time. We never like to see expenses grow faster than revenues -- unless we are sure that growth will make up for it.
We do believe in RW’s business model. We believe in management’s strategy. But we still need to see two things to get excited about RW again:
- Acceleration of revenue growth (25+%)
- Return to profitability
Let’s see what next quarter brings. In the meantime, this one remains a hold for us.