As promised yesterday, today I’m going to deliver my post-conference-call thoughts on small cap Stockgroup Information Systems (SWEB). The company posted their Q1 earnings yesterday afternoon, but I wanted to reserve judgment until I heard what they had to say.

In short, I think whoever’s buying the stock today is making a mistake. SWEB is up 10% as of the time this us being written, and I congratulate the company for that. I can’t congratulate them for another tepid quarter though, this one with a widened loss.

To set the tone here, it just seems like we keep hearing ‘next quarter’ over and over again. (”Next quarter we’ll increase traffic, next quarter we’ll improve revenue, next quarter will shrink the loss, and next quarter we’ll cut expenses.”) My problem is, we’ve been hearing it for about four quarters now.

I’m not naive enough to think success happens overnight, but these guys have gotten into the habit of not delivering, or being flat wrong about critical elements of their business. 

The one that comes to mind from yesterday is expenses. They reported last quarter that the new website’s R&D was essentially ‘paid for’. In Q1, they pushed expenses up from $2.4 million to $3.6 million.

I don’t know if that was some lingering R&D expenses, or new stuff (the general/admin line shot from $1.0 million to $1.9 million though). It doesn’t entirely matter. I just remember last quarter they were touting all the new site expenses had been paid; they didn’t mention they’d offset those savings with other expenses.

In the conference call yesterday, they said they’d be saving $900K after terminating contracts with two vendors. It wasn’t clear if that was for the next quarter or the entire year, but it won’t matter if they spend the savings on something else…as they did this time around.

My other hot button is an ever-growing staff that’s not getting the results we were told to expect. All those sales and marketing gurus they hired? They were on board for all of Q1. Yet, I didn’t see any significant bump in the top line. All I saw was more payroll expenses.

To salt the wound, Stockgroup just diluted the float again with a $3 million financing. The market cap is only $17 million, meaning $3 million more has a big impact on current shareholders.

For those of you who have faithfully attended the conference calls and followed this company’s progress for nearly a year and half, you’ll probably understand my hesitation to be impressed now…it’s always something. I can’t wait to hear the next excuse. And no, I’m not buying in yet, no matter how much the chart looks like it’s turning around.

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