VersaPay’s recent results are encouraging, says Haywood

A quarter that saw some surprising progress has Haywood analyst Pardeep Sangha feeling good about VersaPay (VersaPay Stock Quote, Chart, News: TSXV:VPY).

Yesterday, VersaPay reported its Q2, 2016 results. The company lost $1.61-million on revenue of $1.72-million, a 23 per cent topline increase over the same period last year.

“In addition to strong performance from our merchant services business, we continue to see more and more organizations benefiting from ARC, our accounts receivable solution, as is evident by the 79-per-cent year-over-year growth in revenue from our software business,” said CEO Craig O’Neill. “Our focus continues to be on adding companies and increasing monthly usage on the ARC platform. Not only did we add 27 new suppliers during the quarter, but 5,000 end-customers began using ARC for the first time, boosting invoices received in [second quarter] by 18 per cent over [first quarter], from 122,000 to 145,000, and payments made by 58 per cent from $11.2-million to $17.7-million.”

Sangha says the results were in-line with his expectations, with the POS division coming in better than he expected, generating revenue of $1.4-million against his prediction of $1.2-million.

“Key metrics continue trending upwards,” says Sangha. “During Q2, the Company increased the number of suppliers from 43 to 70, the number of live suppliers from 33 to 55, and the number of end customers increased from 17,700 to 22,900.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $1.60 on VersaPay, implying a return of 36.8 per cent at the time of publication.

Sangha expects VersaPay will post an EBITDA loss of $5.0-million on revenue of $7.2-million in fiscal 2016. He thinks those numbers will improve in fiscal 2017 to negative $1.3-million EBITDA on a topline of $14.3-million.

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