First quarter results that were merely in-line with his expectations aren’t dampening PI analyst David Kwan’s enthusiasm for VersaPay (VersaPay Stock Quote, Chart, News: TSXV:VPY).
On Tuesday, VersaPay posted its Q1, 2017 results. The company generated EBITDA of negative $1.8-million on revenue of $490,000, a topline that was up 66.8 per cent over the $290,000 it posted in the same period a year prior.
“The first quarter of the year introduced some important firsts for the company,” said CEO Craig O’Neill. “With the sale of our POS [point of sale] merchant services business closing in January, Versapay began operating as a pure fintech company for the first time. With the launch of our go-to-market plans with top-tier channel partners, we introduced the white-label version of ARC for the first time. As well, I’m pleased to announce that each of our channel partners won their first clients in the quarter. With these significant firsts and the 67-per-cent growth in software revenues in the quarter, we are very pleased with our start to 2017.”
Kwan notes that VersaPay’s channel partners are ramping up, and says the company’s pipeline could signal the beginning of some very strong growth.
“There could be significant upside to our already strong growth forecasts, primarily due to opportunities in the channel such as: 1) a more robust pipeline (e.g., there are indications that there could be strong demand from their Tier 1 Canadian bank partner); 2) new channel partners (at least a few signings are expected this year, including Ricoh USA which has provided VPY with a potential customer that is generating 4M invoices/month or ~40x its largest customer (the recent win with Ricoh Canada); 3) higher channel ARPU (while early, VPY believes channel ARPU could meet or exceed direct sales ARPU vs. an assumption that was ~50% lower).”
In a research update to clients today, Kwan maintained his “Buy” rating and one-year price target of $1.90 a share on VersaPay.
Kwan thinks VersaPay will generate Adjusted EBITDA of negative $6.8-million on revenue of $2.5-million in fiscal 2017. He expects these numbers will improve to EBITDA of negative $2.8-million on a topline of $8.9-million the following year.
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