A share price that is nearing his target and a slower than expected path to profitability has Haywood Securities analyst Pardeep Sangha lowering his rating on VersaPay (TSXV:VPY).
Yesterday, VersaPay reported its Q2, 2017 results. The company lost $1.95-million on revenue of $630,000, a topline that was 77 per cent better than the same period last year.
“We’re very pleased with the progress we’ve made this quarter,” said CEO Craig O’Neill. “We formally announced our partnership with the Royal Bank of Canada to white-label ARC to RBC’s business clients, and we signed our largest client to date, Livingston International. We also achieved strong new sales in the quarter, and we reached an important milestone in our client base, with 100 clients signed and 50,000 end customers active on the platform. With results like these, VersaPay ARC is becoming the new standard for A/R automation.”
Sangha says the results were in-line with his estimates. But the analyst says he has has altered his expectations due to slower uptake.
“We made reductions to our forecasts due to slower than expected growth of customers through the partner channel,” Sangha says. “Cashflow breakeven is delayed to Q4CY18 (from previously Q3CY18). VersaPay is incurring additional costs with the expansion of its sales team in the U.S. market, causing cashflow breakeven to be delayed by a quarter.”
In a research update to clients today, Sangha maintained his one-year price target of $2.00 on VersaPay, but lowered his rating on the stock from “Buy” to “Hold”.
Sangha thinks VersaPay wiill generate Adjusted EBITDA of negative $7.0-million on revenue of $3.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of negative $3.4-million on a topline of $9.9-million the following year.