VersaPay is regaining momentum, Haywood says

Following the company’s first quarter results, Haywood analyst Daniel Rosenberg has maintained his “Buy” rating on VersaPay (VersaPay Stock Quote, Chart TSX:VPY).

On Wednesday, VPY reported its Q1, 2019 results. The company posted Adjusted EBITDA of negative $2.02-million on revenue of $1.95-million, a topline that was up 90 per cent over the same period last year.

“The first quarter was another record quarter, with total revenues growing 90% year-over-year to $1.95 million,” CEO Craig O’Neill said. “The biggest driver of this was ARCTM which grew 175% year-over-year to $1.46 million. Our recurring business (ARR) is approximately $6.56 million at the end of the quarter with ARCTM representing approximately 70% of this figure. This is significant because of the positive impact it has on our gross margins, which grew to 79% this quarter, up from 71% in Q1 2018. Our subscription backlog and professional services backlog ended the quarter at $1.10 million and $0.47 million, respectively, with new subscription sales of $0.90 million and professional services sales of $0.31 million in the quarter. We will see the majority of this backlog translate to revenue in the coming one to two quarters.”

Rosenberg says both revenue and EBITDA came in ahead of his expectations. He notes that ARC sales in the United States drove a strong quarter.

“Following a few soft growth quarters, VersaPay is now showing signs of improvement with a strong backlog, ARR growth and new customer wins,” the analyst says.

“In a research update to clients today, Rosenberg maintained his “Buy” rating and one-year price target of $2.00 on VersaPay, implying a return of 29 per cent at the time of publication.

The analyst thinks VPY will post Adjusted EBITDA of negative $9.0-million on revenue of $9.7-million in 2019. He expects those numbers will improve to EBITDA of negative $3.8-million on a topline of $17.2-million the following year.