ProntoForms still has room to climb, Beacon says

It’s full speed ahead for ProntoForms Corporation (ProntoForms Corporation Stock Quote, Chart TSXV:PFM), according to Beacon Securities analyst Gabriel Leung who on Thursday reviewed the company’s latest quarterly results and reaffirmed his “Buy” rating and C$0.85 target price.

Ottawa-based ProntoForms, which specializes in field-focused low-code application platforms for enterprise, reported its second quarter fiscal 2019 on Thursday, showing an uptick in recurring revenue.

The company’s revenue and EBITDA numbers were $3.7 million and negative $234,000, respectively, while its net loss for the quarter was $0.53 million, down from a net loss of $0.67 million a year ago. (All figures in US dollars unless noted otherwise.)

“We entered 2019 with a focused plan to expand our enterprise presence. As part of this strategy, we continue building our enterprise go-to-market capabilities with additional investment in product and sales expertise,” said CEO and founder Alvaro Pombo in a press release.

“Recently, a leading global IT analyst firm profiled us as a field-focused leader in the growing LCAP (low-code application platform) market segment. Recognition in this report further validates our approach of enabling enterprises to scale their field-centric automation with the use of our powerful and intuitive solution,” he writes.

“Looking ahead, ProntoForm’s focus remains on growing out its enterprise revenue base, which would include expanding with its existing enterprise customers and adding new ones to its customer portfolio,” says Leung.

In an update to clients, Leung said PFM’s quarter came in-line with expectations and highlighted the company’s recurring revenues of $3.3 million, which were up 26 per cent year-over-year and up five per cent over the previous quarter.

“We believe the strong growth in the company’s recurring revenue base continues to be driven by further penetration into the company’s enterprise customer base,” writes Leung. “Today, about 30 per cent of revenues are being driven by accounts generating annual recurring revenues of over $100,000, which is up from 23 per cent a year ago. There are currently around 20 customers within this category for ProntoForms, although it has many more within its existing customer base that could reach the $100,000+ ARR threshold.”

Leung pointed to PFM’s growing gross margins which came in at 83.6 per cent for the quarter compared to 82.5 per cent a year ago and 81.5 per cent last quarter.

The analyst expects ProntoForms’ Q3 to feature higher sales and marketing expenses given an increase in sales rep head count (from 12 to 15).

Leung is calling for fiscal 2019 revenue and EBITDA of $14.7 million and negative $1.0 million, respectively, and fiscal 2020 revenue and EBITDA of $17.3 million and $0.1 million, respectively.

His C$0.85 target is based on his 4x calendar 2020 EV/Sales estimates and represents a projected return of 67 per cent at the time of publication.

“Looking ahead, ProntoForm’s focus remains on growing out its enterprise revenue base, which would include expanding with its existing enterprise customers and adding new ones to its customer portfolio,” says Leung.

ProntoForms, which went public in September of 2005, had its share price hanging out in the C$0.30 to C$0.40 range for a number of years before getting a boost earlier this year.

The stock is currently up 57 per cent year-to-date.