ProntoForms gets target price raised to $1.00 at Beacon

Following the company’s third quarter results, Beacon Securities analyst Gabriel Leung has raised his target price on ProntoForms (ProntoForms Stock Quote, Chart, News TSXV:PFM).

This morning, PFM reported its Q3, 2019 results. The company lost (US) $421,111 on revenue of $3.84-million, a topline that was up 21 per cent over the same period last year.

“We are pleased to report that our Annual Recurring Revenue (ARR) base grew 30% year-to-year to reach $15.03 million by September 30, 2019, CEO Alvaro Pombo said. “Recurring revenue continued to grow reaching $3.5 million in Q3, representing a 6% increase over Q2 2019 and 26% over Q3 2018. Our accelerating growth continues to be driven by enterprise expansion; accounts with more than $100K of ARR now represent 35% of our base, up from 24% a year ago. Enterprise demand for field automation is a powerful trend propelling our growth. In the opinion of leading IT analysts, enterprises can no longer rely on traditional software development practices to equip employees with the apps they require. ProntoForms low-code app development platform addresses this need. It works seamlessly with other leading systems and systems of record, and empowers enterprise field operations to develop and manage new apps–quickly and at scale–from an IT-approved platform.”

Like Pombo, Leung addressed the gains in recurring revenue first.

“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,” the analyst said. “Today, ~35% of revenues are being driven by accounts generating annual recurring revenues of over $100k, which is up from 30% last quarter and 24% last year. There are currently around 20 customers within this category for ProntoForms, although the company itself has ~100 enterprise customers.”

Leung expanded on the recurring revenue theme.

“The 10% q/q increase in ARR was one of the strongest in company history and was driven by several key wins/expansion including: A Fortune Global 500 companies (PFM’s largest customer) added more than $390k in ARR to bring it over $1M, A US utility added more than $175k in ARR to bring it over $960k to expand technician inspections and compliance reporting A Fortune 500 personal care corporation launched a new deployment for inspections and quality control.”

The Beacon Securities analyst says the progress ProntoForms made this quarter warrants a price target raise.

“We are maintaining our Buy rating, but increasing our target to C$1.00 (was C$0.85), which is based on 5x CY20e EV/Sales. We expect the stock to continue to benefit from a multiple expansion as its enterprise growth strategy continues to play out.”

Leung’s new target price implied a return of 72 per cent at the time of publication.

Leung thinks PFM will generate EBITDA of negative $700,000 (All figures USD) on revenue of $15.0-million in fiscal 2019. He expects those numbers will improve to EBITDA of $400,000 on a topline of $17.6-million the following year.