ProntoForms gets bullish new price target at Beacon Securities

Another good quarter from Ottawa-based ProntoForms (ProntoForms Stock Quote, Chart, News TSXV:PFM) is keeping analyst Gabriel Leung of Beacon Securities bullish on the stock. Leung reviewed the company’s recently released fourth quarter financials in an update to clients on Monday where he reiterated his “Buy” rating and upped his target price from $1.00 to $1.25.

ProntoForms, which provides workflow solutions for mobile employees such as field workers, sales teams, inspectors and delivery personnel, reported its Q4 and full-year 2019 results on March 12, with the year showing recurring revenue up 27 per cent to $13.74 million and total revenue up 24 per cent to $15.10 million.

ProntoForms’ net loss for the year was $1.86 million. The company ended the year with $5.7 million in cash against $2.7 million in debt.

CEO and founder Alvaro Pombo said his company’s growth was led by expansion in its enterprise accounts.

“Powerful macrotrends are driving interest in our platform,” said Pombo in a press release. “These trends include workforce and talent shortages for field technicians and IT, heightened customer expectations related to service transparency, increased competition, and technology rapidly changing the maintenance and service delivery landscape. We are well positioned in the enterprise market because we help companies overcome these challenges through the quick development of customizable apps that empower field service delivery, improved data workflows and enhanced tech stacks with nimble mobile capabilities.”
 
Leung said the fourth quarter came in as expected, with Pronto generating revenue and EBITDA of $4.1 million and negative $373,000, respectively, versus Leung’s estimates at $4.0 million and negative $54,000. The analyst pointed to recurring revenues of $3.8 million which were up 28 per cent year-over-year and up eight per cent sequentially.

“The company’s impressive growth continues to be driven by enterprise expansion,” wrote Leung. “Today, about 36 per cent of revenues are being driven by accounts generating annual recurring revenues of over $100k, which is up from 35 per cent last quarter and 26 per cent last year. We believe there are currently around 20 customers within this category for ProntoForms, although the company itself has about 100 enterprise customers.”

Drilling down, Leung noted Pronto’s Q4 gross margins at 83.8 per cent versus 83.1 per cent a year earlier, while free cash flow was at $121,000 and capex was at $37,000 by the quarter’s end. The analyst expects PFM will maintain a 20 to 30 per cent year-over-year growth in recurring revenues while managing the business to cash flow neutral or slightly EBITDA negative over the near-term in order to keep winning market share.

“We are maintaining our Buy rating but increasing our target (due primarily to the passage of time and forex) to $1.25, which is based on 5x CY21e EV/Sales. We expect the stock to continue to benefit from a multiple expansion as its enterprise growth strategy continues to play out,” Leung wrote.

The analyst is calling for fiscal 2020 revenue and EBITDA of $18.2 million and negative $0.5 million, respectively, and fiscal 2021 revenue and EBITDA of $22.2 million and $1.1 million, respectively.

Leung’s $1.25 target at press time represented a projected 12-month return of 89 per cent.