ProntoForms is still a buy, PI Financial says

Ahead of the company’s fourth quarter results, PI Financial analyst David Kwan has maintained his “Buy” rating on ProntoForms (ProntoForms Stock Quote, Chart, News TSXV:PFM).

On on Thursday, March 12th, before the market open, ProntoForms will report its Q4 and fiscal 2019 results. Kwan said he is expecting fourth quarter EBITDA of negative $300,000 on revenue of $4.1-million.

Kwan said he is anticipating an acceleration in recurring revenue growth from PFM.

“We are forecasting Q4 recurring revenue of $3.8M (up 28% YoY and 8% QoQ; all organic), an acceleration from recent quarters where YoY growth was 26% and QoQ growth has been in the ~4.5%-6.0% range, the analyst said. “We expect this stronger recurring revenue growth to continue into FY20, as PFM benefits from the ramp in productivity from the many additions to its sales team over the last year, with PFM still actively looking to add to its growing sales team given the large greenfield opportunity ahead, including significantly increasing the penetration within its many large enterprise customers.

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Kwan adds that recent weakness in the Canadian dollar could be a tailwind for the company.

“The recent decline in the Canadian dollar could provide a modest tailwind for PFM. With the Company reporting in US$, it could see a slight headwind from a revenue perspective from the weaker C$ (~10-15% of revenue is generated in Canada) but it should see a positive impact to its bottom line, given the majority of its costs are in C$.

In a research update to client today, Kwan maintained his “Buy” rating and one-year price target of $1.10 on ProntoForms, a figure that implied a return of 48.6 per cent at the time of publication.

Kwan thinks PFM will post Adjusted EBITDA of negative $1.2-million on revenue of $15.2-million in fiscal 2019. He expects those numbers will improve to EBITDA of negative $800,000 on a topline of $20.3-million the following year.

The analyst added that the company has limited COVID-19 exposure.

“As a SaaS company, PFM has no exposure to COVID-19 as it relates to manufacturing or its supply chain,” he said. “However, there could be some demand headwinds, as it relates to delayed decision making by (potential) customers as well as possible reduced customer spending due to concerns over a related slowing (global) economy, although these risks are also faced by companies elsewhere.”