Sylogist has an 86 per cent upside, says Echelon

Echelon Capital Markets analyst Amr Ezzat continues to stick with Sylogist (Sylogist Stock Quote, Chart, News, Analysts, Financials TSXV:SYZ), maintaining a “Buy” rating and price target of $19.00/share for a projected total return of 86.1 per cent in an update to clients on Tuesday.

Founded in 1993 and headquartered in Calgary, Sylogist provides comprehensive, mission-critical ERP and CRM solutions, including fund accounting, grant management, enterprise-level case management, grantor money management, justice solutions, and payroll, to both the public and private sector, with its Serenic Navigator platform serving as a common link between all solutions.

Ezzat’s latest analysis comes after the company announced it has closed a pair of acquisitions. On October 6, Sylogist completed the acquisition of Mission CRM, a fundraising and donor engagement SaaS platform for large and mid-market non-profit organizations, for $2.67 million, plus an earnout tied to agreed-upon revenue targets over the next three years.

Then, on Monday, the company completed the acquisition of The Pavlik Group, a provider of proprietary SaaS applications and professional services primarily to public sector organizations and member associations, for $11.5 million. 

“While the Pavliks acquisition is substantially larger in size and scope than that of Mission CRM, we believe both acquisitions to be accretive, enhancing both the near-term and long-term growth outlook for Sylogist,” Ezzat said.

Ezzat notes that, with the completion of the Pavlik Group acquisition, the company has now completed three acquisitions of highly strategic and growing businesses in the past seven months, producing a 50 per cent growth in run-rate revenues compared to the 2020 fiscal year.

In Mission CRM, Sylogist has added a company that set out to develop an innovative, completely SaaS fundraising and donor engagement platform that provides seamless constituent engagement, online fundraising and campaign pages, event management, peer-to-peer fundraising, donation processing, funds distribution, postal integrations, and CRA receipting.

According to Ezzat, earnout targets associated with the acquisition imply Sylogist expects Mission CRM to generate in excess of $8.5 million in revenue by the end of 2023.

“Sylogist intends to accelerate and help recognize Mission CRM’s exciting growth trajectory,” said Bill Wood, President and CEO of Sylogist in the company’s October 6 press release. “We will provide investment, resources, and expertise to enable rapid scaling on all fronts. This strategic acquisition brings with it strong IP, marquee customers, and an exceptional team, with whom we look forward to realizing the business’ full potential.”

Meanwhile, with the Pavlik Group, Sylogist has acquired a provider of proprietary SaaS applications and professional services primarily to public sector organizations and member associations, with its Portal Connector solution showing particular potential to the tune of average yearly growth of 40 per cent to account for one-third of Pavlik’s revenue.

“My family knew that we could only sell our company to someone who would prioritize its customers, invest in its people, and bring the expertise and resources necessary to take it to the next level,” said Ian Pavlik, President of the Pavlik Group. “Having now discussed and worked extensively with Bill and the Sylogist management team, I have complete confidence that they are the right partner to achieve these objectives and take it to new heights.”

The acquisitions have prompted Ezzat to modify some of his future financial projections, with a particular emphasis on 2022. With modest growth projected in 2021’s revenue ($38.2 million compared to the reported $38.1 million in 2020), Ezzat now projects the company’s revenue will be $54.4 million in 2022 compared to his initial $45.1 million projection, marking a 42.5 per cent potential year-over-year increase. From there, Ezzat projects continued growth to $59.5 million in 2023 (9.5 per cent potential year-over-year increase), and $65.5 million in 2024 (10 per cent potential year-over-year increase).

Ezzat has also modified his 2022 adjusted EBITDA projection, which is now set at $19.5 million compared to the initial $18.3 million estimate. The new projection yields an EBITDA margin of 35.8 per cent compared to the 2021 projected margin of 43.7 per cent, with projected margin increases to 37.7 per cent ($22.4 million adjusted EBITDA) in 2023, and 39.5 per cent ($25.9 million adjusted EBITDA) in 2024.

Meanwhile, Ezzat’s EPS projections continue to climb, with an adjusted figure of $0.32/share for 2022 (previously $0.31/share) before increasing to a projected $0.37/share in 2023 and $0.42/share in 2024.

From a valuation perspective, Ezzat has the EV/Sales multiple projecting at 6.8x in 2021 before dropping to a projected 4.8x in 2022, 4.4x in 2023, and 4x in 2024. The EV/EBITDA projections follow a similar trajectory, with a forecast of 15.6x in 2021 before dropping to a projected 13.4x in 2022, 11.6x in 2023, and 10x in 2024, while the EPS projections also drop from a projected 52.9x in 2021 to 33x in 2022, 28.5x in 2023, and 24.9x in 2024.

Overall, Sylogist’s stock price is down 4.5 per cent for the year to date, reaching a high point of $17.75/share on April 27 and recently dipping below double digits at a low point of $9.99/share on October 12.