Beacon Securities analyst Gabriel Leung is ready to fill in some blanks with ProntoForms Corporation (ProntoForms Stock Quote, Chart, News, Analysts, Financials TSXV:PFM), maintaining a “Buy” rating and $1.75/share target price for a projected return of 62 per cent in an update to clients on Thursday.
Founded in 2001 and headquartered in Ottawa, ProntoForms researches, develops and markets mobile business solutions for enterprises to automate field sales, field service and other field data collection business processes through its ProntoForms app, which allows workers to collect data on a mobile device; access company data in the field; and automatically share the results with back-office systems, cloud services and people. The company’s technology is in use in Canada, the United States, Europe and Latin America.
Leung’s latest analysis comes after ProntoForms released its third quarter financial results, which Leung noted to be largely in line with Beacon expectations.
“Overall, we believe the company’s value proposition continues to resonate well, particularly given the increasing complexity of work flow within the enterprise field work force,” Leung said.
The company’s financial results were headlined by $4.9 million in revenue (all report figures in US dollars), representing 1.1 per cent sequential growth and 7.5 per cent year-over-year growth. In total, $4.7 million of the company’s revenue was of the recurring nature, a sequential change of 2.5 per cent and a year-over-year change of 15 per cent.
ProntoForms also reported an EBITDA loss of $715,000 in the quarter, an improvement over the $850,000 EBITDA loss reported in the previous quarter, though it falls behind the $240,000 EBITDA loss reported in the same quarter of 2020.
All told, the company ended the quarter with ARR totalling $19.3 million for 3.2 per cent sequential growth and a 13 per cent year-over-year increase, though Leung also notes that the company also announced a 1.1 per cent quarterly ARR churn due to the discontinuation of an operator reseller agreement in Mexico.
Meanwhile, gross margins remained flat on a sequential basis at 84.3 per cent, an increase from 82 per cent in the same quarter of 2020.
The company also put itself into a solid liquid position, with $6.5 million in cash on hand compared to $3.2 million in debt, though free cash flow came in at a $941,000 loss, with Leung attributing the loss to the timing of cash inflows from prepaid plans and noting that the first and fourth quarters typically yield stronger free cash flow results.
“We are encouraged by the continued steady growth in net bookings and enterprise opportunities,” said Alvaro Pombo, Founder and Chief Executive Officer in the company’s November 4 press release. “Our platform continues to provide value to world-class enterprise organizations thanks to our continued investment in vertical product solutions, platform capabilities, and enterprise go-to-market.”
From a corporate perspective, ProntoForms had a busy third quarter, as it completed a pair of option grants: The first was for 813,500 shares at an exercise price of $1.07 per share in August, with an option for a company officer to purchase 750,000 common shares; the second was for nearly two million shares exercisable at $1.02 per share in September.
ProntoForms also announced that a Fortune 500 organization had deployed its app to its fleet of over 600 technicians for inspections and preventative maintenance to support their digital transformation, then had a company in Southeast Asia expand its ProntoForms deployment with an existing global heavy manufacturing enterprise customer.
Leung predicts modest growth for ProntoForms in his financial projections, as he forecasts revenue of $19.5 million for 2021, a potential year-over-year increase of 10.2 per cent over the reported $17.7 million in revenue from 2020. From there, Leung projects another jump to $23.1 million for 2022, a potential year-over-year increase of 18.5 per cent.
Meanwhile, Leung forecasts the company’s annual EBITDA to slide into negative territory for 2021 at a $2.9 million loss, with a slight improvement to a projected $1.4 million loss in 2022, with Leung projecting the negative figures in spite of the company trying to scale and accelerate its organic growth.
The only valuation multiple Leung reports on in this analysis is the EV/Sales multiple, which he sees dropping from the reported 6.5x in 2020 to a projected 5.9x in 2021, then dropping again to a projected 4.9x in 2022.
Overall, Leung still views ProntoForms as being a solid value option for investors.
“We continue to view ProntoForms as a compelling investment vehicle given its resilient business model, strong growth potential and attractive takeout characteristics,” Leung said.
ProntoForms’ stock price is up 10.4 per cent for the year to date, though its high point came back on January 14 at $1.45/share.