Desjardins profiled Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH) as its “Focus Stock of the Month” in a recent edition of the Desjardins Monthly Diversified Digest, while also adding the company to its Small Cap Watch List for companies being potentially underappreciated or overlooked by investors.
To qualify for the list, Desjardins uses selection criteria including strong evidence of growth, driven by an emerging competitive moat, unique strategy, and/or differentiated product/service offerings, solid progression toward profitability with operating leverage and financial resources to support the company’s growth plans.
“In general, we believe many small caps have been overlooked due to a lack of analyst coverage, operational history, liquidity constraints, and/or the perceived risk typically associated with small-cap names, especially during periods of economic weakness,” said Kevin Krishnaratne, lead author of the Desjardins analysis, delivered on October 29.
Founded in 2009 by CEO Ali Tajskandar and headquartered in Vancouver, Wishpond Technologies is an all-in-one marketing technology and services company focused primarily on the SMB market, having built a platform that includes a number of tools, including website and landing page builders, email marketing, CRM, and payment processing.
The company has continued to grow with the acquisitions of Invigo Media, PersistIQ, and Brax.io in 2021, prompting an expansion in its workforce from 125 to approximately 200 employees.
“Management has outlined a multi-faceted growth plan focused on investment in sales (sales force has doubled from 12 in 2020, with a goal to reach approximately 50 by the end of 2022), new product development (R&D team has almost doubled since January, while WISH has introduced four new products in 2021), and accretive M&A,” Krishnaratne said.
To date, the company has created over one million marketing campaigns and generated over 75 million leads for its customer base of approximately 3,000 clients, generating an annual run rate of approximately $15 million.
“While Wishpond’s core SMB base, defined as clients with anywhere from five to 20 employees, is diverse across a number of categories, the company’s solutions resonate particularly well with e-commerce and services-related merchants,” Krishnaratne said.
To illustrate the point, Krishnaratne noted that the company saw pandemic-induced growth in its direct to consumer clients, as the category now accounts for 25 per cent of the business’s mix compared to 24 per cent for business to business clients, though he also notes the company’s ability to provide solutions for services that require an online presence more than actual product sales, including doctors’ offices, gyms and lawyers.
Wishpond’s most recent quarterly financial results came on August 26 to cover the second quarter of its 2021 fiscal year, headlined by revenue of $3.2 million for a 73 per cent year-over-year increase, which the company’s press release notes was primarily driven by higher organic growth from Wishpond’s incremental investment in its sales team and inorganic growth from the positive contribution of its Invigo and PersistIQ acquisitions. The company notes this number could have been higher, though revenue was affected by a weakened US dollar.
“We have a strong balance sheet to execute on the desirable acquisition opportunities in front of us,” said Juan Leal, Wishpond’s Chief Financial Officer in the company’s August 26 press release. “The Invigo and PersistIQ acquisitions have proven to be accretive to Wishpond’s financial profile and we are committed to following a similar disciplined acquisition and capital allocation plan to maximize shareholder value when making new acquisitions.”
The company has had a busy second half of 2021 so far, having started a partnership with digital courseware provider Stukent to introduce new real-world digital marketing and social media assignments with Wishpond’s technology, then completing the Brax.io acquisition in September, then recently announcing integration for its Wishpond Appointments app within the Zoom App Store.
From a financial standpoint, the company has also made headway, having secured a $6 million revolving credit facility from the National Bank of Canada, as well as having its shares become eligible for trading with the Depository Trust Company.
The Desjardins team projects modest growth for Wishpond over the next two fiscal years, projecting revenue of $14 million in 2021 for a potential year-over-year increase of 75 per cent, then a jump to a projected $20 million in 2022, marking a potential year-over-year increase of 42.9 per cent.
Meanwhile, after projecting a loss of $1 million in 2021, the Desjardins team forecasts the company’s EBITDA to turn positive in 2022 at $1 million. Consequently, Desjardins only provides an EV/EBITDA multiple for 2022, which they project at 37.5x to rank fifth among the companies on the Desjardins small cap watch list.
Overall, Wishpond’s stock price has fallen by 31.8 per cent for the year to date, hitting a high point of $2.38/share on January 20, though it has rebounded nicely since bottoming out at $1.05/share on August 18.
Disclosure: Wishpond Technologies is an annual sponsor of Cantech Letter.
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