PI Financial analyst Kris Thompson is keeping the status quo in regards to ProntoForms Corporation (ProntoForms Stock Quote, Chart, News TSXV:PFM), maintaining a “Buy” rating and $1.50/share target price for a one-year projected return of 87.5 per cent in an update to clients on Friday.
Based in Kanata, Ont., ProntoForms researches, develops, and markets mobile business solutions, like its ProntoForms mobile workflow management app, for enterprises to automate field sales, field service, and other field data collection business processes.
Thompson’s latest update comes after ProntoForms released its fourth quarter financial results, along with 2021 year-end figures.
The ProntoForms quarterly report was headlined by $5 million in revenue (all report figures are in US dollars), representing a sequential increase of 2.3 per cent and year-over-year growth of 6.3 per cent while being in line with PI Financial projections.
Meanwhile, the company’s ARR of $19.8 million represented a 15.6 per cent year-over-year increase, and significantly outpaced the 8.7 per cent year-over-year increase from 2020.
“Post COVID-19 softness, and since hiring a new CRO in Q3/21 and upgrading its quota-carrying sales force, we expect ARR and recurring revenue to improve in 2022,” Thompson said. “Progress is expected to be back-end loaded in 2022 as the new sales professionals gain traction.”
Meanwhile, ProntoForms earned a beat in its EBITDA report, with the reported $500,000 loss coming in ahead of the PI Financial expectation of a $1.3 million loss. However, after a negative 2021 overall in terms of EBITDA, Thompson also projects a negative 2022 as the company focuses on sales growth.
“Our investment thesis is centered on revenue growth over the next two years, not expense control,” Thompson noted.
Since the release of the quarterly results, ProntoForms also announced an option grant based on the requirements of the TSX Venture Exchange, which would be part of the overall remuneration and incentive program for its new employees, including options to purchase 100,000 common shares to directors of the company. These stock options are exercisable at $0.80 per share, the stock’s closing price on March 11.
“Our customers need to accelerate the speed of automation in the field and they see our product’s agility and breadth of use cases as a catalyst in this digital transformation,” said Alvaro Pombo, Founder and Chief Executive Officer of ProntoForms in the company’s March 10 press release. “We have compelling new use case stories and a Wakefield Research customer impact report demonstrating value across many industries and multiple tech stacks. Our focus continues to be on enterprise expansion and we are off to a strong start having added enterprise sales resources and go to market infrastructure in early 2022.”
All told, the company ended the 2021 fiscal year with $6 million in cash on hand, and has also increased its TD credit facility from C$6 million to $10 million. ProntoForms management believes it has enough capacity to fund its growth plans for the next two years, but Thompson thinks the company might need a bit more working capital in 2023.
Going forward, Thompson continues to back the investment thesis of ProntoForms being all in on its Enterprise push, with Enterprise currently accounting for 41 per cent of the company’s base ARR.
“PFM has an installed base of about 165 Enterprise accounts with only 29 of them contributing greater than US$100,000 ARR,” Thompson said. “It will take a couple quarters to assess PFM’s expanded sales force success using new vertical and use case messaging to drive higher penetration within that base, and to add new enterprise customers.”
The updated quarterly reports have prompted Thompson to make slight revisions to his financial projections, raising his forecast for 2022 from $22.8 million to $22.9 million for a potential year-over-year increase of 15.7 per cent. Looking ahead to 2023, Thompson’s projection remains at $28.5 million for a potential year-over-year increase of 24.5 per cent, though there is a slight uptick in recurring revenue from $27.2 million to $27.4 million in that projection period.
From a valuation perspective, Thompson projects the company’s EV/Revenue multiple to drop from the reported 4.1x in 2021 to a projected 3.5x in 2022, then to a projected 2.8x in 2022.
Meanwhile, while still projecting losses, Thompson did improve his EBITDA projection for 2022 from a $5.9 million loss to a $5.7 million loss, while his 2023 projection is now set at a $4.8 million loss instead of a $5.1 million loss.
ProntoForms investors have seen a loss of 37.3 per cent over the last 12 months and 18.8 per cent since the start of 2022. After a brief recovery, the stock took another dive yesterday, closing at a 52-week low of $0.69/share.