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Plurilock Security has a ton of upside, says Leede Jones Gable

Greg McLeish of Leede Jones Gable continues to be locked in with Plurilock Security (Plurilock Stock Quote, Charts, News, Analysts, Financials TSXV:PLUR), maintaining a “Buy” rating and target price of $1/share for a projected return of 270 per cent in an update to clients on Monday.

Founded in 2018 and headquartered in Victoria, B.C., Plurilock Security is an identity-centric cybersecurity solutions provider to government, institutions and businesses. The company operates in two segments: a Technology division which builds and operates Plurilock’s own proprietary products and a Solutions division which offers security consulting services and resells cybersecurity industry products and technologies to meet customer needs.

McLeish’s latest analysis comes after the company released its year-end results for the 2021 fiscal year, headlined by $36.6 million in net revenue, which came in ahead of the Leede Jones Gable projection of $34.8 million while also representing a massive jump from the $0.5 million reported for 2020. 

According to McLeish, the beat is attributable to hardware sales coming in slightly ahead of forecast at $33.5 million compared to the $31 million Leede Jones Gable estimate, accounting for 91 per cent of the company’s revenue mix after not being present in the 2020 year-end.

The shift in Plurilock’s revenue mix was further emphasised by the company’s electronic software license and maintenance sales revenue, which came in at $2.6 million in 2021 compared to just $326,000 the previous year. That still only accounted for 7.1 per cent of the mix compared to 68 per cent in 2020, with the remainder coming from professional services.

The momentum has continued into the early part of 2022, where Plurilock indicated it had contracts and orders representing approximately $6.8 million in sales already.

Plurilock also reported gross profit of $2.5 million for a margin of 6.8 per cent, beating the Leede Jones Gable estimate of $1.9 million and a 5.4 per cent margin.

Meanwhile, the company also reported an EBITDA loss of $4.3 million, a slight improvement on the Leede Jones Gable projection of a $4.6 million loss on account of higher revenue and gross margin.

“Into 2022, our focus will be to extend our sales pipeline further and complete more high-margin proprietary software sales,” said Ian Paterson, CEO of Plurilock Security in the company’s April 29 press release. “We aim to continue executing on our stated strategy of acquiring profitable cybersecurity companies with great customers that can improve our operating margins and open new distribution channels for cross-selling our software products.”

Plurilock has had a busy start to 2022, having received a purchase order through its Aurora Systems Consulting subsidiary to deploy Plurilock’s DEFEND continuous authentication solution from a California-based pension fund, which was already a Plurilock customer. The deal marks Aurora’s first cross-sell under the Plurilock banner; customers will pay a monthly subscription fee based on the number of end users specified in the purchase order for the company’s continuous identity confirmation solution.

In March, the company acquired all the issued and outstanding shares of Integra Networks Corporation, a cybersecurity and IT solutions leader which helps implement technology solutions for all levels of Canadian governments, educational institutions, global healthcare organizations, and world-class enterprise companies.

“Plurilock plans to continue evaluating other accretive and profitable acquisition targets that will extend its distribution channels, while adding new top-tier customers and competitive technology assets to its business,” McLeish said.

Looking ahead, McLeish foresees continued growth for Plurilock, as he forecasts revenue of $49.4 million in 2022 for a potential year-over-year increase of 34.8 per cent. For 2023, McLeish has revenue jumping up to $57.3 million, representing potential year-over-year growth of 16 per cent.

McLeish also forecasts the company’s gross margin to widen in that time, with a jump to $4.9 million in projected gross profit for 2022 implying a margin of 9.9 per cent, while the 2023 call of $6 million implies a gross margin of 10.4 per cent.

Meanwhile, McLeish continues to forecast negative EBITDA for the company in 2022 ($4.1 million projected loss) and 2023 ($3.6 million projected loss).

Looking forward, McLeish points to Plurilock’s balance sheet as another reason for optimism for the company, along with management’s stated target of acquiring companies that will add complementary capabilities to accelerate adoption, integration, and sales of core Plurilock technologies.

“Plurilock’s strong financial position will allow it to continue to pursue strategic acquisitions to enhance its go-to-market and sales capabilities,” McLeish said. “Plurilock’s management believes that acquisitions will allow it to offer a broader suite of products which will enhance its ability to be a ‘single-provider solution’ as this is what many customers are looking for.”

McLeish said cyber attacks worldwide are already on the rise this year, with the first quarter representing the third consecutive year that data breaches increased when compared to the Q1 of the previous year. McLeish said global spending on cybersecurity products and services is expected to grow by a 15 per cent CAGR from 2021 to 2025.

Disclosure: Plurilock Security is an annual sponsor of Cantech Letter.

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About The Author /

Geordie Carragher is a staff writer for Cantech Letter
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