A solid M&A strategy and equally strong revenue ramp have Acumen Capital analyst Nick Corcoran taking a bullish stance on B2B software company Pluribus Technologies (Pluribus Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:PLRB). In a coverage initiation on Wednesday, Corcoran issued a “Buy” rating on Pluribus, saying the company is a high-growth acquirer currently trading at a discount to its peers.
Toronto-based Pluribus was founded in 2018 and began trading on the Venture Exchange in January of this year after completing an RTO transaction and concurrent financing. The company pursues acquisitions of smaller businesses, those with less than $10 million in revenue and EBITDA margins of between 20 and 30 per cent, and has so far completed 13 buys for an aggregate price tag of $74 million, focusing the four fields of eLearning, cCommerce, Digital Enablement and Health Tech.
By vertical, Pluribus has made seven acquisitions in eLearning, two in eCommerce, three in Digital Enablement and one in Health Tech, with some of its largest being POWR, a plugin designer for e-commerce, and ICOM, an e-learning solutions provider.
Corcoran said Pluribus’ focus markets are primed for expansion going forward.
“PLRB is a high growth technology company that acquires small, profitable and independent B2B technology businesses and rolls them up into one family. The Company focuses on acquiring businesses in four verticals with a large addressable market and high growth – eLearning, eCommerce, Digital Enablement, and HealthTech. For reference, eLearning has an estimated $250 billion TAM with a 21 per cent growth rate, eCommerce has an estimated $6 billion TAM with a 17 per cent growth rate and HealthTech has an estimated $175 billion TAM with a 25 per cent growth rate,” Corcoran wrote.
On the numbers, Pluribus recently released its first quarter 2022 financials, which showed revenue up 285 per cent to $8.5 million, gross profit up 269 per cent to $5.7 million and an adjusted EBITDA of $1.4 million. At the quarter’s end, the company had $2.7 million in cash on hand compared to $1.7 million at the end of Q4 2021, while it raised $25 million through its RTO financing. Subsequent to the end of the Q1, Pluribus announced a new $42.0 million credit facility made up of a $24.0 million term loan, a $15.0 million delayed draw term loan for future acquisitions and a $3.0 million revolving line of credit for general working capital and corporate purposes.
Management said it intends to keep its M&A this year at a similar pace to 2021, with to this point four acquisitions in 2022 as part of its roll-up and integration strategy.
“Our results [in the first quarter] reflect the impact of the seven acquisitions we have completed within the past 12 months although we don’t see a meaningful impact from Kesson and Social5 until we execute on our integration plan,” said CEO Richard Adair in a May 30 press release.
“Looking ahead, we remain focused on maintaining our transaction cadence established in 2021 through the end of the second quarter and while also integrating each of our new portfolio companies to help support further cross-selling opportunities and synergies across the business,” he said.
As for Corcoran, the analyst sees Pluribus’ topline going from $18.6 million in 2021 to $43.8 million in 2022 to $48.5 million in 2023 with a forecasted organic growth rate of four per cent this year and five per cent in 2023. On earnings, Corcoran is calling for adjusted EBITDA to go from $2.8 million in 2021 to $8.3 million in 2022 to $9.5 million in 2023 with an adjusted EBITDA margin projected to increase from 15.1 per cent in 2021 to 18.9 per cent in 2022 to 19.6 per cent in 2023.
On its leadership, Corcoran said Pluribus has a management team with a track record to scale the business and a strong Board of Directors for a company of its current size, while having 14 per cent of the outstanding shares owned by management and directors means there’s alignment with shareholders.
Finally, on valuation and comps, Corcoran said Pluribus is trading at a discount to its Canadian Software peer group, with Pluribus currently at 4.8x 2023 EV/EBITDA and 0.9x EV/Sales compared to the peer average at 9.9x and 3.0x, respectively.
“PLRB trades at a discount to the peer group on both EV/Sales and EV/EBITDA. We believe that PLRB will trade in line with the peer group as it executes the acquisition strategy and shows organic growth,” Corcoran said.
The analyst has paired his “Buy” rating with a target price of $4.50 per share, applying a target EV/EBITDA multiple of 10.0x to his 2023 estimates. At the time of publication, Corcoran’s target represented a projected one-year return of 79.3 per cent.