PFM Stock keeps “Buy” rating at Beacon

Following the company’s third quarter results, Beacon analyst Gabriel Leung has maintained his “Buy” rating on ProntoForms (ProntoForms Stock Quote, Chart, News, Analysts, Financials TSXV:PFM).

On November 1, PFM reported its Q3, 2023 results. The company posted a net loss of $270,000 on revenue of $6.16-million, a topline that was up 13 per cent over the same period last year.

“Our trailing twelve months (“TTM”) revenue growth accelerated to 14.2% in the last quarter and helped eliminate our quarterly non-GAAP operating loss,” co-CEO Philip Deck said. “Our tight focus on cost control while funding essential investments for growth resulted in an 11% reduction in operating expenses compared to Q2 2023 and offset unusually low professional services deliveries. TTM annual recurring revenue (“ARR”) base growth continued to be strong at approximately 18%. Net bookings improved with an ARR base increase for the first nine months of 2023 of over 250% compared to the increase for the first nine months of 2022. Revenue retention continues to be strong, particularly with our enterprise customers.”

Leung says the quarter was indicative of momentum the company is building.

“Discussions with management suggest that near-term growth opportunities revolve mainly around expansion opportunities within existing accounts (i.e. seat and module expansions), although it does expect to see the fruit of recent marketing efforts in the form of new enterprise account wins over the coming year,” he said. “We believe this could translate into an acceleration of CY24 ARR growth over and above recent levels of ~18% y/y. Likewise, we believe the company remains focused on improving profitability, which, combined with increasing ARR, should help to drive further margin expansion in CY24 and beyond. Overall, we believe it has been a very productive CY23 and we are impressed by the pace of improvement in ARR growth and margins, particularly given the difficult enterprise spending environment. As the company’s growth and margin expansion thesis continues to play out, we believe the stock could continue to benefit from a multiple expansion closer to the peer group average of ~4x EV/Sales.”

In a research update to clients November 1, Leung maintained his “Buy” rating and one-year price target of $1.05 on PFM, implying a return of 88 per cent at the time of publication.

Leung thinks the company will post EBITDA of negative $800,000 on revenue of $24.4-million in fiscal 2023. He expects those numbers will improve to EBITDA of positive $2.2-million on a topline of $28.7-million the following year.