NowVertical is still a buy, Ventum says

Its second quarter results are in the books and Ventum Capital Markets analyst Rob Goff is still bullish on NowVertical Group (NowVertical Group Stock Quote, Chart, News, Analysts, Financials TSXV:NOW).

On August 15, NOW reported its Q2, 2024 results. THe company posted Adjusted EBITDA of $1.8-million on revenue of $12.3-million, a topline that was down 12% year-over-year.

“We continued to make strides in the second quarter towards laying the foundation for profitability and sustainability, prioritizing long-term stakeholder value creation,” CEO Sandeep Mendiratta said. “During the quarter, we made amendments to certain obligations, earnouts and completed other settlements, which will improve our balance sheet. We also undertook a strategic disposition, allowing us to focus on our core business and strengthened our board, further solidifying our leadership. We delivered these changes while improving our EBITDA nearly 20% year-over-year. I am pleased to report that our transition to operational excellence and execution is well underway by finding opportunities for synergies and organic growth driven by cross selling and product market fit to our client base.”

Goff says there were positives to take away from this report.

“Tough measures taken during Q2/24 secured the Company against financial pressures and cash flow constraints while gaining efficiencies,” the analyst wrote. “We are encouraged by management repositioning NowVertical as an integrated, one brand, professional services provider with a focus on cross-selling to gain value and share of wallet across strategic accounts. While the focus has been on securing financial flexibility, integration and efficiency, we look for the focus to move towards leveraging platform capabilities to drive a return to double-digit organic growth anticipated in H2/25. We see balanced double-digit growth supporting a positive revaluation. The 46% YoY growth in CoreBI highlights exceptional regional capabilities that NOW looks to cross-sell into other regions, leveraging both the capabilities and low-cost position.”

In a research update to clients August 21, Goff maintained his “Buy” rating but lowered his price target on NOW from $0.45 to $0.40. The stock closed August 20 at $0.19.

The analyst thinks NOW will post EBITDA of $4.8-million on revenue of $36.8-million in fiscal 2024. He expects those numbers will improve to EBITDA of $6.1-million on a topline of $40.7-million in fiscal 2025.

“We have cautiously trimmed our PT from C$0.45 to C$0.40 while we await visibility on balanced double-digit organic growth. While proforma financials were modestly above our forecasts, the positive outperformance rested with CoreBI where it recorded 46% YoY growth in reaching $3.9M, while A10 saw a YoY decline of 11% with its $3.2M and Acrotrend recorded a 14% YoY decline with its $1.3M. We understand that $117K in revenues were negatively impacted by the reporting of net versus gross revenues due to the change in its revenue mix. We anticipate that investors will look for balanced growth, and we expect YoY growth to return to all three divisions in 2025, together with sustained outperformance from CoreBI,” Goff added.