Financial Research and Quantitative Trading Strategies for TSX Venture Investors

VPY.V - Keep in mind.

July 11, 2019

 

 

VersaPay Corp. (VPY.V) provides cloud-based invoice-to-cash solutions which enables businesses to get paid faster, to streamline financial operations, and to reduce costs. The company specialize in accounts receivable and collections management by providing clients with a self-serve platform to view invoices online, collaborate on inquiries and disputes, as well as facilitate secure online payments (EFT/ACH and credit card). 

 

We initiated coverage on December 2018. Here's an update.

 

Dec. 12 - Signs Contract With Large US based Pest Control Firm To Provide Invoice-To-Cash Solution.

 

Jan. 23 - Adds Kite Realty Group Trust as Latest REIT. 

 

Feb. 21 - Adds Sporting Goods Giant Amer Sports to Growing Client List.  Will implement VersaPay ARC as its central receivables management platform for its Wilson Sporting Goods Co. and the Winter and Outdoor brand. Amer also plans expansion for other brands in the future.

 

Mar. 12 - Named A Leader in the IDC MarketScape.

 

“As a result of conversations with their large clients, it is evident that VersaPay software is a must consider solution. IDC anticipates VersaPay will continue to grow their market presence well into the future.” - Kevin Permenter, Senior Research Analyst, IDC.

 

Mar. 19 - Launches Cash Application and Bank Reconciliation Module Powered by Cashbook. ARC's new Cash Application module powered by Cashbook automates all payments, even those made outside of the platform. ARC can now connect to over 200 banks worldwide.

 

Mar. 26 - Becomes A Certified Product Partner of MRI Software.

 

Apr. 2 - Announces Q4 and Full Year 2018 Financial Results.

 

Apr. 30 - Announces Signing of a Top 10 US Craft Brewery. Now with ARC in place, the brewery offers customers the flexibility and convenience of paying online and has eliminated the manual work associated with collecting and accounting for payments.

 

May 10 - VersaPay CEO to Present at IMN's Annual Real Estate Forum.

 

May 16 - Signs Large US Retail REIT as Newest ARC® Client. "The commercial real estate sector continues to be a leading vertical for VersaPay, and we're delighted to be working alongside yet another large US REIT to enhance the level of service offered to their tenants." - VPY.V's CEO.

 

May 22 - Announced Q1 2019 Financial Results. 

 

Jun. 5 - Adds Large Drainage Company to Expanding Client Portfolio.  "ARC was seen to be a game changer in advancing the experience the client could provide to its customers. "We continue to focus on expanding our presence in the large enterprise market," - VPY.V's CEO.

 

Jun. 6 - Present at Fintech Conference Hosted by Credit Suisse in NYC.

 

Jun. 13 - Hosts Inaugural Client Advisory Board for Commercial Real Estate. 

 

July 9 - Simplifying Acceptance of Virtual Cards for Businesses Everywhere. Mastercard Works with VersaPay to Introduce Virtual Card Receivables Service to Help Suppliers Effectively and Efficiently Reconcile B2B Payments. 

 

The Virtual Card Receivables Service will aggregate information from Mastercard Issuers related to Virtual Card payments by their corporate customers and compile it into one comprehensive file, available in a digital format that is preferred by suppliers.

 

In the last six months, VPY.V signed at least six new clients:  a Pest Control, two REIT - including Kite Realty Group Trust, a Manufacturer (Amer Sports), an US Craft Brewery, and a Large Draining Company.  Six months prior, VPY.V reportedly added a Top Accounting firm, four Large US Distributor: including JJ Haines, Ideal Supply. Clearly, VPY.V has demonstrated that it is vertical agnostic.  

 

In addition to being noted by IDC, VPY.V made three key partnerships: and as recently announced Master Card.  No small feat!

 

VPY.V's performance's was noted by the investment banking community after the release of the Q4 and 2008 results. On April. 4, Haywood upgrade it to "Buy" with a $2.00 target (from $1.30). April 8, PI Financial  declared a target price of $2.30. April 11, Raymond James issued a  "strong buy" - target $3.30. 

 

Yesterday Haywood raised its target to $2.30 (from $2.00). “We view the partnership with a marquee financial services company as a strong endorsement of VersaPay’s capabilities,” Rosenberg says. “While there was no mention of financial terms, we believe over the medium/long term it will meaningfully broaden VersaPay’s reach with potential to cross-sell additional services in Mastercard’s large customer base.”

 

However, while Versapay is growing its revenue in the last three quarters: Q3 2018 ($1.14M), Q4 2018 ($1.45M), Q1 2019 ($1.95M),  it is yet profitable. In fact, cash & equivalent resources are decreasing from 11M in Q4 2018 to 8.5M in Q1 2019.

 

 

Going back to the MD&A reveals for Q2 2018: "The Company had an average operational burn rate of $1.0 million per month for the three months ended June 30, 2018". At the time, VPY.V's  cash on hand totaled $9.9 million  (June 30, 2018).  Thereafter a Bought Deal for $8M was announced. This eventually closed oversubscribed at $9.2M but something to consider because...  

 

As for the last MD&A (Q1 2019): "The Company had an average operational cash burn rate of $0.81 million per month for the three months ended March 31, 2019". This is a stellar 19% improvement from Q4 2018 but "Cash and Equivalent were $8.8 million". Hence, financing might be in the horizon.

 

It by no means takes away from recent accomplishments or the fact that VPY.V's is a potential target for acquisition but its something to keep in mind.

 

 

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.  

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