Raymond James raised PT to $22 and OUTPERFORM While the third-quarter results fell below his expectations, Raymond James analyst Stephen Boland emphasized the Toronto-based legal software vendor is “in the midst of the seasonally strongest quarter, expense management is taking hold, and the balance sheet has improved.”
After the bell on Tuesday, it reported revenue of $107.3-million and adjusted EBITDA of $60-milion for its third quarter, both falling below Mr. Boland’s projections of $113.1-million and $64.9-milllion.
“Although, the global exposure to real estate is noticeably lower, the slower winter quarter makes it more difficult to model,” he said. “The gross margin rebounded in the quarter from last quarter and in line with our estimate. Management on the conference call indicated that 4Q should be a record quarter as transaction volumes in conveyance and due diligence have increased though no specific guidance was provided.
“More positively, the company continues to reduce its real estate exposure as it looks to grow its Annual Recurring Revenue (ARR) base. Real estate transactions as a percentage of revenue now account for 43 per cent down from 44 per cent last quarter vs 50 per cent last year. ARR now accounts for 30 per cent of total revenue (compared to 19 per cent last year). We believe this should reduce volatility in future quarters.”
Reiterating an “outperform” rating, the analyst raised his target to $22, matching the average on the Street, from $16.