Posera Has Been Transformed by Recent Divestitures

Reflecting this positive news, shares of Posera Ltd. (TSX:PAY) are up more than 47% over the past six months, and Company revenues should improve over the coming quarters

SmallCapPower | February 15, 2018: Posera Ltd. (TSX:PAY) is a leading provider of Point of Sale (POS) solutions for the hospitality industry in Canada and the U.S. Posera’s current product offerings include Maitre’D, a full services restaurant management systems & POS system, Kitchen Display Systems (KDS), an order tracking and prioritization app, and SecureTablePay, an EMV compliant Pay-At-The-Table (PATT) application.

Over the past two years, Posera has divested two assets (Zomaron Inc. in April 2016, and FingerPrints in September 2017), providing the Company with sufficient capital to focus on core assets – Maitre’D, Kitchen Display Systems, and SecureTablePay. Reflecting this positive news, shares of Posera are up over 47% over the past six months. However, the stock is down 19% over the past month and trades at an Enterprise Value of $16 million, or 1.6x an estimated 2018 revenue of $10 million (after adjusting for the FingerPrints divestiture). As Posera expands into non-hospitality verticals along with traction in its SecureTablePay offering, its revenues should improve over the coming quarters.

Investment thesis

  • A transformed company focused on core assets
  • Non-hospitality verticals and product strategy to drive future growth

Recent divestitures transform Posera into a leaner company focused on core products

Over the past two years, Posera made two significant divestitures, along with key management changes, that have transformed it into a leaner company focused on core products. In April 2016, Posera sold its wholly-owned subsidiary Zomaron Inc., within the Payments Segment, to a company established by Zomaron’s operating management team for $4.5 million. In addition, during Q3/2017, Posera sold its FingerPrints business to SICOM for $12.2 million. These two divestitures, particularly the FingerPrints sale, provided Posera resources and capital investment for its Maitre’D, Kitchen Display Systems and SecureTablePay product offerings.

Posera’s Maitre’D is a full-services restaurant management systems and POS system offering a robust and comprehensive solution, including hardware integration services, merchant staff training, system installation services, post-sale software and hardware customer support. SecureTablePay is an EMV compliant Pay-At-The-Table application. Kitchen Display Systems, previously only integrated into Maitre’D, has recently been offered as a standalone solution that provides restaurants with order visibility and tracking, prioritization, and superior customer service.

Along with divestitures, Posera also made some key management changes to align with the new strategic focus. In January 2017, Posera appointed Mr. Dan Poirier as its Chief Executive Officer. Mr. Poirier has been responsible for the transformation of the Company’s sales and customer service organization from regional operating teams into a single, global operating platform and has been leading several international expansion initiatives.

Reflecting the positive developments discussed above, shares of Posera have been on an upswing, and even with a decrease from a 52-week high of $0.34 in early January, the Company’s stock price registered a six-month gain of more than 47%.

Recurring revenue model

Posera generates ~30% of its revenues as stable, predictable recurring revenue streams from software license agreements, and ongoing support and maintenance for its POS products. Although most of the recurring revenue is from the Company’s flagship MaitreD’ solution, the recently-launched SecureTablePay app should also gradually add to sales going forward, as it gains traction in the U.S.

Non-hospitality verticals and product strategy to drive future growth

In addition to the growth strategy for the core restaurant market, Posera believes much of its future growth, particularly in the international markets, will come from casinos, assisted living, hotels, resorts, school cafeterias, hotels, and other similar establishments.

As part of a renewed product strategy, Posera recently started offering KDS as a standalone product, unbundled from the Maitre’D POS, enabling it to be sold to a broader base of customers, including merchants with other POS systems. Within months of launching as a standalone product, Posera received positive transaction and already scheduled hundreds of new KDS installations.

Continued enhancements to products, recent Blockchain announcement drives stock 33%

Apart from identifying new verticals, Posera continues to invest in enhancing its existing POS products. Recently for SecureTablePay, Posera added chip and sign as well as the ability to accept gift cards for the U.S. market. In December 2017, SecureTablePay received certification with First Data, a provider of commerce-enabling technology, which makes the solution easily accessible to merchants across the U.S.

In December 2017, Posera announced an integrated solution for the Hospitality Industry by partnering with gateway provider Shift4 Corporation. Shift4’s DOLLARS ON THE NET integrates with Posera’s Maitre’D to support credit, debit, and gift card transactions, and provides out-of-the-box support for U.S. and Canadian EMV, point-to-point encryption (P2PE) and tokenization. The joint solution enables food and beverage operators to process EMV payments to help prevent the fraudulent use of stolen card data at physical points of sale in fine and quick service, casual dining, hotels, bars and more, while adding the layered security of Shift4’s tokenization and PCI-validated P2PE.

In October 2017, Posera signed a joint venture arrangement with DLT Labs Inc to incorporate Blockchain technology in the hospitality POS ecosystem, including developing a real-time transaction and inventory management system. Shares of Posera surged 37% to $0.26 following the announcement.

Integrating hospitality payment processing on a Blockchain enables merchants, processors, suppliers, and ISVs access to the transaction data in a secure and real-time environment, which will not only decrease systems expenses but also enable an entirely new generation of real-time analytics solutions. Specifically, the integration will allow Posera’s SecureTablePay pay-at-the-table solution to accept cryptocurrencies, making Posera a pioneer in the process of accepting crypto payments in the hospitality industry.

Outlook and valuation

For more than three decades, Posera has been a leading provider of POS solutions for the hospitality industry in Canada. Over the past two years, Posera has divested two assets, providing the Company with sufficient capital to focus on core assets – Maitre’D, Kitchen Display Systems and SecureTablePay. Reflecting this positive news, shares of Posera are up over 47% over the past six months even with a 19% correction over the past month. The Company currently trades at an Enterprise Value of $16 million, or 1.6x an estimated 2018 revenue of $10 million (after adjusting for the FingerPrints divestiture). As Posera expands into non-hospitality verticals along with traction in its SecureTablePay offering, its revenues should improve over the coming quarters.

Disclosure: Neither the author nor his/her family own shares in the company mentioned above.

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