Techopia Live: ‘No skeletons in the closet’: ProntoForms CEO riffs on running a publicly traded micro-cap

Over the past two decades, Alvaro Pombo has quietly built ProntoForms into one of the Ottawa tech scene’s steadiest performers. 

After a shaky start to the pandemic, the Kanata-based firm – which makes software that helps field workers in oil and gas, heavy manufacturing, medical equipment and other industries manage their workflows – appears to be hitting its stride as more enterprise customers sign on to its platform.

OBJ’s Michael Curran recently spoke with Pombo, who founded ProntoForms 20 years ago and is one of the region’s longest-serving tech CEOs, about the financial challenges of running a publicly traded company as ProntoForms looks to continue its ascent.

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This is an edited transcript of the second part of a two-part interview with Pombo. Part one can be found here.

OBJ: In the first episode, we talked about the history of the company, your market opportunities and your product. So if anyone wants to know that stuff, go back to the other episode. We’re going to look forward now. I want to start off by talking about your financials, Alvaro. You reported your Q3 results not too long ago. Give us a peek inside of the books, as they say, of ProntoForms.

AP: The company has a very long history of good numbers. Our (year-over-year) growth has been ranging in the 20 percentage points. In Q4 (of 2020), we (discontinued) a channel (partnership) with AT&T in the U.S., and that took some customers away, which is totally fine, because we focus on large enterprises. Some small businesses went away with AT&T, happily, because we can focus more on what our (core) business is. I don’t know how many quarters we’ve had of steady growth, in the four to five per cent range, and then we have these blips of large enterprise growth. So from a growth perspective, our objective is to be in the high 20s, close to 30s. We were there in 2019. The pandemic had an effect, no question about it, but now we’re going back up. About 70 per cent of our revenue comes from existing customers. We run at about a 90 per cent margin, so it’s a great business. We’ve been profitable – anytime we stop hiring people, we become profitable. But this is a growth story, and there is never enough growth. We’re going at it very hard in a rational way.

OBJ: You must have lots of recurring revenue, if I understand your business model. So you’re on an upward trajectory there. Is that correct?

AP: Yeah. About 90, 91 per cent of our revenue is recurring. So we do about $20 million US in annual recurring revenue.

OBJ: Talk to me a little bit about that balance. You are growing, but you’re continually reinvesting in the company in order to fuel that growth. Do I understand that correctly, Alvaro?

AP: Totally. It’s a growth play. I mean, look, if we stop investing as much as we are in the business, we can get profitable in two seconds. We’ve done it through the pandemic; we’ve done it quite a few times where we touch profitability. But we continue to invest, and being public helps us. But when you’re public, the objective is to attract shareholders to that profile. There are investors who understand exactly what I’m referring to. We’re growing the company steadily in a rational way, without throwing tons of money at it and waiting to see what happens. Now, we might lose acceleration sometimes, but at our stage, we believe we’re doing it right, and we are definitely pushing the gas pedal harder as we speak.

OBJ: That’s a great segue into the fact that ProntoForms is a publicly traded company on the TSX Venture Exchange. You have an interesting challenge here being a publicly traded company. Tell us about that decision way back when to go public, and maybe part two of that would be, what’s it like to manage a public company?

AP: We ended up being public because in 2008 the world collapsed, as we all remember (during the Great Recession). And we decided that the best way to bring some money into the company was through (a reverse takeover). And that gave us enough money to continue the journey. The beauty of this thing is that there are no skeletons in the closet – everybody owns the same type of shares. Everything is very clear, very transparent. Governance is very clear. The company has evolved in a more mature way than our revenue represents. The key is the kind of shareholders you target. A company like us cannot go to the public markets looking for the retail monstrous play, when people don’t understand what you’re trying to do. There is a level of sophistication in the investors that understand we’re a micro-cap and deploying our resources in a certain way. At the end of the day, our shareholders are very sophisticated funds and very sophisticated wealthy shareholders that understand what they buy and what they hold. Therefore, the stock doesn’t move that much. We’re building shareholder value, and the realization of it will come at a different time.

OBJ: So you’re not looking for retail investors – I mean, you might bump into them, but that’s not really the play. So how do you get the attention of these funds? I would imagine many of them are in the U.S. Do you cold call them and say, come visit our office, and we’re gonna show you what ProntoForms is about? How do you do that?

AP: There is magic there – targeting. When these guys go to micro-cap conferences, I speak to them in the same way I’m speaking to you, very openly, transparently. And people understand the play, okay? And they understand that the Canadian market is undervalued. There is a market for these types of stories. And these investors are sophisticated; they keep in touch with you, they visit you, they fly to see you, all those wonderful things. And you build a strong relationship with them. We have three to five of that type. And there are another 10-15, call it, sophisticated investors who know what they’re doing. And then there is a larger amount of others – I think we have around 200 shareholders – and they know what we do.

OBJ: We’re going to talk about a business development challenge that you experienced. Tell us a bit about this business challenge, with the hope that other people might relate to it and understand your issue here.

AP: I’ll paint the following scenario. You’re a SaaS company and you’re focusing on large enterprise customers. We sell quite a few new accounts every quarter, and they usually start with a tiny little proof of concept to demonstrate impact on the business. So as you get that, the next step is, “Okay, how are we going to expand?” And how you are going to expand requires different degrees of sophistication. 

So the first stage is to onboard them properly and make investments in customer success. But then you get to the next level, which is, okay, how are you going to look into all their use cases that can propagate into other parts of those organizations? So we’ve made a huge investment in identifying those use cases and trying to show the customer journey throughout different use cases, because field automation is quite a big area. 

To get to the next level, you need strategic account managers – salespeople who are sophisticated in their trade and can present these different opportunities. Now I have 160 large enterprise customers. And how do you grow those relationships at scale? Because that’s where revenue growth in the 30s or north of 30s comes from, doing that at scale. So I go back to where I was saying in the previous episode, you have these peaks and valleys, and doing these at scale is what will reduce the valleys and ultimately create growth at a different speed. So you have to develop new muscles in your corporate body and you have to develop sophistication in your go-to market strategy. That is easier said than done. I knew that was a challenge, a wall that was coming. Climbing it has been a lot harder than I thought.

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