QuoteMedia, Inc.
Q1 2023 Earnings Call Transcript

Published: 15 May 2023

[Operator:]

Good day, everyone, and welcome to today's 2023 Q1 Earnings Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions]

[It is now my pleasure to turn the conference over to Brendan Hopkins.:]

[Brendan Hopkins:]

Thank you. Thank you, everyone, for joining us today. We have a brief safe harbor, and then we'll get started.

[Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results.:]

[With that said, I'd like to turn the call over to Dave Shworan, CEO of QuoteMedia.:]

[David Shworan:]

Thank you, Brendan. Welcome, everybody, and thank you for joining us. We're pleased to announce that we achieved an 11% increase in revenue in Q1 over Q1 of last year. And if we do a ForEx-neutral comparison and remove the impact of the 3% decline in the Canadian dollar, that would have put our true comparable at an increase of 14% for the quarter. Nonetheless, we're very happy with our growth.

[In the quarter, we saw a very strong uptake of our web content solutions. This shows that more clients are moving to QuoteMedia for the provisioning of our web-delivered products to power their websites, portals, research areas and trading systems.:]

[Corporate Quotestream revenue also increased as we continue to bring on more corporate clients, while Individual Quotestream slightly fell as we saw a decrease in home users. This is consistent with the trend in the industry as there is no longer that surge that we saw during the pandemic. And individuals are certainly watching their dollars a bit more these days.:]

[Another thing to note is that we have improved our margins, and we are certainly -- and we are starting to bank some money. In fact, we increased our cash balance by nearly $0.5 million from Q1 of last year. And even with the -- with booked revenue based on existing contracts, we are forecasting record profitability this year. So this is certainly forecasted to be an excellent year for QuoteMedia.:]

[I will now pass the mic to Keith Randall so he can take us through some of the numbers for the quarter, and then we can answer any questions that you may have.:]

[Keith Randall:]

Thank you, Dave, and welcome, everyone. I will now start with the income statement. Note that all comparisons are on a year-over-year basis, unless otherwise noted.

[Overall, we had an 11% increase in total revenue for the quarter. On an FX-neutral basis, our revenue growth was 14% as our revenue was negatively impacted by the decline in the Canadian dollar since the comparative period. Calculating revenue growth on an FX-neutral basis translates our Canadian dollar revenue at the average exchange rate of the comparative period.:]

[In general, our new products continue to gain traction in the market, which has allowed us to attract some of the larger customers we've recently signed. Breaking down our revenue. Our total Quotestream revenue increased by 2% due to the 6% increase in Corporate Quotestream revenue, resulting from increases in both the number of customers and average revenue per customer since the comparative period.:]

[Our Individual Quotestream revenue decreased by 12% due to a decrease in subscribers and the decline of the Canadian dollar as approximately 50% of our Individual Quotestream revenue is earned in Canadian dollars. Interactive Content revenue, which is web display content, increased 22%, mainly due to an increase in the average size of our customer base due to the larger contracts recently signed.:]

[Our cost of revenue consists of fixed and variable stock exchange fees and other data costs and amortization of capitalized development costs. Our cost of revenue increased 4% for the quarter. This was mainly due to increased amortization expense associated with capitalized costs related to improving infrastructure, new product development, data collection and the expansion of our global market coverage.:]

[Overall, our cost of revenue decreased as a percentage of sales, increasing our gross margin percentage to 51% from 47% in the comparative period. The improvement is mainly due to the higher gross margins associated with the new contracts signed since the comparative period.:]

[Our total operating expenses increased 22% during the quarter. Most of the increase relates to additional personnel hired to achieve our expansion objectives, including improvements made to our infrastructure, security and business continuity management.:]

[Sales and marketing expenses increased 10% and development expenses increased 34% primarily due to additional personnel hired since the comparative period. The increases were offset by the decline in the Canadian dollar as most of our sales and development personnel are located in Canada. G&A expenses increased 27% primarily due to additional professional fees incurred resulting from the change of principal accountants in January of this year.:]

[Our net income for the quarter was $113,000 compared to $149,000 in the comparative period, a decrease of $36,000. Higher-than-normal professional fees impacted our net income for the quarter. In addition, we incurred $78,000 in noncash stock-based compensation expense related to the fair value adjustment of our preferred stock warrant liability. We expect our net income to improve for the remainder of the year as those costs normalize and our revenue grows.:]

[Our adjusted EBITDA was $830,000 compared to $680,000 in the prior period, an improvement of $150,000. Please refer to the reconciliation included in our press release for the calculation of adjusted EBITDA.:]

[Turning now to our balance sheet and cash flow statement. Our cash totaled $675,000 at quarter end, which was $197,000 increase from our year-end cash balance of $478,000. Our net cash flow from operations was $992,000, while net cash used in investing activities was $795,000 primarily due to spending on infrastructure and product development.:]

[Looking forward for the remainder of 2023, based on revenue already on our contracts and new opportunities currently in the discussion phase, we expect improved revenue growth for the remainder of the year and record profitability for fiscal 2023. We also expect a corresponding increase in our cash balances for the remainder of the year and beyond.:]

[Thank you, and I'll now pass it back to Dave.:]

[David Shworan:]

Thank you, Keith. We're now happy to open up the call for any questions that you have. And if you have future questions after the call, please feel free to reach out to Brendan Hopkins, [e-mail]. So we'll open up the call to questions now.

[Operator:]

[Operator Instructions] Our first question comes from Michael Kupinski.

[Michael Kupinski:]

So revenues decelerated from the fourth quarter. And I was just wondering if you can talk a little bit about the trends that you're seeing there. And if you could talk -- you mentioned that Individual Quotestream subscribers are down year-over-year, which makes sense. What -- how many -- what are the subscriber totals for Corporate Quotestream? If you could just to give us some color on what's happening there.

[Keith Randall:]

I guess I'll answer this. I don't have those totals right in front of me, unfortunately, for this, but I could get those to you offline if you need them. But our revenue really hasn't really decelerated. I think you're referring to just the revenue growth from just our growth rate. I would love to give...

[Michael Kupinski:]

The growth rate, yes.

[Keith Randall:]

Yes. I mean our revenue was 4% over the -- our last quarter Q4. So -- but we expect that rate. And partially, it's due to the revenue growth, the comparison of the revenue in our first quarter of last year. So as the year goes on, our overall revenue growth will increase, and we expect the end of the year at a comparable revenue growth as we had in 2022.

[Michael Kupinski:]

Okay. And just in general, if you can give us a sense of what you're seeing in the marketplace, particularly for Corporate Quotestream, and then also for your Interactive business as well. If you could just kind of give us a sense of what you're hearing from the customers.

[Keith Randall:]

Dave, do you want to get that?

[David Shworan:]

I can answer that. Yes, I'll go through that. The -- so basically, Corporate Quotestream is always a growing entity for us. It's a product that more and more firms are coming to purchase from us. That's where we're going after big accounts, where it's hundreds of users, thousands of users that will use this product. So that product is always a good one for us because it saves companies a lot of money. They don't need to use expensive Bloomberg terminals or a competitive product. The Quotestream product line is excellent for the corporate accounts.

[We don't focus too much on the individual accounts. Those are just one-offs that come in and sign up for individual use, putting in a credit card and using that. So we do have some marketing that goes in that direction. But really, we're after the corporate side, and that's why we're seeing the growth there, and that's really our focus. That closes a lot more revenue as opposed to a single user. I mean we don't turn away a single user, but we're after the big blocks.:]

[And then as far as other content solutions -- yes, as far as the content solutions and the web displays, that's an incredible area for us. I mean we're one of the best in the industry as far as providing content to power portals or websites or trading systems or banks or brokerage firms. So basically, all -- we own all of the data. We run all of the data. We process it, we display it, and we create all of these widgets and custom views and different things for clients. And that's really where it seems the world is noticing us, and a lot of firms are coming to us now for that.:]

[And because of closing a bunch of big deals in the last few years that have shown that we're a pretty big player in that space, that's why we're very busy with new proposals coming in and new pricing models and things like that. So I see good growth in that area for sure.:]

[Michael Kupinski:]

Yes. You mentioned that G&A costs up 27% due to professional fees. I was just wondering, are we to look for that to moderate as we go forward from here?

[Keith Randall:]

Yes. So we had some overlap in accounting fees due to the changeover of firms. So that -- we expect that to dramatically decrease going forward, so -- and normalize. So that and the adjustment in fair value of the preferred stock warrant liability negatively impact our revenue. So...

[Michael Kupinski:]

And then the development cost as well, can you talk a little bit about that and what we're expecting for the balance of the year there?

[Keith Randall:]

Are you saying -- are you referring to the development expenses or the [ account-wise ]?

[Michael Kupinski:]

Yes, you mentioned -- yes, the development expenses, they were up 34% in the quarter, you mentioned.

[Keith Randall:]

Yes. I would expect those to normalize as well as the year goes.

[Michael Kupinski:]

Okay. And then can you tell me about your full-time equivalents? How many sales people have you added? Did you add in the quarter? Or where are you at this point?

[Keith Randall:]

I don't have the figures of each, like, department in terms of employees, but we've probably added -- since the comparative period, we probably added at least 20 employees net since the comparative period. And most of those personnel or employees would be in sales and marketing and -- actually, most would be in development and then sales and marketing. So...

[Michael Kupinski:]

Got you. And then in terms of...

[Brendan Hopkins:]

So [ Street-wise ] so 20% this year, if you want a figure, I would put it at an estimate.

[Michael Kupinski:]

Got you. And then just in terms of the revenue growth opportunity because, always, you're in a very big playground here, and it seems like maybe the revenue should be growing a little faster, we'd like to see some acceleration in the revenue growth. Are there products or things that maybe you need to offer to get you into a more competitive and larger field? Or do you feel like you have the feature set and the product sets that you think that you can be competitive at this point, and now it's just a matter of getting your voice heard in this -- in the marketplace?

[David Shworan:]

Yes. I think it's more of the latter, getting our voice heard. Certainly, by -- as we grow -- you go with larger and larger firms as you're growing and people trust you. And there are firms that we did not proceed with maybe a few years ago because they thought we were too small. They didn't know if they could trust us. And they went with one of the multibillion-dollar providers. But now they're coming back and saying, "Okay, we see that you're now part of -- you're at the table. You're part of the group."

[And I think we do have all the products. We have the full suite of data sets, of product lines, of everything that they're looking for. And that was always the goal of the company with -- you get the checklist and you make sure you can check off all the boxes that you have, all the pieces of data and product lines, and we certainly have done that.:]

[So yes, I don't think we really need to expand as far as more products. I mean we're always building on to what we have, and we're adding more analytic data. We're adding more different widgets and tools that display the data differently, different things like that. But as far as the suite of products, I think we have a very, very good suite of products now.:]

[Michael Kupinski:]

And final question. Can you just talk about the competitive landscape? Are you seeing pricing pressure? Can you talk about customer retention, that sort of thing, just in general?

[David Shworan:]

Yes. Pricing, so I mean, I think the landscape, we're not seeing competition as far as undermining our pricing. If anything, we're the lower pricing. When it comes to some of these big firms, they come along, and once we do an analysis, their spend for the last 10 years was ridiculous in how much they were spending. So that when they come to meet with us, we can typically save them a lot of money.

[So that's always our goal. I mean, obviously, we want to make as much as we can. But we also want to be realistic and we want to win the deals, and we want to help these firms that are overspending. And we're not really seeing any of those lowering their prices or coming in after us because I think it's very difficult for them to do that.:]

[Once they have a bunch of firms at a certain price level, if they start lowering their pricing, it would really hurt them and affect their name in the industry if they did that. So we're kind of like that mosquito that's in there, closing deals behind the scenes.:]

[Michael Kupinski:]

And customer retention in the quarter?

[David Shworan:]

Yes. I think customer retention is pretty good. I mean we're typically running over 95% retention. And if customers do leave us or -- it's not because they're leaving us to go to a competitor. They're either closing down a division or they're changing their model, and they're not buying certain data or certain product lines. But we certainly are not -- we don't find customers leaving us to go to other providers.

[Michael Kupinski:]

And you didn't lose any major accounts in the quarter then?

[Keith Randall:]

No.

[Michael Kupinski:]

Okay. That's all.

[Keith Randall:]

We've had some decreases -- I'll say this, we've had some decreases in usage from existing customers. But usually, in that scenario, it's -- we've found a more cost-effective data for them. So really, the decrease in revenue, there's a corresponding decrease in expenses as that revenue is more pass-through revenue. But in terms of losing customers, we haven't seen that.

[Operator:]

[Operator Instructions] It appears we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

[David Shworan:]

Thank you so much. I didn't expect a lot of questions since we had a call not very long ago. But thank you for your interest in QuoteMedia. And again, if you have any future questions, feel free to reach out to Brendan Hopkins, [e-mail]. Happy to answer questions in the future. Thanks so much for joining us, and we'll talk to you next time. Bye-bye.

[Operator:]

Today's conference has concluded. You may disconnect at any time.