Quotemedia Inc

Good day, everyone, and welcome to today's 2022 Q2 results call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and the number 1 on your touchtone phone. You may withdraw yourself from queue by pressing star and the number 2. Please note this call is recorded, and I will be standing by should you need any additional assistance. It is now my pleasure to turn the conference over to Mr. Brendan Hawkins. Please go ahead.

Thank you, Chas. 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 would like to turn the call over to Dave Schwerin, CEO of Quote Media. Thank you, Brendan.

Welcome, everybody, and thank you for joining us. We are pleased to announce that we achieved a 12% increase in revenue in Q2 over Q2 of last year, and we're very happy with our growth this quarter. Our percentage increase looks a bit lower than expected, but that's simply because due to accounting rules, a substantial amount of revenue relating to development and setup fees for several large clients must be deferred into later quarters this year. In a nutshell, a lot of the development work that we've completed and is being paid for cannot be recognized until these large clients go live. This will happen over Q3 and even more so in Q4. As a result, everything will even out over the course of the year, keeping us on track for, as we previously stated, around a 20% annual growth rate. Being awarded contracts for two of the largest banks in Canada, as well as Motley Fool, The Street, CI Financial, NASDAQ, and others, is a testament of how we are proving ourselves as a top-tier provider. We are seeing that the industry is taking notice and more and more large firms are contacting us to discuss their market data and financial application needs. In addition, we've been closing partnership deals with other data firms in order to accelerate the sales of our new proprietary data sets. And we've closed two partnership deals currently and we are working on several more at this time. The reaction to our new product lines and our new trading systems and the uptake of our new analytics and research data sets are excellent. And I'm very proud of what we've achieved, and our clients are very impressed with not only the breadth of our data coverage, but the quality of our products and the premium level of services that Cold Media provides. This is certainly proving to be the most exciting year in the history of Cold Media. I'll now pass the mic over to Keith Randall so he can take us through some of the numbers for the quarter, and then we can answer some questions that you may have.

Thank you, Dave, and welcome, everyone. I'll now start with the income statement. Note that all comparisons are on a year-over-year basis unless otherwise noted. Overall, we had another good quarter with a 12% increase in total revenue. Our new products recently added continue to gain traction in the market, and we continue to add and improve the functionality of our existing products. This has allowed us to attract the customers Dave previously mentioned that have increased our average revenue per customer for both corporate quote stream and interactive content revenue. Note that most of the revenue related to those contracts will be deferred to the third and fourth quarters of this year, as we have only started recognizing revenue from one of the large Canadian banks to date, even though we have received payments and have started to work on some of the other contracts. Breaking down our revenue, our total quote stream revenue grew by 2%, driven by a 5% increase in corporate quote stream revenue. The increase in corporate quote stream was primarily due to new contract signs since the comparative quarter and an increase in the number of subscribers for existing customers. Our individual quote stream revenue decreased by 9%, primarily due to lower cost exchange fee options that subscribers can choose. Note that this does not affect our bottom line as those are mostly pass-through fees. Interactive content revenue, which is web display content, increased 27% mainly due to an increase in number of clients and an increase in the average revenue per client. In particular, the revenue from the large Canadian bank had a significant impact on our interactive content revenue. Our cost of revenue consists of fixed and variable stock exchange fees and other data costs. It also includes amortization of capitalized development costs. Our cost of revenue increased 3%, mainly due to increased amortization expense associated with internally developed application software. Overall, our cost of revenue decreased as a percentage of sales as evidenced by our gross margin percentage that increased to 47% from 43% in the comparative quarter. The improvement is mainly due to revenue from the large Canadian bank as it has higher gross margins than our typical customer contracts have on average. Our total operating expenses increased 18% during the quarter. Most of the increase in operating costs relate to improvements made to our infrastructure security, and business continuity management, and in particular, the costs associated with obtaining SOC 2 Type 2 certification, which we expect to achieve this year. SOC 2 Type 2 certification provides independent assurance that an organization maintains the highest level of information security and data integrity and has controls in place to assure business continuity. Sales and marketing expenses increased 20%, and development expenses increased 22%, primarily due to additional personnel hired to achieve our expansion objectives. DNA expenses increased 14%, primarily due to the increased personnel costs and software expenses related to the SOC 2 certification process. Our net loss for the quarter was $163,000 compared to $80,000 in the comparative quarter, an increase of $83,000. We made some non-recurring adjustments, non-recurring accounting adjustments that negatively impacted our bottom line this quarter but will not impact future periods. Our operating loss decreased to 27,000 from 98,000 in the comparative quarter, an improvement of 71,000. Finally, our adjusted EBITDA was 508,000 compared to 312,000 in the comparative quarter, an improvement of 196,000. 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 890,000 at quarter end, which was a 632,000 increase from year end. Our net cash flow from operations was 2 million, while net cash used in investing activities was 1.4 million due to increased spending on infrastructure and product development. The increase in cash during the quarter is mainly due to payments received from the customers discussed earlier, as much of that revenue has been deferred to future periods. Note that a $230,000 payment received from one of the large Canadian banks has been recorded as a customer deposit until the contract is finalized and is currently included in accrued liabilities. Looking forward, based on the contracts discussed earlier, we anticipate particularly strong revenue growth in the second half of the year, and we remain on track to achieve full-year revenue growth of just under 20%. We expect to return to profitability next quarter and end the year with positive net income. And looking ahead to 2023, we expect to significantly improve upon our bottom line based on customers already under contract. Thank you, and I'll now pass it back to Dave.

Thank you, Keith. We're now happy to open up the call for any questions that you may have.

We will take our first question from Richard Hauschen. Please go ahead.

Yes, congratulations on your finances for the quarter. I have one question. Do you guys ever plan on going on the NASDAQ?

Thank you for the question. We've been looking at that, and when the timing is right, that's certainly one of the next phases of Quo Media is moving to a bigger board, and probably analyzing it next year is our plan.

Do you expect to break $20 million this year for the fiscal year?

Yeah, I don't think we're going to break $20 million this year, but we'll be relatively close.

Okay. Thank you very much. Thank you.

It appears that 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.

All right. Well, that was a short one. I guess we're all good to go. All right. Well, if anybody does have future questions, feel free to reach out to us. The contact would be Brendan Hopkins, which is bhopkins at QuoteMedia.com. Please contact him if you have any further questions and we can connect. Thanks, everybody, for attending the call. We'll see you next quarter.