Quotemedia Inc

Good day, everyone, and welcome to today's Quote Media third quarter results conference call. At this time, all participants are in a listen-only mode. Later, you'll 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 1 on your telephone keypad. Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Dave Shorin. Please go ahead, sir.

Thank you and welcome everyone. We appreciate you joining us today. Before we begin, I have a brief safe harbor statement. Except for historical information contained herein, the statements made in this call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. And now we're happy to go through our 2025 third quarter results. 2025 continues to be a very successful year for Quote Media. We're growing and this quarter clearly reflects that momentum. We've delivered a 10% year over year revenue increase and revenue rose 5% sequentially from Q2. This is a solid growth, and importantly, it is supported by several new contracts that will be starting next quarter. Looking ahead, we expect this momentum to continue, and we're forecasting even higher growth numbers for Q4. Our pipeline is strong, and we're in advanced stages on several new large proposals. We are busier than ever. both onboarding new clients and expanding our footprint with existing clients. We're also continuing to expand our products and our data across almost every category, and the response from clients has been overwhelmingly positive. I'd like to touch briefly on profitability trends. Our gross margin improved from 46% to 48%, and we expect our gross margin to continue improving as revenue grows. and as amortization expenses trend downward over time. The same is true for EBITDA and overall profitability, which we expect to strengthen in coming quarters as the impact of previously capitalized development costs continue to diminish. In addition, our deferred revenue finished the quarter at 2.2 million, which reflects strong contracted business that will be recognized in future periods. We're extremely proud of the progress we're making. The products are state-of-the-art. Our data is comprehensive and proprietary, and we continue to differentiate ourselves in the competitive industry. We're successfully winning business from large incumbents, and our market position is strengthening quarter after quarter. It's all very exciting, and we believe that we're extremely well-positioned for continued strong growth heading into 2026. With that, I'll now pass the mic over to Keith Randall to walk us through the financial details for the quarter. And after that, we'll be happy to take any questions. Go ahead, Keith.

Thank you, Dave. Welcome, everyone. I'll start with the income statement. Note that all comparisons are on a year-over-year basis unless otherwise noted. We had a 10% increase in total revenue compared to Q3 2024. and a 5% increase compared to Q2 2025. Corporate closed-stream revenue increased 18%, and interactive content revenue increased 5%. These increases were driven by an increase in average revenue per customer. As we continue to attract larger customers and cross-sell additional products to existing customers, individual closed-stream revenue was relatively flat, increasing 1%. Our cost of revenue consists of fixed and variable stock exchange fees and other data costs and amortization of capital life development costs. Our cost of revenue increased 6%, mainly due to increased variable stock exchange fees related to our increase in revenue, as well as price increases for fixed stock exchange fees. Our gross margin percentage increased from 46 to 48%. as the cost of revenue decreased as a percentage of sales. This is due to an increase in revenue as well as a decrease in amortization expense related to capitalized development costs. We expect our gross margin percentage to continue to improve going forward as our revenue grows and the amortization expense continues to decrease as we capitalize less development costs. Our total operating expenses increased 11% for the quarter. Sales and marketing expenses decreased 5% due to a decrease in salary payroll. G&A expenses decreased 25% mainly due to a decrease in bad debt expense. The decrease was also due to a decrease in office rent expense as we downsized our office space in Vancouver, Canada when our previous lease ended in June. Since COVID, the majority of our development staff work remotely. Therefore, we require less office space. Software development expenses increased by 74%. This was due to the decrease in the percentage of development costs capitalized versus expensed. As we capitalized 4% this quarter compared to 26% in Q3 2024. The increase in development expenses was offset by the decrease in payroll expense resulting from the reduction in development personnel in December 2024. Our net loss for the quarter was 367,000 compared to a net loss of 441,000, an improvement of 74,000. Our adjusted EBITDA was 378,000 compared to 367,000, an increase of 11,000. While the accounting for development costs has no impact on cash flow, it continues to negatively impact our reported earnings. As previously mentioned, a smaller proportion of development costs was capitalized compared to prior quarters, resulting in a greater amount being expensed immediately. As development costs are amortized over a three-year period, amortization expense remains elevated due to higher levels temporarily reducing our net income. But despite the negative impact of the accounting for development costs, our profitability improved versus Q3 2024. We expect gross margin, EBITDA, and overall profitability to continue to improve in future quarters as our revenue grows and the impact of higher amortization expenses related to prior periods diminishes. 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 281,000 at quarter end, which was a 304,000 decrease from our 2024 year-end cash balance of 585,000. Our deferred revenue totaled 2.2 million at quarter end, The future costs associated with realizing that revenue is minimal, as most of our deferred revenue relates to setup and development work already completed. Those setup and development fees have been deferred and will be recognized in future periods over the service contract to which they relate. Our year-to-date net cash flow from operations was 832,000, while net cash used in investing activities was 1.1 million, primarily due to spending on infrastructure and product development. Going forward, we expect our double-digit revenue growth to continue for the remainder of this year and into 2026. Also, as mentioned earlier, we expect our bottom line to improve as our revenue grows. and the amortization expense associated with capitalized development cost decreases. Thank you, and I'll now pass it back to Dave.

Thanks, Keith. Okay, we'll now open up the call for any questions, so please let us know if you have any questions.

At this time, we will begin the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and you'll be placed into the queue in the order received. You may remove yourself from the queue at any time by pressing pound and 1. Once again, to ask a question, press star 1 now. And our first question will come from Michael Kupinski with Noble Capital Markets.

Thank you for taking my question. Good evening. Yeah, a couple questions. You mentioned that you believe that there will be an acceleration in the rate of growth in the Q4. And I was wondering if you were referring just to year-over-year growth or were you referring to sequential growth? You mentioned that you saw 5% sequential growth in Q3. I was just wondering, just to clarify, what you were referring to there.

That was year-over-year in terms of the double-digit growth.

Yeah, okay.

We also expect quarter-over-quarter growth as well.

Right, but not at the 5% level.

Well, it'll be comparable to that.

Gotcha. Okay.

Quarter growth will be comparable. I'm not sure if it'll be exactly 5%, but Q4 will definitely be revenue growth. The revenue for Q4 will definitely be higher than Q3.

Gotcha. Okay. And in terms of that, can you kind of give us a little color if you believe that growth is coming from increased number of customers or is that coming from an increased average revenue per customer?

Well, it's mostly increased average revenue per customer, but that's a little bit deceiving because it's new business coming in the door for existing customers. So basically cross-selling new products to existing customers.

And then in terms of just kind of like the tone of the market and the competitive nature of the market, I was just wondering if you can just talk a little bit about that. And then if you can talk a little bit about, you know, we went through a period of product development you know, for the company to be a little bit more competitive with the products. And it seems like you're kind of gaining a little traction there. How do you feel about the product suite that you have right now in terms of your competitive position? Are there products that you feel that you may need to invest in to offer in the future to be a little bit more competitive? Or do you feel like your product suites are pretty much very competitive where you are?

So the product suites that we have, I think, are very, very competitive. There isn't a lot of investment that we have to make to expand on that. It's more internal. So it's more just doing more with the data. We're doing a lot of work with AI so that, you know, it can automate a lot of services that people are looking for. Because we own all of the data, that's making it perfect. I mean, it's making us very, very strong in the industry. But as far as product lines against our top competitors, we are definitely either neck and neck or better than them in many areas. And that's why we're taking away some of their business, which is great. Yeah. So I think, you know, we're always developing and we're always adding. We're expanding on, you know, all kinds of different features and services and product lines and data sets that we're doing. But it's not like it's heavy investment anymore. It's just continuation of of expansion.

And you touched on my next question, I was just wondering, in terms of AI, what are how are you using AI? You know, obviously, you have a lot of opportunities, especially as you look at, you know, some utilizing some of your data reports and things like that was just wondering if you can just kind of give us some thoughts on how you're utilizing AI.

Yeah, we've been well, cool media has been using AI for probably since the inception of it in some shape or form. So because we're doing a lot of the data collection, data normalization, all kinds of things like that, the AI has always kind of been there behind the scenes doing things for us. But as it gets stronger and stronger now, now we're having it do a lot more. And we actually have an AI department that's building out all kinds of advanced AI tools on top of all of our data for our clients. So it's things like, you know, taking our CodeStream platform and having a complete chatbot that you can talk to and you can have it do anything you want, you know, tell you about trades, execute trades, you know, analyze portfolios, all of those things. So we're basically training AI, but having AI use our data for everything. So it's not about you know, where you have chat GPT where it goes out on the web and it starts hitting websites and grabs information and puts it together for you. This is actually using actual complete fundamental data from us, our corporate action data, our quote data, everything, all of the data from the user. So you should, you know, the users are going to be able to do everything that they want with AI in all of our products. And that's where we're going with it. And in addition, we're doing a lot of data collection with AI, data cleansing with AI, normalization, scoring, you know, sentiment, you know, all kinds of things with AI, taking news, turning it into smaller tidbits that are easily ingestible by people, flagging what's going on in their portfolios with their watch lists, you know, things like that. So, we're working with all of our obviously our higher level clients, all of our high level clients have a wish list. And, and we're working with them kind of across the board, to take all of this to market. And we're moving very quickly with it, because we've already been working with AI. So it's probably going to be coming out very, very quickly.

Thanks for the color there. And if I could squeeze in just one more question, in terms of the churn in the third quarter, Was churn very similar to second quarter, or can you just kind of give us some thoughts about customer churn and how it was relative to maybe the first and second quarter?

Yeah, we had very little churn this quarter and last quarter for that matter.

And so it was very similar.

Yeah. I mean, I don't have an exact percentage to give you, but I can tell you it's very low.

Okay. All right, that's all I have. Congratulations. Thank you.

And our next question will come from Jonathan Jettmanson. Please go ahead.

Hey, thanks, guys. Two quick questions. One is on the cash balance. You guys are cutting it pretty close. So just wondering, kind of now over a month into Q4, how cash is looking, and is there any risk of needing outside financing? this year or early next year until cash starts to build?

Yeah, I can answer that. Unfortunately, the way the timing of our funds work is we receive, we have some quarterly clients that we get in right after the end of each quarter. So the quarter ends are the lowest of our cash balances. And then I think on October 3rd, Third, we got in $700,000. So it's just the timing of our cash flow. The end of the quarter is always the lowest.

Okay. And then turning to bookings, if you look at end of Q3, taking recognized revenue to the quarter as well as any kind of new bookings on top of that, do you guys have an estimate of what ARR looks like at the end of Q3?

Sorry, repeat that last part.

Yeah, asking if you have an idea of what kind of total booked ARR was at the end of Q3, which would be taking, you know, if you're recognized revenue plus any new bookings that just haven't started recognizing yet.

I don't have that exact figure, but as you know, most of our revenue is almost exclusively, all our revenue is recurring. You don't even part of the revenue that's not recurring is just the development work that we do, like the setup and development. So that's something we'll look to, I think, maybe to publish in future quarters. But I don't have a – if you're asking for an exact amount, I don't have it handy right now.

Okay. Final question is really on the sales and marketing and data market. Like, how are – How would you rate the effectiveness of that team and strategy right now? Because just looking at the financials, you guys spend a decent amount on sales and marketing and generate kind of net new bookings each year well below that. So I'm just trying to understand how you guys think about it and how we can get more efficiency and effectiveness out of the sales.

Yeah, that's always the game plan. But I think this year has proven that we've done a pretty good job. There's a lot of activity with sales and marketing going on. There's a lot of conferences. I don't know if you follow our LinkedIn, but they're always attending every event in every city that we can go to and meeting with every different firm. So we're doing everything we can as far as sales and marketing, but they've done well. We've got but a 10% increase. And in fact, you know, if I know the math and what we lost in our previous year, which was probably about 5%, so that's probably a 15% increase, you know, in reality of how well the salespeople have done, they're doing very well. And I think we've got a good team. I'd like to expand on that team. I'd like to get into some more cities. But yeah, they're You know, we're monitoring it all and working. It's a big team approach, and they're closing some pretty big deals now. So things are going well.

Okay. Thank you. Thank you.

And as a reminder, if you'd like to ask a question, you may signal by pressing star 1. And our next question will come from Ankur Sagar. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. Congratulations to you, Dave and Keith. I think at least getting back on that, you know, growth trajectory after your last year's efforts. I just have a couple of questions. On the press release, I think it was mentioned about some large or major new contracts that will start contributing in Q4. On those, if you could just shed some light on these larger contracts, on what sizes and products these are, and, you know, have they contributed anything, you know, these new contracts in this Q3, or they're just net new?

I can address that. We had some larger ones. I'm not going to get into the exact dollar amounts from some of our larger. And this is like new statement of works for existing larger customers. So some of that revenue has started in Q3. And then the remainder of that will start in Q4 or possibly in Q1 of next year.

In terms of the size, if you were to look at the annual contribution, both the development cost and the ARR, are these like seven figures?

Combined, they approach it, but individually, no. But we have other deals that are in the pipeline as well.

So based on these and the pipeline that you have, you expect to continue on this growth trajectory. Would that be fair to say?

Yeah. That's what we predict. Yeah, that's what we're predicting. But, I mean, it's also because we have a lot of new ones, like actually brand-new clients on the go right now. I mean, Keith's referring to – you know, we close a whole pile of new deals. But as far as the largest ones were new statement of works or new purchase orders from some of our largest clients where they expanded with us and they went into other divisions and powered other services and platforms and things like that. So, you know, obviously the bigger the firm, when you're you're working with a multi-billion dollar firm, they have lots of different places that we can do business with them. So we've been expanding in all those areas. But we also have some more of those in the works right now. Okay.

And how much of that growth, Dave, is within the existing clients? As you mentioned, you work with these large clients where you you know, you get a deal in one area and then you're able to, you know, sell into and work with them on other areas or they're just net new customers. You know, what portion of growth is net new customers and the other way with existing customers?

Well, as far as this last quarter, I mean, it all depends on what the quarter holds, right? Sometimes there's you're closing more new deals, and sometimes, you know, all of a sudden one of your largest customers comes along and says, you know, I want to spend another million dollars with you, and then all of a sudden you jump that way. But, I mean, we're always working on both. So what percentage? It's hard to say. It's, you know, I don't even know the numbers of percentages because it fluctuates, right? Like, you know, when I sign up. We might sign a big deal with an existing customer right now, and then next week we might sign a big deal with a brand-new customer, and then you kind of even out.

Okay. And then one for you, Keith. In terms of this, you know, development cost capitalization, I mean, when do you expect this to be done with this or at least get to a normal level? You think where it should just be, you know? reflect the true profitability?

Yeah, I think by the end of... Yeah, sorry to cut you off. Yeah, I mean, you can already see that the impact's diminishing. I would imagine that the impact will be... I don't really work out the exact numbers, but by the end of next year, the impact will be negligible by the end of 2026. But each quarter, the impact goes down and down. And, you know, if you... if you remove the impact of capitalization of costs, whether it's development or fixed assets for the quarter, we actually have a positive net income if you remove the impact of those, those, those affect the accounting of those capitalized costs. So they really do distort our earnings.

Yeah, for sure.

But that impact is, like I say, Every quarter.

And I think the message there is also that we're going to be banking cash because even though the books show these numbers that are, you know, financially reported, it's not the reality of the cash flow, right? So, you know, as we start banking cash, then we can start to figure out what we're going to do with that cash, whether it's share buyback or acquire companies or different things like that. So we're on the right trajectory now for 2026.

Got it. And then on that cash flow, Keith, I know you were mentioning to the prior caller how it works. I mean, quarter-end, your cash flow shows down on the cash on the balance sheet. But with this double-digit growth that you're expecting, despite the way it works quarter-end, you expect to be free cash flow positive in a Q4 and then going forward?

Cash flow positive, I think that's fair to say. We're always subject to timing of when we receive funds. It's unfortunate that the timing of our funds, we have a lot of large clients that pay quarterly and it's at the beginning of the quarter. By the end of the quarter, like I previously mentioned, our our cash balances are at their lowest at the end of each quarter.

But there is also the dynamics where you generate the cash and there's also you invest into the development of it. I mean, the cost, I mean, you know, you expect probably next year those development costs to be less. Any expectation or, you know, comments you could share on that?

I don't, you know, lots of people ask me that if I'm going to decrease development costs. I think I don't really want to decrease development. I want to keep development as kind of a flat, like so where we keep our developers and they're working. We have lots and lots of things that I want to do and where we want to go. But it's not growing the development costs. I think that's the main thing is we want to use all of those people. They're very well-versed in our systems. You know, we've got good teams. Everybody's creating what's needed. And when a company comes along, you have to realize when these big companies come along, you know, they've got lots of money and they want it done a certain way. And I want to have the people to do it that way. And, you know, that's how you do it. But then, you know, you lock them in for many, many years. And, you know, once they're in, they're in. And you just keep growing it.

Okay. Yeah. One last one for you, Dave, not trying to put you on the spot, but still, you know, we're showing top-line growth. You know, based on your commentary, the outlook looks pretty good. I mean, you will have double-digit year-over-year growth going forward. But the company's valuation just doesn't reflect that improvement. Any thoughts you could share on, you know, what, you know, things you could probably do, as you mentioned about share repurchase or any other instruments you could use?

Yeah, I mean, I think it's mostly, you know, just doing more IR activities and, you know, next year going to more conferences and getting the word out. You know, just doing the best we can that way. We needed to pull out of that bad year, and we did. So, You know, I'm glad I didn't spend a lot of time last year doing those events because I would have been talking to a wall. But, you know, now I think, you know, we've got the story again. Everything's looking great. We're projecting really good growth. We've got bigger clients we can announce next year. So it's perfect timing to get the ball rolling and get, you know, get investors to know about Quote Media. I think we're so thinly traded. And our stock bumps up and down. I mean, it dropped significantly. today, but somebody just threw some shares out there and the next thing you know, it's down, but it could be up tomorrow. I mean, it's just, we're so thinly traded. We need to get more investors. So that's the target for next year.

And I also think we're negatively impacted by our accounting bottom line, which, because I don't think a lot of people can wrap their head around that it's the reason for it, that it's the capitalization of development costs. So So that's going to work itself out as well. So they think that's keeping their stock price down.

Yeah, I agree. That's great. Great job, guys. Thank you for taking my call. Thank you.

And once again, if you'd like to ask a question, please press star 1 at this time. And it appears we have no further questions. Mr. Schworn, I'll turn the conference back to you.

Okay. Well, thank you, everyone, for joining us today. We appreciate your continued support and interest in Quote Media, of course. And as always, if you have any follow-up questions, please feel free to reach out to us, reach out to me. Investors at QuoteMedia.com is an email address we use. And thanks again. We wish you have a great rest of your day. Bye-bye.

And this does conclude today's Quote Media third quarter results conference call. Thank you for your participation. You may now disconnect.